DISTRIBUTION AGREEMENT

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Exhibit 10.31

[***]—Certain information in this exhibit have been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

DISTRIBUTION AGREEMENT

        THIS DISTRIBUTION AGREEMENT (this " Agreement ") is made as of October 1, 2004 (the " Effective Date ") by and between i-STAT Corporation, a Delaware corporation having its principal place of business at 104 Windsor Center Drive, East Windsor, New Jersey 08520 USA (" i-STAT ") and an Affiliate of Abbott Laboratories, and Heska Corporation, a Delaware corporation, having its principal place of business at 1613 Prospect Parkway, Fort Collins, Colorado 80525, USA (" Heska ").

W I T N E S S E T H:

         WHEREAS , i-STAT is a manufacturer of diagnostic health care equipment and reagents and desires to obtain a distributor of Products (as hereinafter defined) in the animal health care market (" Field " as hereinafter defined) in the Territory (as hereinafter defined);

         WHEREAS , Heska is a distributor of various products in the Field in the Territory;

         WHEREAS , Heska and i-STAT previously executed a distribution agreement dated as of February 9, 1998, which was amended and restated as of February 24, 1999, under which Heska distributed products for i-STAT in the Field in the Territory (the " Prior Agreement "); and

         WHEREAS , in accordance with the terms and conditions hereof, i-STAT is willing to appoint Heska as its exclusive distributor of Products in the Territory, and Heska is willing to accept such appointment.

         NOW, THEREFORE , in consideration of the mutual covenants and agreements contained herein, and upon the terms and subject to the conditions set forth below, Heska and i-STAT hereby agree as follows:

ARTICLE 1—DEFINITIONS

        The following words and phrases, when used herein with initial capital letters, shall have the meanings set forth or referenced below:

1.1

" Affiliate " shall mean, with respect to each Party (as hereinafter defined), any legal entity that is, directly or indirectly, controlling, controlled by or under common control with such Party. For purposes of this definition, a Party shall be deemed to control another entity if it owns or controls, directly or indirectly, more than fifty percent (50%) of the voting equity of the other entity (or other comparable ownership interest for an entity other than a corporation).

1.2

" Analyte " shall mean an individual compound, protein or fragment thereof, or substance that is the target of quantitative or qualitative measurement.

1.3

" Analyzer " shall mean a device that processes Cartridges (as hereinafter defined) and is capable of detecting at least one (1) Analyte for use in the Field, and specifically excludes analyzers designed primarily for use in patient self-testing.

1.4

" Base Cartridge Target " shall mean, for each Contract Year (as hereinafter defined), the minimum unit number of Cartridge purchases required to be made by Heska and its Affiliates during such Contract Year as set forth in Section 2.4 and Section 2.5 .

1.5

" Business Day " shall mean any day other than a day which is a Saturday or Sunday or other day on which commercial banks in New York, New York are authorized or required to remain closed.

1.6

" Calendar Quarter " shall mean a period of three (3) consecutive calendar months commencing on January 1, April 1, July 1 or October 1 of any Contract Year.

1.7

" Cartridge " shall mean the disposable test component of a particular Product that contains one or more sensor chips and fluid handling channels and operates on an Analyzer.

1.8

[***}

1.9

" Cartridge Purchases " shall mean, pursuant to Section 11.2 , for each Contract Year, the unit number of Cartridges purchased by Heska and its Affiliates from i-STAT. For the purposes of this definition, a Cartridge shall be considered purchased in the Contract Year in which it was delivered after having been duly ordered pursuant to Section 3.3 .

1.10

" Cartridge Sales " means the number of units of Cartridges Sold in the Field in the Territory by Heska directly to: (a) Dealers (as hereinafter defined) for resale to End Users; or (b) End Users; net of returns and unpaid Cartridges.

1.11

" Change of Control " shall mean: (a) the consolidation or merger of Heska or any Affiliate of Heska with or into any Third Party wherein the shareholders of Heska immediately prior to such transaction shall cease to be the holders of at least fifty percent (50%) of the outstanding securities of the surviving corporation in such transaction; (b) the assignment, sale, transfer, lease or other disposition of all or substantially all of the assets of Heska; or (c) the acquisition by any Third Party or group of Third Parties acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission (" SEC ") under the Securities and Exchange Act of 1934) of more than fifty percent (50%) of the outstanding shares of voting stock of Heska.

