UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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x
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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Title of each class
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Trading Symbol
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Name of each exchange on which registered
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Common stock, $0.01 par value
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HSKA
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The Nasdaq Stock Market LLC
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Securities registered pursuant to Section 12(g) of the Act: None
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Large accelerated filer o
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Accelerated filer x
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Non-accelerated filer o
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Smaller Reporting Company ¨
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Emerging Growth Company ¨
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Page
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Item 1.
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Item 1A.
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Item 1B.
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Item 2.
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Item 3.
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Item 4.
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Item 5.
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Item 6.
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Item 7.
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Item 7A.
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Item 8.
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Item 9.
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Item 9A.
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Item 9B.
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Item 10.
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Item 11.
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Item 12.
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Item 13.
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Item 14.
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Item 15.
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Item 16.
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•
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the success of third parties in marketing our products;
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•
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outside business interests of our Chief Executive Officer,
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•
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our reliance on third party suppliers and collaborative partners;
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•
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our dependence on key personnel;
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•
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our dependence upon a number of significant customers;
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•
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competitive conditions in our industry;
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our ability to market and sell our products successfully;
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expansion of our international operations;
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•
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the impact of regulation on our business;
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•
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the success of our acquisitions and other strategic development opportunities;
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•
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our ability to develop, commercialize and gain market acceptance of our products;
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•
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cybersecurity incidents and related disruptions and our ability to protect our stakeholders’ privacy;
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•
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product returns or liabilities;
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volatility of our stock price;
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our ability to service our convertible notes and comply with their terms.
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Item 1.
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Business
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•
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Quidel for the development of SOLO STEP CH Cassettes and SOLO STEP FH Cassettes;
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•
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Mindray for the development of veterinary applications for the HT5 Veterinary Hematology Analyzer and associated reagents;
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•
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FUJIFILM for the development of veterinary applications for the Element DC and Element DC5x Veterinary Chemistry Analyzers and associated slides and supplies;
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•
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Collaborating with third-parties for the development and manufacturing of the Element UF urine and fecal analyzers.
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•
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USDA. Vaccines and certain single use, point-of-care diagnostics are considered veterinary biologics and are therefore regulated by the Center for Veterinary Biologics, or CVB, of the USDA. In contrast to vaccines, single use, point-of-care diagnostics can typically be licensed by the USDA in about two years, at considerably less cost. However, vaccines or diagnostics that use innovative materials, such as those resulting from recombinant DNA technology, usually require additional time to license. The USDA licensing process involves the submission of several data packages. These packages include information on how the product will be manufactured, information on the efficacy and safety of the product in laboratory and target animal studies and information on performance of the product in field conditions.
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•
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FDA. Pharmaceutical products, which typically include synthetic compounds, are approved and monitored by the Center for Veterinary Medicine of the FDA. Under the Federal Food, Drug and Cosmetic Act, the same statutory standard for FDA approval applies to both human and animal drugs: demonstrated safety, efficacy and compliance with FDA manufacturing standards. However, unlike human drugs, neither preclinical studies nor a sequential phase system of studies are required. Rather, for animal drugs, studies for safety and efficacy may be conducted immediately in the species for which the drug is intended. Thus, there is no required phased evaluation of drug performance, and the Center for Veterinary Medicine will review data at appropriate times in the drug development process. The time and cost for developing companion animal drugs may be significantly less than for drugs for livestock animals, which generally have enhanced standards designed to ensure safety in the food chain.
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•
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EPA. Products that are applied topically to animals or to premises to control external parasites are regulated by the Environmental Protection Agency, or EPA.
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Item 1A.
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Risk Factors
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•
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Inability to meet minimum obligations. Current agreements, or agreements we may negotiate in the future, may commit us to certain minimum purchase or other spending obligations. It is possible we will not be able to create the market demand to meet such obligations, which could create a drain on our financial resources and liquidity. Some agreements may require minimum purchases and/or sales to maintain product rights and we may be significantly harmed if we are unable to meet such requirements and lose product rights.
