Exhibit 10.2
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– 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 AGREEMENT made and entered
into effective as of November 1, 2004 (the “ Effective
Date” ), by and between ARKRAY Global Business, Inc., a
Japanese corporation with its principal office at 57 Nishi
Aketa-cho, Higashikujo, Minami-ku, Kyoto 601-8045, Japan
(hereinafter referred to as “AGB”) and HESKA
Corporation, a Delaware corporation with its principal office at
1613 Prospect Parkway, Fort Collins, Colorado 80525, U.S.A.
(hereinafter referred to as “HESKA”),
WITNESSETH
WHEREAS, HESKA and ARKRAY, Inc.,
a parent company of AGB, are the parties to the distribution
agreement made and entered into effective as of February 16,
2001;
WHEREAS, effective November 1,
2001, ARKRAY, Inc. has assigned and transferred to AGB, and AGB has
accepted from ARKRAY, Inc. all of ARKRAY, Inc.’s rights and
obligations under the said distribution agreement with prior
written consent of HESKA (the distribution agreement so assigned
and transferred is hereinafter referred to as the
“ Current Agreement”); and
WHEREAS, in the absence of 180
day prior written notice not to renew the Current Agreement, (1)
the Current Agreement has been automatically renewed for an
additional period of one year from February 16, 2004, and (2) the
Current Agreement so renewed is to be further renewed for an
additional period of one year from February 16, 2005 but AGB and
HESKA desire to terminate the Current Agreement on October 31, 2004
and enter into a new distribution agreement effective as of
November 1, 2004.
NOW, THEREFORE, in consideration
of the foregoing premises and of the mutual covenants herein
contained, the parties hereby agree as follows:
ARTICLE I
AGB hereby appoints HESKA as its
exclusive distributor to promote, market, service and sell the
Products (hereinafter defined) in the Field of the Territory
(hereinafter respectively defined) from the Effective Date of this
Agreement, and HESKA accepts such appointment,
subject to and in accordance with
the following terms and conditions. AGB and HESKA acknowledge and
agree that the Current Agreement shall terminate and cease to be
valid any further upon this Agreement becoming
effective.
1.1 Products
The Products means those products
manufactured by or for the ARKRAY group of companies, and listed on
Attachment 1 (hereinafter referred to as the
“Products”), along with all related spare parts
necessary to support those products. The Attachment 1 can be
amended as needed in the future by mutual written agreement of both
parties.
1.2
Branding
AGB and HESKA agree that the
brand name of the Products and its logotype shall be a combination
of “ARKRAY” and “HESKA” in a format to be
mutually agreed upon by the parties hereto.
1.3
Distribution Right
HESKA shall have an exclusive
right to promote, market, sell and distribute the Products, with
the right to appoint sub-distributors, only in the veterinary
market (hereinafter referred to as the “Field”) of
North America, i.e. USA and Canada (hereinafter referred to as the
“Territory”). The exclusivity referred to in this
Agreement applies between HESKA and AGB, AGB’s affiliates and
AGB-appointed distributors. Except as expressly provided in this
Article 1, no right, title or interest is granted, whether express
or implied, by AGB to HESKA, and nothing in this Agreement shall be
deemed to grant to HESKA any right to any products other than the
Products.
HESKA agrees that, during the
term of this Agreement, (a) HESKA shall not make commercially
available a product(s) with features identical to the Products, (b)
HESKA shall not handle or otherwise provide any
“off-brand” and/or “generic” form of
consumables, test strips or reagents for use with any instrument
Product, PROVIDED, HOWEVER, this paragraph shall not apply to
common laboratory transfer pipettes, common QC serum materials and
primary blood collection tubes that fit commercially available
external centrifuges.
1.4 Sales
Responsibility
HESKA assumes all sales
responsibilities for the Products to be sold under this Agreement.
“Sales Responsibilities” as used herein includes
all sales force training, maintenance and support activities,
warranty repair service as contemplated at Section 2.1 below as
well as advertising, promotion, and demonstration. AGB will provide
HESKA with all drawings,
specifications, test procedures,
manuals, information and demonstration materials, but only to the
extent that they are reasonably necessary for HESKA to fulfill its
Sales Responsibilities. AGB will also provide HESKA with test data
and results, performance studies, and other materials as needed to
obtain regulatory clearance to market all Products in the Field of
the Territory.
1.5
Relationship of Parties
Each party shall be considered an
independent contractor of the other party. Nothing in this
Agreement shall be construed as establishing a joint venture or
partnership or principal/agent or employer/employee relationship.
No party is authorized to make any statement, claim, representation
or warranty or to act on behalf of the other party with respect to
any of the provisions of this Agreement, except as provided for
herein or as specifically authorized in writing by the other
party.
1.6 Term
Unless terminated earlier as set
forth in Section 1.7, this Agreement shall continue to be in full
force and effect for a period of three (3) years from the Effective
Date first hereinabove written.
1.7 Termination
1.7.1 Either party may
terminate this Agreement by a written notice to the other party at
any time in the event that the other party shall have been in
breach of any of the provisions of this Agreement and such breach
shall have continued for sixty (60) days (ten (10) days in the case
of breach of payment terms) after receipt of written notice of the
breach from the non-breaching party.