1.12

" Confidential Information " shall mean any and all technical data, information, materials and other know-how, including trade secrets, presently owned by or developed by, on behalf of, either Party and/or its Affiliates during the Term (as hereinafter defined) which relates to a Product, its development, manufacture, promotion, marketing, distribution, sale or use and any and all financial data and information relating to the business of either of the Parties and/or of their Affiliates, which a Party and/or its Affiliates discloses to the other Party and/or its Affiliates in writing and identifies as being confidential, or if disclosed orally, visually or through some other media, is identified as confidential at the time of disclosure and is summarized in writing within thirty (30) days of such disclosure and identified as confidential, except any portion thereof which:

(a)

is known to the receiving Party and/or its Affiliates at the time of the disclosure, as evidenced by its written records;

(b)

is disclosed to the receiving Party and/or its Affiliates by a Third Party having a right to make such disclosure;

(c)

becomes patented, published or otherwise part of the public domain through no fault of the receiving Party and/or its Affiliates; or

(d)

is independently developed by or for the receiving Party and/or its Affiliates without use of Confidential Information disclosed hereunder, as evidenced by its written records.

1.13

" Contract Year " shall mean each consecutive twelve (12) month period prior to the termination of this Agreement, beginning on January 1 and ending on December 31 of each such Contract Year.

1.14

" Counterfeit Products " shall have the meaning set forth in Section 4.10 .

1.15

" Dealer " shall mean a natural person, corporation, partnership, trust, joint venture, government authority or other legal entity or organization in the Territory, other than Heska or i-STAT and/or

their respective Affiliates, which purchases Products from Heska for the purpose of resale to End Users for use in the Field.

1.16

[***]

1.17

" End User " shall mean a natural person, corporation, partnership, trust, joint venture, government authority or other legal entity or organization in the Field in the Territory, other than Heska or i-STAT and/or their respective Affiliates, that purchases Products under this Agreement for its own use or consumption in the Field, and excluding any Third Party use in the human healthcare market.

1.18

" Extended Warranty " shall have the meaning set forth in Section 7.1 .

1.19

" Extension Term " shall mean each additional Contract Year, if any, following the Initial Term or another Extension Term, as set forth in Section 10.1 .

1.20

" Field " shall mean the animal health care market specifically excluding the human health care market.

1.21

[***]

1.22

" Incremental Cartridge Purchases " shall have the meaning set forth in Section 3.6.1 .

1.23

[***]

1.24

" Initial Term " shall mean the time beginning on the Effective Date and ending on [***].

1.25

" Most Favored Price " shall have the meaning set forth in Section 2.14 .

1.26

" Notice Date Time " shall mean the period of time beginning on January 1 and ending on May 15 immediately following any Contract Year in which Cartridge Purchases were less than the Base Cartridge Target.

1.27

" Notice Period " shall mean a period of time, the length of which shall be set forth in Section 2.13 , which shall begin upon the receipt by Heska of i-STAT's written notice of i-STAT's decision to exercise its termination rights as set forth in Section 2.6 and during which time Heska shall maintain non-exclusive rights to Sell Products in accordance with this Agreement.

1.28

" Party " shall mean i-STAT or Heska and "Parties" shall mean i-STAT and Heska.

1.29

" Products " shall mean the products manufactured by or for i-STAT listed on Exhibit 1.29 .

1.30

" Purchase Price " shall mean the price for Analyzers, Cartridges and other Products purchased by Heska and its Affiliates from i-STAT and its Affiliates hereunder, as set forth on Exhibit 1.29 and more fully described in Section 3.6.

1.31

[***]

1.32

" Sale ", " Sell " or " Sold " shall mean to sell, hire, let, rent, lease or otherwise dispose of Product to a Third Party or Affiliate, provided such Affiliate is an end user of Products for commercial purposes for monetary or other valuable consideration. "Sale", "Sell" or "Sold" shall not include a transaction where samples of Product are supplied without charge to a Third Party or Affiliate for marketing or demonstration purposes or in connection with clinical or other experimental trials.

1.33

" Technical Documentation " shall mean all documents prepared by i-STAT in the ordinary course of business that describe the Products in terms of their intended use and Product claims. Such documents may take the form of user instructions, system manuals, product updates or technical bulletins, but are not limited to such forms.