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•
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Loss of exclusivity. In the case of our point of care laboratory instruments, if we are entitled to non-exclusive access to consumable supplies for a defined period upon expiration of exclusive rights, we may face increased competition from a third party with similar non-exclusive access or our former supplier, which could cause us to lose customers and/or significantly decrease our margins and could significantly affect our financial results. In addition, current agreements, or agreements we may negotiate in the future, with suppliers may require us to meet minimum annual sales levels to maintain our position as the exclusive distributor of these products. We may not meet these minimum sales levels and maintain exclusivity over the distribution and sale of these products. If we are not the exclusive distributor of these products, competition may increase significantly, reducing our revenues and/or decreasing our margins.
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•
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Changes in economics. An underlying change in the economics with a supplier, such as a large price increase or new requirement of large minimum purchase amounts, could have a significant, adverse effect on our business, particularly if we are unable to identify and implement an alternative source of supply in a timely manner.
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•
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The loss of product rights upon expiration or termination of an existing agreement. Unless we are able to find an alternate supply of a similar product, we would not be able to continue to offer our customers the same breadth of products and our sales and operating results would likely suffer. In the case of an instrument supplier, we could also potentially suffer the loss of sales of consumable supplies, which would
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•
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High switching costs. In our point of care laboratory instrument products, we could face significant competition and lose all or some of the consumable revenues from the installed base of those instruments if we were to switch to a competitive instrument. If we need to change to other commercial manufacturing contractors for certain of our regulated products, additional regulatory licenses or approvals generally must be obtained for these contractors prior to our use. This would require new testing and compliance inspections prior to sale, thus resulting in potential delays. Any new manufacturer would have to be educated in, or develop, substantially equivalent processes necessary for the production of our products. We likely would have to train our sales force, distribution network employees and customer support organization on the new product and spend significant funds marketing the new product to our customer base.
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•
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The involuntary or voluntary discontinuation of a product line. Unless we are able to find an alternate supply of a similar product in this or similar circumstances with any product, we would not be able to continue to offer our customers the same breadth of products and our sales would likely suffer. Even if we are able to identify an alternate supply, it may take us additional time and expense to gain the necessary approvals and launch an alternative product, especially if the product is discontinued unexpectedly.
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•
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Inconsistent or inadequate quality control. We may not be able to control or adequately monitor the quality of products we receive from our suppliers. Poor quality items could damage our reputation with our customers.
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•
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Limited capacity or ability to scale capacity. If market demand for our products increases suddenly, our current suppliers might not be able to fulfill our commercial needs, which would require us to seek new manufacturing arrangements and may result in substantial delays in meeting market demand. If we consistently generate more demand for a product than a given supplier is capable of handling, it could lead to large backorders and potentially lost sales to competitive products that are readily available. This could require us to seek or fund new sources of supply, which may be difficult to find or may require terms that are less advantageous if available at all.
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•
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Regulatory risk. Our manufacturing facility and those of some of our third party suppliers are subject to ongoing periodic unannounced inspection by regulatory authorities, including the FDA, USDA and other federal, state and foreign agencies for compliance with strictly enforced Good Manufacturing Practices, regulations and similar foreign standards. We do not have control over our suppliers’ compliance with these regulations and standards. Regulatory violations could potentially lead to interruptions in supply that could cause us to lose sales to readily available competitive products. If one of our suppliers is unable to provide a raw material or finished product due to regulatory issues, it could have a material adverse financial impact on our business and could expose us to legal action if we are unable to perform on contracts to our customers involving related products.
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•
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Developmental delays. We may experience delays in the scale-up quantities needed for product development that could delay regulatory submissions and commercialization of our products in development, causing us to miss key opportunities.
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•
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Limited geographic rights. We typically do not have global geographic rights to products supplied by third parties. If we were to determine a market opportunity in a geography where we did not have distribution rights and were unable to obtain such rights from the supplier, it might hamper our ability to succeed in such geography and our sales and profits would be lower than they otherwise would have been.