1.7.2 Either party may
terminate this Agreement without any notice to the other party if
the other party (1) is declared insolvent or bankrupt, or
proceedings for commencement of civil rehabilitation, company
reorganization or other similar procedure are made against it in a
court of competent jurisdiction or (2) enters into liquidation
whether compulsorily or voluntarily; or compounds or makes any
arrangements with its creditor or has a receiver, manager or
administrator appointed in respect of all or any part of its
assets.
1.7.3 Either
party may terminate this Agreement by a written notice to the other
party at any time in the event of any sale to a competitor of the
other party’s veterinary blood chemistry business pertaining
to this Agreement occurs, whether by sale of assets or divisions,
merger or otherwise.
1.8 Effect of
Termination
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– Certain information on this page have been omitted and
filed separately with the Securities and Exchange Commission.
Confidential treatment has been requested with respect to the
omitted portions.
1.8.1 Upon
termination of this Agreement, the terminating party may (but has
no obligation to) cancel any and all outstanding orders pending
hereunder.
1.8.2 In the event of
termination by HESKA, HESKA will have the right to return any
instrument Products in-transit from AGB to HESKA as well as in its
possession in unused or unpacked condition to AGB, at AGB’s
expense for return freight, for a full refund of the purchase price
paid for such Products by HESKA to AGB.
1.8.3 In the event of
termination by AGB, at the option of AGB, either AGB will have the
right to repurchase any instrument Products in HESKA’s
possession in unused or unpacked condition, at HESKA’s
expense for return freight, for a full refund of the purchase price
paid for such Products by HESKA to AGB or HESKA shall pay for any
and all Products in process, in inventory, and/or in-transit to
HESKA and, when applicable, the deficient number of the instrument
Products provided for at Section 3.2 and shall take delivery of
those Products as soon as demanded by AGB; provided, that HESKA is
allowed to distribute such purchased Products in the Field in the
Territory for six (6) month after such termination. Unless
otherwise provided herein, each party waives any claims for
compensation or damages in connection with such cancellation of
outstanding orders from the other party.
ARTICLE II
2.1 Warranty and
Quality
AGB warrants that the Products
sold hereunder shall be free and clear of any and all liens,
encumbrances or defects in title and shall be conveyed to HESKA
with lawful and marketable title. AGB further warrants that the
Products shall satisfy the performance specifications set forth in
Attachments 1 and 2. AGB will not make any changes to the
Products without first (i) notifying HESKA in writing at least
ninety (90) days in advance of such changes, (ii) providing HESKA
with satisfactory evidence that such changes do not alter the
performance specifications of any Product or necessitate further
regulatory filings for any Product, and (iii) obtaining
HESKA’S consent in writing. AGB shall input normal reference
ranges for animals supplied by HESKA in writing into the instrument
Products without modification by AGB.
The instrument Products are
warranted by AGB to be free from defects in materials and
workmanship for a period of [***] from the date of shipment from
AGB to HESKA, and the test strip Products are warranted for a
period of their remaining shelf lives, provided, however, AGB shall
not ship test strip Products whose remaining shelf lives are less
[***] at the time of shipment. AGB will use good faith efforts to
provide the longest possible shelf life in excess of the minimum
requirement of [***]. During the warranty period, AGB will promptly
provide HESKA with all necessary warranty repair parts to have the
non-conforming Products repaired by HESKA, or replacement of the
non-conforming Products at no cost. AGB’s
warranty obligation under this
Section 2.1 is limited to the timely supply of free repair parts or
free replacement of the non-conforming Products.
In the event that HESKA
determines that any shipment of the Products fails to conform to
their performance specifications set forth in Attachments 1 and
2, HESKA shall promptly notify AGB and reasonably specify the
manner in which the Products fail to conform. AGB shall have the
right to make its own inspection and evaluation of the allegedly
non-conforming Products and shall notify HESKA, within twenty one
(21) days after receipt of such information, including samples of
the allegedly non-conforming Products from HESKA, whether it has
confirmed and accepted HESKA’S claim that the Products are
non-conforming.
If AGB determines and confirms
that the Products are non-conforming, AGB shall replace, at no cost
to HESKA, the non-conforming Products at the earliest date after
confirmation of the Products non-conformance. AGB shall also bear
the freight charges for return of all non-conforming Products to
AGB from HESKA.
If, after evaluating the
allegedly non-conforming Products, AGB believes that the Products
in question are conforming, AGB shall supply HESKA with its written
findings and request HESKA to submit additional samples of the
Products to an independent third party, acceptable to both parties,
for testing in accordance with and against the performance
specifications set forth in Attachments 1 and 2. The
decision of such third party shall be final with respect to the
alleged non-conforming Products and binding on both parties to this
Agreement.
If the decision of the third
party is that the Products are non-conforming, AGB shall pay the
return freight with respect to the Products shipped to HESKA as
well as all costs and expenses relating to the testing of the
Products by the independent third party. In addition, AGB shall
supply HESKA with a Certificate of Destruction certifying that the
non-conforming Products returned by HESKA have been destroyed in an
environmentally safe manner.