1.34

" Technical Support " shall have the meaning set forth in Section 4.8 .

1.35

" Term " shall have the meaning set forth in Section 10.1 .

1.36

" Territory " shall mean the entire world except Japan.

1.37

" Third Party " shall mean a natural person, corporation, partnership, trust, joint venture, governmental authority or other legal entity or organization other than the Parties and/or their Affiliates.

ARTICLE 2—APPOINTMENT TO MARKET AND DISTRIBUTE

2.1

Exclusive Appointment in the Territory.     As of the Effective Date and subject to Section 2.4 and Section 2.5 below, i-STAT hereby appoints Heska and its Affiliates for the Term as i-STAT's exclusive distributor of Products in the Field in the Territory, and Heska accepts such appointment. As exclusive distributor in the Field in the Territory, Heska shall have the sole and exclusive right to market, promote, Sell and distribute Products in the Territory for use in the Field, which right shall operate to exclude all others, including i-STAT, its Affiliates and all Third Parties; provided , however , that i-STAT may maintain certain consultative and technical staff, at i-STAT's expense, to assist Heska in connection with such marketing, promotion, sales and distribution efforts, in accordance with Article 4 . In furtherance of this exclusive grant to Heska and its Affiliates, i-STAT hereby agrees to use its commercially reasonable efforts to ensure that any Products Sold outside the Field are not Sold directly or indirectly by i-STAT distributors to End Users. Nothing contained in this Agreement shall limit or be interpreted to limit i-STAT or i-STAT's Affiliates from directly selling products not listed on Exhibit 1.29 in the Territory.

2.2

Non-exclusive Appointment in Japan.     As of the Effective Date and subject to Section 2.4 and Section 2.5 below, i-STAT hereby appoints Heska and its Affiliates for the Term as i-STAT's non-exclusive distributor of Products in the Field in Japan, and Heska accepts such appointment. Heska shall have the non-exclusive right to market, promote, Sell and distribute Products in Japan for use in the Field.

2.3

Heska's Obligations.     Heska shall purchase Products for distribution and Sale in the Field in the Territory exclusively from i-STAT. Heska shall maintain, at its own expense, a commercially reasonable inventory of Products for the Sale, promotion and delivery of the Products and for managing customer satisfaction with the Products. Heska shall not promote, market or Sell any Product for use outside the Field. Recognizing the end use of the Products in healthcare, Heska shall not solicit or Sell any Product to an End User or other Third Party (including a Dealer) that Heska has, or should have, reason to believe will redistribute Products or otherwise direct Products for use to customers outside the Field. Heska promptly shall take all reasonable actions to prevent Sales of Products to customers, including Sales by Dealers, known or identified by Heska to be outside the Field. Upon i-STAT's request, if and to the extent Heska or its Dealers Sells Products to customers outside the Field, Heska shall remit to i-STAT an amount equal to the difference between: (a) the amount of sales billed by Heska from Sales of such Products (net of duties, freight, replacements, returns, refunds and taxes); and (b) the Purchase Price paid to i-STAT. The Cartridge units Sold outside the Field shall not be included in Cartridge Purchases for the purpose of meeting the minimum purchase requirements of Sections 2.4 and 2.5 .

2.4

Minimum Purchase Requirements during the Initial Term.     Subject to Sections 2.6 , 2.7 and 2.9 , Cartridge Purchases shall be greater than or equal to the Base Cartridge Target for each Contract Year during the Initial Term, which, for purposes of this Agreement, shall be as set forth in the following Table 2.4 ; provided, that Cartridge Sales shall be at least ninety-five percent (95%) of Cartridge Purchases during such Contract Year.

Table 2.4

For example, if Heska has 2007 Cartridge Purchases of [***] and 2007 Cartridge Sales of [***], Heska shall have fulfilled the requirements of this Section 2.4 ([***] Cartridge Purchases and Cartridge Sales are 95.3% Cartridge Purchases). In a separate example, if Heska has 2007 Cartridge Purchases of [***] and 2007 Cartridge Sales of [***], Heska shall not have fulfilled the requirements of this Section 2.4 (since Heska would have met the Cartridge Purchases requirement, but would have Cartridge Purchases of 94.9% of Cartridge Sales, less than the required 95%).