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•
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Limited intellectual property rights. We typically do not have intellectual property rights, or may have to share intellectual property rights, to the products supplied by third parties and any improvements to the manufacturing processes or new manufacturing processes for these products.
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•
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Changes to United States tariff and import/export regulations. Changes to United States trade policies, treaties and tariffs could have a material adverse effect on global trade. These changes could result in increased costs of goods imported into the United States for the Company and our third party suppliers. Our third party suppliers may limit their trade with companies in the United States, including us.
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•
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Global human and animal health risk. Several of our suppliers have operations in areas that may be susceptible to public health emergencies that could restrict global trade generally, and our access to consumables and product, specifically. The risk of infectious disease in humans and animals may limit trade and product access with third party suppliers with companies inside and outside the United States, including us. In particular, the use of animal bi-product may affect our consumable supply as a result of global animal health risks.
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•
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uncertain political and economic climates, fluctuations in exchange rates that may increase the volatility of foreign-based revenue and expenses.
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•
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burdens of complying with and unexpected changes in foreign laws, accounting and legal standards, regulatory requirements, taxes, tariffs and other barriers or trade restrictions.
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•
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lack of experience in connection with the customs, cultures, languages and sales cycle.
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•
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reduced or altered protection for intellectual property rights and data privacy laws in foreign countries, which require that data storage and processing be subject to laws different than the United States.
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•
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supply of products, including minimum purchase agreements, from third party suppliers or termination, cancellation or expiration of such relationships;
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•
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competition and pricing pressures from competitive products;
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•
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the introduction of new products or services by our competitors or by us;
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•
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large customers failing to purchase at historical levels;
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•
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fundamental shifts in market demand;
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•
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manufacturing delays;
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•
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shipment problems;
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•
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information technology problems, which may prevent us from conducting our business effectively, or at all, and may also raise our costs;
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•
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regulatory and other delays in product development;
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•
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product recalls or other issues which may raise our costs;
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•
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changes in our reputation and/or market acceptance of our current or new products; and
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•
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changes in the mix of products sold.
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•
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stock sales by large stockholders or by insiders;
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•
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changes in the outlook for our business;
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•
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our quarterly operating results, including as compared to expected revenue or earnings and in comparison to historical results;
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•
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termination, cancellation or expiration of our third-party supplier relationships;
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•
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announcements of technological innovations or new products by our competitors or by us;
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•
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litigation;
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•
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regulatory developments, including delays in product introductions;
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•
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developments or disputes concerning patents or proprietary rights;
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•
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availability of our revolving line of credit and compliance with debt covenants;
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•
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releases of reports by securities analysts;
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•
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economic and other external factors;
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•
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issuances of equity or equity-linked securities by us; and
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•
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general market conditions
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•
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place restrictions on the transfer of our common stock that could adversely affect our ability to use our domestic NOL, which can have an effect of preventing a takeover;
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•
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establish a classified board of directors through our 2020 annual meeting of stockholders so that not all members of our board of directors are elected at one time;
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•
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provide that our board of directors may, without stockholder approval, issue shares of preferred stock with special voting or economic rights;
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•
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prohibit stockholders from calling a special meeting of our stockholders;
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•
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set forth supermajority requirements for amending certain provisions of our Certificate of Incorporation or our bylaws;
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•
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provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; and
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•
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establish advance notice requirements for nominations for elections to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings.
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Item 1B.
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Unresolved Staff Comments
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Item 2.
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Properties
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Item 3.
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Legal Proceedings
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Item 4.
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Mine Safety Disclosures
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Item 5.