If the decision of the third
party is that the Products conform to the performance
specifications set forth in Attachments 1 and 2, HESKA shall
accept the Products and shall be responsible for the return freight
and all costs and expenses relating to the testing of the Products
by the independent third party.
AGB shall, at its cost, comply
and provide HESKA with certifications that the Products are in
compliance with any applicable government regulations relating to
the sale of the Products in
the Territory, and manufacture in
Japan or in China, as the case may be, including compliance with
ISO 9001 or ISO 13485 requirements. HESKA agrees to take
responsibility for timely providing AGB with such regulations in
writing. AGB and HESKA shall cooperate in meeting all regulations
or requirements of, and the guidelines published by, the U.S. Food
and Drug Administration and any other applicable U.S. governmental
regulatory agencies. AGB and HESKA, in consultation, shall use
their best efforts to answer specific questions relating to quality
assurance as soon as possible upon receipt of such
questions.
AGB warrants that shipping of
Products is in compliance with all applicable laws and government
regulations of Japan and/or China regarding exports.
2.2 Trademark
AGB grants HESKA a limited
non-exclusive and non-transferable license to use ARKRAY,
Inc.‘s and/or AGB’S trademarks and brand names set
forth in Attachment 3 for the specific purpose of performing
its obligations hereunder. Except as specified in this Section 2.2
and Section 1.2, no party hereto will derive any legal rights to
the other party’s trademarks and brand names by use thereof.
No party hereto shall adopt, use or register in any country,
without the prior written consent of the other party, any
trademarks and brand names which are likely to be confused with a
trademark(s) and brand names of the other party.
2.3 Recall
If any governmental or regulatory
authority having jurisdiction over the Products requires AGB or
HESKA to recall any Products, such party shall immediately give a
notice to the other party of such requirement and all particulars
thereof and review with the other party the proposed manner in
which the recall is to be carried out, it being the intention of
the parties that the cost, expenses and liabilities associated with
any such recall shall be borne by the party that caused the recall.
The party responsible for carrying out the recall shall do so in as
expeditious a manner as possible and in such a way as to cause the
least disruption to the sale of the Products and to preserve the
goodwill attached to the Products and each party.
2.4 Spare Parts,
Consumables and Test Strips
Notwithstanding any provision of
this Agreement to the contrary, AGB will continue to furnish for
five (5) years after the termination or expiration of this
Agreement the spare parts, consumables and test strip Products for
exclusive use with the instrument Products at their prices as of
the termination date; provided, that such prices can be adjusted
once a year equal to the percentage increase in the U.S. Consumer
Price Index. For purposes of this Agreement, U.S. Consumer Price
Index means the U.S. Consumer Price Index, All Urban
Consumers
(CPI-U). U.S. City Average for
all Items, 1982-84=100.
2.5 Patents
AGB warrants and represents to
HESKA that to the best of its actual knowledge, and as of the
Effective Date of this Agreement, neither the Products covered by
this Agreement nor their manufacture, use, rental, importation or
sale will infringe upon any issued patent or other proprietary
rights held by a third party.
AGB shall, in consultation with
HESKA, defend, indemnify and hold HESKA and its subsidiary or
affiliated companies, and customers thereof, harmless from any
costs, damages, loss, expense, claims, judgments or settlements
including without limitation reasonable attorney’s fees and
investigation costs, with respect to any and all claims that the
manufacture, use, rental, importation or sale of any Products
covered by this Agreement infringes upon any patent or other
proprietary rights of a third party.
ARTICLE III
3.1 Orders and
Forecast
HESKA agrees and acknowledges
that each order for the instrument Products shall be in multiples
of five (5) units, and each order for the test strip Products shall
be in multiples of one hundred (100) boxes. On or around the
Effective Date of this Agreement, HESKA shall submit a firm
purchase order for the Products covering its requirement for the
first five (5) months. Thereafter, HESKA shall submit periodically
purchase orders by the end of each calendar quarter as needed in
the form agreed to by both parties, the terms and conditions of
which shall be applicable hereto to the extent they are not
inconsistent with the provisions of this Agreement. AGB will
immediately confirm the receipt of each purchase order from HESKA
so that HESKA has assurance that each purchase order is duly
received by AGB. Such purchase orders shall not bind AGB unless or
until accepted by AGB. AGB shall notify HESKA of its decision on
acceptance within ten (10) days after receipt of a purchase
order.
HESKA shall provide AGB, on a
quarterly basis by the end of each calendar quarter, with a
non-binding rolling one (1) year forecast of its anticipated
purchases of the Products. AGB shall keep HESKA notified
immediately of any events that may significantly impact AGB
’ S ability to deliver the Products, such as
interruptions by suppliers, labor troubles, discovered defects, and
the like.
3.2 Minimum
Purchase Requirement for Instrument Product
During the effective term of this
Agreement, HESKA guarantees to purchase from AGB and
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– Certain information on this page have been omitted and
filed separately with the Securities and Exchange Commission.
Confidential treatment has been reques