2.5

Minimum Purchase Requirements during any Extension Term.     Subject to Sections 2.6 , 2.7 and 2.9 , Cartridge Purchases shall be greater than or equal to the Base Cartridge Target for each Contract Year during any Extension Term, which for purposes of this Agreement, shall be calculated as set forth in the following Table 2.5 ; provided, that Cartridge Sales shall be at least ninety-five percent (95%) of Cartridge Purchases during such Contract Year.

Table 2.5

For example, if the [***], then the 2010 Base Cartridge Target will be equal to [***], calculated as follows: [***]. In this example, the 2011 Base Cartridge Target will be equal to [***], calculated as follows: [***].

2.6

Implications of Failure to Meet Minimum Purchase Requirements.     i-STAT's sole remedy for Heska's failure to meet the Base Cartridge Target in Sections 2.4 or 2.5 in any Contract Year shall be to terminate this Agreement upon prior written notice to Heska as set forth in Section 2.13 ; provided, however, that i-STAT shall meet with Heska to discuss under what terms and conditions, if any, Heska may continue to distribute Products hereunder; and provided, further, that such failure to meet the Base Cartridge Target shall not be considered as a breach of this Agreement.

2.7

Failure to Supply Minimum Purchase Requirements.     If during any Contract Year, i-STAT is unable to supply Cartridges properly forecasted and ordered hereunder pursuant to Article 3 , the Base Cartridge Target for such Contract Year shall be reduced by the number of such Cartridges ordered by Heska pursuant to the terms of this Agreement and not supplied by i-STAT hereunder during such Contract Year. i-STAT, shall consider in good faith the impact of a material interruption in supply on Heska's ability to achieve future Base Cartridge Targets in subsequent Contract Years and shall consider in good faith reasonable adjustments to Base Cartridge Targets proposed by Heska for such subsequent Contract Years; provided, however, that any decision regarding any reduction to future Base Cartridge Targets shall be at i-STAT's sole discretion.

2.8

Right of First Offer.     As long as Heska is i-STAT's exclusive distributor of Products in the Field in the Territory, i-STAT shall, prior to offering any other or new products to any Third Party for resale in the Field in the Territory, first offer in writing (which for the purposes of this Section 2.8

may be by e-mail) to Heska the opportunity to negotiate with i-STAT in good faith to include such products as a Product hereunder on such terms and conditions as are mutually acceptable to the Parties.

2.9

Discontinued Products.     i-STAT shall have the right to discontinue the manufacture of any Product hereunder. If i-STAT, in its sole discretion, decides to discontinue the manufacture of any Product, i-STAT shall: (a) provide written notice to Heska as follows: (i) for Analyzers, upon twelve (12) months' prior written notice; and (ii) for all other Products, upon one hundred eighty (180) days' prior written notice; and (b) negotiate in good faith with Heska an adjustment to the Base Cartridge Targets set forth in Sections 2.4 and 2.5 ; provided , that no adjustment shall be made if a discontinued Product is replaced by an equivalent Product at an equivalent price. If the Parties are unable to agree on an adjustment, if any, to the Base Cartridge Targets as a result of good faith negotiations under clause (b) of the preceding sentence, they will follow the procedures set forth in Section 11.9 to establish an adjustment, if any. i-STAT may materially alter the performance of any or all of the Products upon ninety (90) days' prior written notice to Heska. i-STAT shall use commercially reasonable efforts to provide to Heska reasonable quantities of repair and/or replacement parts, on an as needed basis, for Analyzers for at least three (3) years from the date of discontinuance of manufacture or sale of Analyzers or introduction of a materially altered Product for which parts are not interchangeable. i-STAT also shall use commercially reasonable efforts to consult with Heska prior to any discontinuance of the manufacture of any Product or material alteration of any Product where such alteration, in i-STAT's reasonable opinion, would impact applicable regulatory approvals of Heska and / or marketing of the Products by Heska.

2.10

Selling Price.     Heska, in its sole discretion, shall determine the final sales price of Products Sold by Heska to Third Parties in the Field in the Territory, and no other term or provision in this Agreement shall be interpreted or deemed to provide i-STAT with any right to determine the final sales price of Products Sold by Heska hereunder. Heska or its appointed Dealers solely shall be responsible for seeking and obtaining all pricing approvals from all applicable authorities in those countries in the Territory where Heska is distributing Products in the Field.