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Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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Dec-14
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Dec-15
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Dec-16
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Dec-17
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Dec-18
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Dec-19
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||||||||||||
Heska Corporation
|
$
|
100
|
|
|
$
|
213
|
|
|
$
|
395
|
|
|
$
|
442
|
|
|
$
|
475
|
|
|
$
|
529
|
|
NASDAQ Medical Supplies Index
|
$
|
100
|
|
|
$
|
111
|
|
|
$
|
126
|
|
|
$
|
165
|
|
|
$
|
177
|
|
|
$
|
234
|
|
NASDAQ Composite Total Return Index
|
$
|
100
|
|
|
$
|
107
|
|
|
$
|
116
|
|
|
$
|
151
|
|
|
$
|
147
|
|
|
$
|
200
|
|
Item 6.
|
Selected Financial Data
|
|
2019
|
|
2018
|
|
2017
|
|
2016
|
|
2015
|
||||||||||
|
(In thousands, except per share data)
|
||||||||||||||||||
Consolidated Statements of Income Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Revenue, net
|
$
|
122,661
|
|
|
$
|
127,446
|
|
|
$
|
129,341
|
|
|
$
|
130,083
|
|
|
$
|
104,597
|
|
Net (loss) income attributable to Heska Corporation
|
$
|
(1,465
|
)
|
|
$
|
5,850
|
|
|
$
|
9,953
|
|
|
$
|
10,508
|
|
|
$
|
5,239
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
(Loss) earnings per share attributable to Heska Corporation:
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic (loss) earnings per share attributable to Heska Corporation
|
$
|
(0.20
|
)
|
|
$
|
0.81
|
|
|
$
|
1.42
|
|
|
$
|
1.55
|
|
|
$
|
0.80
|
|
Diluted (loss) earnings per share attributable to Heska Corporation
|
$
|
(0.20
|
)
|
|
$
|
0.74
|
|
|
$
|
1.30
|
|
|
$
|
1.43
|
|
|
$
|
0.74
|
|
Basic weighted-average common shares outstanding
|
7,446
|
|
|
7,220
|
|
|
7,026
|
|
|
6,783
|
|
|
6,509
|
|
|||||
Diluted weighted-average common shares outstanding
|
7,446
|
|
|
7,856
|
|
|
7,642
|
|
|
7,361
|
|
|
7,074
|
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
Consolidated Balance Sheets Data:
|
|
|
|
|
|
|
|
|
|
||||||||||
Total assets
|
$
|
244,424
|
|
|
$
|
156,452
|
|
|
$
|
135,444
|
|
|
$
|
130,844
|
|
|
$
|
109,719
|
|
Long-term obligations and redeemable preferred stock
|
$
|
50,882
|
|
|
$
|
6,031
|
|
|
$
|
6,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash dividends declared per share:
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Item 7.
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Management's Discussion and Analysis of Financial Condition and Results of Operations
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Revenue
|
$
|
122,661
|
|
|
$
|
127,446
|
|
|
$
|
129,341
|
|
Gross profit
|
54,449
|
|
|
56,638
|
|
|
