DISTRIBUTION AGREEMENT

Exhibit 10.2

[***]     – 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

[***]     – 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

[***]     – Certain information on this page have been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been reques