2.11

Heska's Sales Efforts.     Heska shall use commercially reasonable efforts to offer for Sale, Sell, have Sold, use, have used, market, have marketed, distribute, have distributed and import Products in the Field in the Territory, as more fully set forth in Article 4 .

2.12

Appointment of Dealers.     Heska shall have the right to appoint Dealers for the sale of the Products in the Field in the Territory. Heska agrees that, if it enters into an agreement or arrangement with any Dealer to allow such Dealer to offer for Sale, Sell, have Sold, use, have used, market, have marketed, distribute, have distributed, import and have imported Products in the Field in any country or region of the Territory, Heska shall restrict such Dealer's activities to sales of Products in the Field for use in the Field by affirmatively restricting the Dealer from reselling Products to Third Parties outside the Field. Heska shall name i-STAT as the "third party beneficiary" for the purposes of enforcing this provision in any agreement or arrangement with a Third Party for Sale of Products in the Field.

2.13

Termination Notice Provisions.     In the event that i-STAT exercises its right to terminate this Agreement in any given Contract Year for failure to meet the Base Cartridge Target in such Contract Year pursuant to Section 2.6 , such termination shall be effective upon expiration of the Notice Period, determined as follows:

(a)

Six (6) months if [***];

(b)

Twelve (12) months if [***];

(c)

Eighteen (18) months if [***];

(d)

Twenty-four (24) months if [***]; or

(e)

Thirty-six (36) months if [***].

In order to terminate the Agreement pursuant to Section 2.6 , i-STAT must give written notice during the Notice Date Time. Upon receipt of written notice, Heska's distributorship rights in the Field in the Territory shall become non-exclusive and remain non-exclusive throughout the Notice Period.

For example, Heska has [***], Heska receives written notice of termination from i-STAT on January 15, 2008 and the Parties meet to discuss this situation on February 1, 2008 but cannot agree on amended terms under which Heska would continue to distribute Products. Pursuant to Sections 1.8 and 1.27 , [***], which under Section 2.13 , results in a Notice Period of twenty-four (24) months. Thus, in this example, the Agreement would terminate on January 15, 2010.

2.14

Most Favored Pricing.     If, during any time period in which Heska is a non-exclusive distributor hereunder (including any time period set forth in Section 2.13 ), i-STAT shall sell Products in the Field in the Territory to any other distributor, dealer or Third Party at a price lower than the Purchase Price then paid by Heska hereunder (the " Most Favored Price "), then i-STAT shall give Heska prior written notice of the Most Favored Price and the period it is to be in effect and Heska shall be entitled to such Most Favored Price for such Product for so long as such lower price is in effect for any other distributor, dealer or Third Party in the Field in the Territory.

2.15

Restoration of Exclusivity and Cancellation of Termination.     If, following any Contract Year in which Cartridge Purchases were less than the Base Cartridge Target, Heska's Cartridge Purchases for the subsequent Contract Year are equal to or greater than Base Cartridge Target for the subsequent Contract Year, i-STAT shall consider in good faith restoring exclusivity to Heska as described in Section 2.1 and canceling the notice of termination previously sent to Heska; provided , however , that such restoration of exclusivity shall be only to the extent i-STAT has not made alternative contractual arrangements that would preclude restoring Heska's exclusivity in any part of the Territory.

2.16

Competitive Products.     In furtherance of its duties and in recognition of the unique healthcare and related responsibilities in connection with the distribution of the Products, during the Term Heska shall not anywhere in the Territory promote, market, distribute or Sell any hand held device performing any tests performed by the Products, including new Products, if any, added to this Agreement pursuant to the terms and conditions set forth in this Agreement. Heska shall exclusively use the i-STAT control products set forth on Exhibit 1.29 unless i-STAT gives prior written approval for substitution.

2.17

EU Commission Directive.     In accordance with the EU Commission Directive on Vertical Agreements , the covenant not to sell competitive products set forth in Section 2.16 for countries in the European Union (" EU ") shall be for no longer than five (5) years after the Effective Date. Heska agrees that if Heska has maintained exclusivity as set forth in Sections 2.4 and 2.5 during the Term, that Heska will meet with i-STAT to negotiate in good faith the terms, if any, under which the covenant not to sell competitive products in the EU may be extended (if any).