58,261
|
|
|||
Operating expenses
|
54,122
|
|
|
52,844
|
|
|
40,042
|
|
|||
Operating income
|
327
|
|
|
3,794
|
|
|
18,219
|
|
|||
Interest and other expense (income), net
|
2,910
|
|
|
(13
|
)
|
|
(150
|
)
|
|||
(Loss) income before income taxes and equity in losses of unconsolidated affiliates
|
(2,583
|
)
|
|
3,807
|
|
|
18,369
|
|
|||
Income tax (benefit) expense
|
(1,446
|
)
|
|
(2,115
|
)
|
|
8,913
|
|
|||
Net (loss) income before equity in losses of unconsolidated affiliates
|
(1,137
|
)
|
|
5,922
|
|
|
9,456
|
|
|||
Equity in losses of unconsolidated affiliates
|
(594
|
)
|
|
(72
|
)
|
|
—
|
|
|||
Net (loss) income, after equity in losses of unconsolidated affiliates
|
(1,731
|
)
|
|
5,850
|
|
|
9,456
|
|
|||
Net (loss) income attributable to non-controlling interest
|
(266
|
)
|
|
—
|
|
|
(497
|
)
|
|||
Net (loss) income attributable to Heska Corporation
|
$
|
(1,465
|
)
|
|
$
|
5,850
|
|
|
$
|
9,953
|
|
|
Year Ended December 31,
|
|
Change
|
|||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
Dollar Change
|
% Change
|
Dollar Change
|
% Change
|
||||||||||
Point of Care Laboratory:
|
$
|
67,132
|
|
|
$
|
57,375
|
|
|
$
|
54,855
|
|
|
$
|
9,757
|
|
17%
|
$
|
2,520
|
|
5%
|
Consumables
|
53,590
|
|
|
44,771
|
|
|
39,161
|
|
|
8,819
|
|
20%
|
5,610
|
|
14%
|
|||||
Instruments
|
12,137
|
|
|
10,810
|
|
|
13,773
|
|
|
1,327
|
|
12%
|
(2,963
|
)
|
(22)%
|
|||||
Other
|
1,405
|
|
|
1,794
|
|
|
1,921
|
|
|
(389
|
)
|
(22)%
|
(127
|
)
|
(7)%
|
|||||
Point of Care Imaging
|
25,652
|
|
|
22,832
|
|
|
21,907
|
|
|
2,820
|
|
12%
|
925
|
|
4%
|
|||||
Other CCA Revenue
|
13,786
|
|
|
28,717
|
|
|
28,429
|
|
|
(14,931
|
)
|
(52)%
|
288
|
|
1%
|
|||||
Total CCA Revenue
|
$
|
106,570
|
|
|
$
|
108,924
|
|
|
$
|
105,191
|
|
|
$
|
(2,354
|
)
|
(2)%
|
$
|
3,733
|
|
4%
|
Percent of Total Revenue
|
86.9
|
%
|
|
85.5
|
%
|
|
81.3
|
%
|
|
|
|
|
|
|||||||
Cost of Revenue
|
52,923
|
|
|
56,326
|
|
|
54,509
|
|
|
(3,403
|
)
|
(6)%
|
1,817
|
|
3%
|
|||||
Gross Profit
|
53,647
|
|
|
52,598
|
|
|
50,682
|
|
|
1,049
|
|
2%
|
1,916
|
|
4%
|
|||||
Operating Income
|
$
|
1,358
|
|
|
$
|
2,040
|
|
|
$
|
12,656
|
|
|
$
|
(682
|
)
|
(33)%
|
$
|
(10,616
|
)
|
(84)%
|
|
Year Ended December 31,
|
|
Change
|
|||||||||||||||||
|
2019
|
|
2018
|
|
2017
|
|
Dollar Change
|
% Change
|
Dollar Change
|
% Change
|
||||||||||
Revenue
|
$
|
16,091
|
|
|
$
|
18,522
|
|
|
$
|
24,150
|
|
|
$
|
(2,431
|
)
|
(13)%
|
$
|
(5,628
|
)
|
(23)%
|
Percent of Total Revenue
|
13.1
|
%
|
|
14.5
|
%
|
|
18.7
|
%
|
|
|
|
|
|
|||||||
Cost of Revenue
|
15,289
|
|
|
14,482
|
|
|
16,570
|
|
|
807
|
|
6%
|
(2,088
|
)
|
(13)%
|
|||||
Gross Profit
|
802
|
|
|
4,040
|
|
|
7,580
|
|
|
(3,238
|
)
|
(80)%
|
(3,540
|
)
|
(47)%
|
|||||
Operating (Loss) Income
|
$
|
(1,031
|
)
|
|
$
|
1,754
|
|
|
$
|
5,563
|
|
|
$
|
(2,785
|
)
|
(159)%
|
$
|
(3,809
|
)
|
(68)%
|
|
|
Three Months Ended
December 31,
|
|
Year Ended
December 31,
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
Operating income
|
|
$
|
775
|
|
|
$
|
3,314
|
|
|
$
|
327
|
|
|
$
|
3,794
|
|
Acquisition-related costs(1)
|
|
674
|
|
|
—
|
|
|
674
|
|
|
—
|
|
||||
Litigation and other one-time costs(2)
|
|
—
|
|
|
232
|
|
|
—
|
|
|
7,407
|
|
||||
Non-GAAP operating income
|
|
$
|
1,449
|
|
|
$
|
3,546
|
|
|
$
|
1,001
|
|
|
$
|
11,201
|
|
Non-GAAP operating margin
|
|
4.3
|
%
|
|
10.4
|
%
|
|
0.8
|
%
|
|
8.8
|
%
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Net (loss) income attributable to Heska Corporation
|
|
$
|
(1,728
|
)
|
|
$
|
3,468
|
|
|
$
|
(1,465
|
)
|
|
$
|
5,850
|
|
Income tax expense (benefit)
|
|
520
|
|
|
(175
|
)
|
|
(1,446
|
)
|
|
(2,115
|
)
|
||||
Interest expense (income)
|
|
2,075
|
|
|
4
|
|
|
2,428
|
|
|
49
|
|
||||
Depreciation and amortization
|
|
1,157
|
|
|
1,122
|
|
|
4,916
|
|
|
4,595
|
|
||||
EBITDA
|
|
$
|
2,024
|
|
|
$
|
4,419
|
|
|
$
|
4,433
|
|
|
$
|
8,379
|
|
Acquisition-related costs(1)
|
|
674
|
|
|
—
|
|
|
674
|
|
|
—
|
|
||||
Litigation and other one-time costs(3)
|
|
(250
|
)
|
|
232
|
|
|
307
|
|
|
7,407
|
|
||||
Stock-based compensation
|
|
1,343
|
|
|
1,453
|
|
|
4,968
|
|
|
5,227
|
|
||||
Adjusted EBITDA
|
|
$
|
3,791
|
|
|
$
|
6,104
|
|
|
$
|
10,382
|
|
|
$
|
21,013
|
|
Adjusted EBITDA margin(4)
|
|
11.2
|
%
|
|
17.9
|
%
|
|
8.5
|
%
|
|
16.5
|
%
|
|
|
Three Months Ended
December 31,
|
|
Year Ended
December 31,
|
||||||||||||
|
|
2019
|
|
2018
|
|
2019
|
|
2018
|
||||||||
GAAP net income attributable to Heska per diluted share
|
|
$
|
(0.23
|
)
|
|
$
|
0.44
|
|
|
$
|
(0.20
|
)
|
|
$
|
0.74
|
|
Acquisition-related costs(1)
|
|
0.08
|
|
|
—
|
|
|
0.08
|
|
|
—
|
|
||||
Litigation and other one-time costs(2)
|
|
(0.03
|
)
|
|
0.03
|
|
|
0.04
|
|
|
0.94
|
|
||||
Amortization of debt discount and issuance costs
|
|
0.19
|
|
|
—
|
|
|
0.23
|
|
|
0.01
|
|
||||
Stock-based compensation
|
|
0.17
|
|
|
0.18
|
|
|
0.62
|
|
|
0.67
|
|
||||
Gain (loss) on equity investee transactions
|
|
0.02
|
|
|
0.01
|
|
|
0.07
|
|
|
0.01
|
|
||||
Estimated income tax effect of above non-GAAP adjustments(3)
|
|
(0.11
|
)
|
|
(0.06
|
)
|
|
(0.26
|
)
|
|
(0.40
|
)
|
||||
Discrete tax benefits associated with stock-based compensation activity
|
|
(0.02
|
)
|
|
(0.06
|
)
|
|
(0.21
|
)
|
|
(0.33
|
)
|
||||
Non-GAAP net income per diluted share
|
|
$
|
0.07
|
|
|
$
|
0.54
|
|
|
$
|
0.37
|
|
|
$
|
1.64
|
|
|
|
|
|
|
|
|
|
|
||||||||
Shares used in diluted per share calculations
|
|
8,036
|
|
|
7,947
|
|
|
7,977
|
|
|
7,856
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Net cash provided by operating activities
|
$
|
3,296
|
|
|
$
|
13,287
|
|
|