ARTICLE 3—MANUFACTURE, SUPPLY AND DELIVERY OF PRODUCTS

3.1

Manufacture, Sale and Purchase of Products.     During the Term, i-STAT shall use commercially reasonable efforts to manufacture or have manufactured, release, sell and deliver to Heska those units of Products as are consistent with the forecasting process, lead times and terms and conditions of this Agreement and as are ordered by Heska hereunder. i-STAT shall manufacture or have manufactured, release, sell and deliver each such Product in accordance with each Product's Specifications and all applicable rules and regulations applicable to the manufacture or sale of

Products in the Territory in the Field, including as applicable, those rules and regulations of the FDA, including QSRs (including applicable cGMPs), and in accordance with all other applicable laws and regulations of countries in which Heska sells Products.

3.2

Rolling Forecasts.     Thirty (30) days after the Effective Date, Heska shall provide i-STAT with a monthly forecast of its requirements of the Products for the first full Contract Year. On or before the fifth (5th) day prior to the beginning of each subsequent calendar month during the Term, Heska shall provide i-STAT with a rolling 12-month forecast, the first three (3) months of which will be firm purchase orders binding on Heska, the last nine (9) months of each shall consist of Heska's best estimate forecast of its requirements of Products.

3.3

Product Orders.     Heska shall order Products on purchase orders consistent with the process set forth in Section 3.2 . All purchase order forms shall specify the quantities of each Product ordered, requested delivery dates, the identity of Products ordered, Product price, and delivery and shipping instructions including carrier selected. All orders will be governed by the terms of this Agreement. To the extent that any purchase order, confirmation of acceptance or other document contains terms in conflict with, or in addition to, the terms of this Agreement, such conflicting or additional terms shall not be binding on the Parties unless agreed upon in advance by the Parties.

3.4

Acceptance of Purchase Orders.     i-STAT shall within five (5) Business Days notify Heska of any purchase order (or partial purchase order) accepted, rejected, or delayed, and the reason for any such rejection or delay. No purchase order shall be binding upon i-STAT until accepted by i-STAT. Purchase orders not rejected within five (5) Business Days shall be deemed accepted. Heska may not modify any purchase order after its acceptance by i-STAT without i-STAT's prior consent. All purchase orders shall provide i-STAT with no less than ninety (90) days notice to the requested shipping date from i-STAT after receipt of the purchase order. Heska understands and agrees that optimum dating of Products shipped cannot be assured for Products shipped in connection with purchase orders placed less than ninety (90) days prior to the requested shipment date of Product from i-STAT.

3.5

Firm Order Changes.     If, before submitting a purchase order form to i-STAT, Heska requests an increase to binding forecasts for the three (3) month firm forecast timeframe and such increase is no more than one hundred twenty percent (120%) of the amount of Products (on a Product-by-Product basis) originally reflected in forecasts, i-STAT shall use commercially reasonable efforts to accommodate such increases within reasonable manufacturing capabilities and efficiencies, taking into account other orders and forecasts. If such increases reflects an increase of more than one hundred twenty percent (120%) of the amount of Products (on a Product-by-Product basis) originally reflected in Heska's binding forecasts, i-STAT shall advise Heska of any additional costs associated with manufacturing such increased number of Products in such timeframe, and if Heska indicates to i-STAT that i-STAT should proceed to manufacture such increased amount of Products, i-STAT shall use reasonable commercial efforts to manufacture such increased number of Products, and Heska shall bear all costs reasonably associated with such manufacturing increases. Such payments shall be payable within thirty (30) days of receipt of i-STAT's invoice for such charges.

3.6

Purchase Prices.     Purchase Prices for the Products are listed on Exhibit 1.29 .

3.6.1

Rebates.     [***]

3.6.2

Pricing Adjustments.     At the end of the Initial Term and each Extension Term thereafter, Purchase Prices may be adjusted at i-STAT's sole discretion for inflationary increases in production costs. Such increase shall be at the rate of increase in the U.S. PPI (Producer Price Index) since the Effective Date of the Agreement for the Initial Term or since the last inflationary adjustment for each Extension Term.

3.6.3

Increased Manufacturing Costs.     If i-STAT experiences an increase in Product manufacturing costs that exceed ten percent (10%) for any Product during any Contract Year, i-STAT and Heska shall meet and negotiate in good faith to determine whether an adjustment to the Purchase Price for that Product is appropriate in the circumstances.

3.6.4

Taxes.     All Purchase Prices for Product are calculated for delivery as set forth in Section 3.7 . The Purchase Prices do not include insurance, freight, customs, duties, taxes, any foreign, federal, state or local taxes that may be applicable to Products including, without limitation, sales, excise, value-added, withholding, and other taxes other than taxes based upon i-STAT's net income and other similar charges. Customs duties and charges, if any, shall be borne by Heska. Any and all export and import licenses or approvals shall be obtained by Heska at its expense. When i-STAT has the legal obligation to collect such taxes, the appropriate amount shall be added to Heska's invoice and paid by Heska unless Heska provides i-STAT with a valid tax exemption certificate authorized by the appropriate taxing authority.

3.7

Delivery of Product.     

3.7.1

Delivery; Determination of Method of Transportation.     Products shall be delivered FCA (Incoterms 2000) i-STAT's U.S. warehouse or other i-STAT warehouse. The method of transportation of the Products, shipping destination and the carrier selected shall be as specified by Heska in its purchase orders.

3.7.2

Risk of Loss.     Risk of loss for Products shall pass to Heska, FCA (Incoterms 2000) i-STAT's warehouse site.

3.7.3

Title.     Title shall pass to Heska when Products are transferred to Heska's designated courier at i-STAT's warehouse site.

3.8

Payments Due; Credit Limits.     All payments due and payable hereunder shall be made by check or wire transfer within thirty (30) days from the date of the invoice. All payments shall be made without set-off or counterclaim and free and clear of and without deduction for any other charges of any kind. The invoiced amount shall be paid by Heska to i-STAT by: (a) wire transfer to the bank listed on Exhibit 3.8 or otherwise specified by i-STAT, or (b) certified bankers check. i-STAT reserves the right to change the payment or credit terms at any time upon ninety (90) days' prior notice to Heska. Any invoiced amount not received within thirty (30) days of the date the payment was due shall be subject to a service charge of the lesser of one and one-half percent (1.5%) per month or the maximum rate permitted by law. All exchange, interest, banking collection and other charges shall be at Heska's expense. Decreases in Heska's credit limit will be based on i-STAT's evaluation of Heska's financial performance over the previous six (6) months and/or Heska's payment history with i-STAT over the past immediate twelve (12) months. If Heska disagrees with any notice of a change in payment terms or decrease in credit limit, Heska may dispute the decision with the President of Abbott's Point of Care business and discuss options for resolution. The resolution to the disputed decrease in credit limit shall be at the sole discretion of the President of Abbott Point of Care division. If Heska believes the resolution reached by the President of Abbott Point of Care is inequitable, Heska may enter into alternative dispute resolution with i-STAT. Notwithstanding anything in this Agreement or any exhibit attached hereto to the contrary: (y) all costs for Heska and i-STAT associated with such alternative dispute resolution shall be borne solely by Heska, regardless of the decision by the neutral in the alternative dispute resolution process; and (z) such alternative dispute resolution, if requested by Heska for this issue, shall be only for this specific issue, and no other issue shall be added to the process.

3.9

Currency Basis.     All prices including Product Prices for Products and payments therefor shall be in U.S. dollars.

3.10

Acceptance of Product.     Heska shall not be obligated to accept any Product that does not meet the applicable i-STAT specifications as set forth in the Analyzer's operators' manuals, or the Cartridges' product inserts, if any, as registered in the Territory. i-STAT shall provide Heska with thirty (30) days' advance notice of a change or issuance of new Analyzer operator manuals or Cartridge product inserts. Heska shall inspect all Products upon delivery in a commercially reasonable manner. Failure by Heska to give notice of defective or damaged Product within the time periods specified in Section 3.11 shall be deemed a waiver of i-STAT's obligations as stated herein, with respect to such defect or damage only.

3.11

Defective and Improper Delivery; Product Returns.     If Heska or a Dealer or End User claims that: (a) any Product shipped directly by i-STAT hereunder was damaged in transit to the End User; (b) incorrect Product was shipped; or (c) that there was a shortage in the shipment, and notice in writing of such damage, incorrect shipment or shortage is provided to i-STAT within thirty (30) days of receipt of the shipment by the End User then, upon receipt of such notice, i-STAT's sole obligation shall be to either replace any damaged or incorrectly shipped Product, make up any shortfall or refund any Purchase Price paid by Heska, at i-STAT's option. If any Product is claimed by Heska, a Dealer or End User to be defective and i-STAT is notified in writing of such defect within thirty (30) days of receipt of the Product by the End User or, in the case of a latent defect, i-STAT is notified in writing within fifteen (15) days of discovery of such latent defect within the warranty period stated in Section 7.2 , then i-STAT's sole obligation shall be to either repair of replace any Product found by i-STAT to be defective. If Heska claims a credit pursuant to this Section 3.11 , such claim shall be accompanied by the original invoice issued by Heska to the End User or Dealer returning the Product. Upon request by i-STAT, Heska shall deliver to i-STAT, at Heska's cost, any returned Product with regard to which the credit is claimed. i-STAT solely shall determine in good faith the amount of any credit due Heska, if any, and to the extent any returned Product is defective, reimburse Heska for reasonable freight expenses directly related to delivering said Product to i-STAT. In the event that i-STAT issues a Product recall and requests that Heska return Products to i-STAT as a result of such recall, i-STAT shall reimburse Heska for reasonable freight expenses directly related to such recall. There will be no Product returns accepted except as set forth in this Section 3.11 .

ARTICLE 4. MARKETING OF PRODUCTS

4.1

Marketing.     Heska shall, at its own expense, use commercially reasonable efforts to market and promote the Products in the Territory. Heska's promotional activities shall include, but shall not be not limited to: (a) including the Products in its appropriate catalogs, promotional mailings and like publications, (b) developing, preparing and placing advertising concerning the Products in appropriate media or through appropriate direct mail; (c) exhibiting the Products at appropriate trade shows and exhibitions, (d) conducting appropriate market research as it deems necessary or desirable; and (e) rendering other services customarily rendered by a distributor of veterinary medical products; provided , that by October 31 of each Contract Year, Heska shall provide i-STAT with a list of all proposed trade shows and exhibitions that it plans to attend in the next Contract Year. Heska may develop printed sales and promotional materials relating to the Products in the local language at its own expense. Heska shall provide such materials, if any, which have not been previously approved to i-STAT for i-STAT's review and approval, which approval shall not be unreasonably delayed or withheld. i-STAT shall review such materials within fifteen (15) Business Days, and i-STAT's failure to object to any materials within such fifteen (15) Business Days of sending shall be deemed approval. If i-STAT objects to the material, Heska shall modify such materials accordingly.

4.2

Catalogs, Bulletins.     At Heska's written request, i-STAT shall provide Heska with reasonable quantities of brochures, instructional material, advertising literature and other relevant Technical

Documentation regarding the Products, at no charge to Heska. Such documents shall be in the English language, and may be in other languages to the extent already available. Heska, at its own cost, may provide a translation of the documents into the local language. Such translations shall be made available to i-STAT for review and comment before dissemination.

4.3

Follow-up Training.     At Heska's reasonable written request, i-STAT shall provide follow-up training, as mutually agreed by the Parties, at Heska's facility. i-STAT shall pay for its employees' salaries and their travel and travel-related expenses, including meals, lodging and other living expenses. For training situations not covered by this Section 4.3 , the Parties shall discuss how to equitably share the travel and related expenses.

4.4

Strategy Meetings.     Periodically during the Term (but not less than once per Contract Year) while Heska is the exclusive distributor of Products in the Field in the Territory, Heska and i-STAT shall review topics which may include Heska's marketing and selling strategy, training of End Users, inventory, and other practices with a view toward maximizing End Users' use of and satisfaction with Products.

4.5

Quality Assurance Audit.     Heska agrees that upon a minimum fifteen (15) days notice from i-STAT, representatives of i-STAT, during normal business hours, shall be permitted to visit all locations where Heska maintains inventory of Products to conduct a quality assurance audit of such facilities and/or an on-site surveillance of the inventory storage tracking. i-STAT shall have the right during reasonable business hours, to inspect the books and records of Heska relating to Product complain