$
|
10,409
|
|
Net cash used in investing activities
|
(1,923
|
)
|
|
(12,174
|
)
|
|
(17,169
|
)
|
|||
Net cash provided by financing activities
|
74,264
|
|
|
2,627
|
|
|
5,551
|
|
|||
Effect of currency translation on cash
|
4
|
|
|
(10
|
)
|
|
74
|
|
|||
Increase (decrease) in cash and cash equivalents
|
75,641
|
|
|
3,730
|
|
|
(1,135
|
)
|
|||
Cash and cash equivalents, beginning of the period
|
13,389
|
|
|
9,659
|
|
|
10,794
|
|
|||
Cash and cash equivalents, end of the period
|
$
|
89,030
|
|
|
$
|
13,389
|
|
|
$
|
9,659
|
|
|
Total
|
|
Less Than 1 Year
|
|
1 - 3 Years
|
|
3 - 5 Years
|
|
After 5 Years
|
||||||||||
Purchase obligations
|
$
|
13,539
|
|
|
$
|
9,122
|
|
|
$
|
3,329
|
|
|
$
|
1,088
|
|
|
$
|
—
|
|
Consideration payable for acquisition(1)
|
14,579
|
|
|
14,579
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Operating lease obligations
|
6,727
|
|
|
1,792
|
|
|
3,052
|
|
|
1,826
|
|
|
57
|
|
|||||
Finance lease obligations
|
82
|
|
|
46
|
|
|
34
|
|
|
2
|
|
|
—
|
|
|||||
Other long term borrowings
|
1,121
|
|
|
—
|
|
|
—
|
|
|
673
|
|
|
448
|
|
|||||
Convertible senior notes (2)
|
86,250
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
86,250
|
|
|||||
Future interest obligations (3)
|
22,650
|
|
|
3,237
|
|
|
6,475
|
|
|
6,473
|
|
|
6,465
|
|
|||||
Total
|
$
|
144,948
|
|
|
$
|
28,776
|
|
|
$
|
12,890
|
|
|
$
|
10,062
|
|
|
$
|
93,220
|
|
Item 7A.
|
Quantitative and Qualitative Disclosures about Market Risk
|
Item 8.
|
Financial Statements and Supplementary Data
|
|
Page
|
|
|
December 31,
|
||||||
|
|
2019
|
|
2018
|
||||
ASSETS
|
||||||||
Current assets:
|
|
|
|
|
|
|
||
Cash and cash equivalents
|
|
$
|
89,030
|
|
|
$
|
13,389
|
|
Accounts receivable, net of allowance for doubtful accounts of $186 and $245, respectively
|
|
15,161
|
|
|
16,454
|
|
||
Inventories, net
|
|
26,601
|
|
|
25,104
|
|
||
Net investment in leases, current, net of allowance for doubtful accounts of $105 and $40, respectively
|
|
3,856
|
|
|
2,989
|
|
||
Prepaid expenses
|
|
2,219
|
|
|
1,533
|
|
||
Other current assets
|
|
3,000
|
|
|
2,938
|
|
||
Total current assets
|
|
139,867
|
|
|
62,407
|
|
||
Property and equipment, net
|
|
15,469
|
|
|
15,981
|
|
||
Operating lease right-of-use assets
|
|
5,726
|
|
|
—
|
|
||
Goodwill
|
|
36,204
|
|
|
26,679
|
|
||
Other intangible assets, net
|
|
11,472
|
|
|
9,764
|
|
||
Deferred tax asset, net
|
|
6,429
|
|
|
14,121
|
|
||
Net investment in leases, non-current
|
|
14,307
|
|
|
11,908
|
|
||
Investments in unconsolidated affiliates
|
|
7,424
|
|
|
8,018
|
|
||
Other non-current assets
|
|
7,526
|
|
|
7,574
|
|
||
Total assets
|
|
$
|
244,424
|
|
|
$
|
156,452
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
||||||||
Current liabilities:
|
|
|
|
|
|
|
||
Accounts payable
|
|
$
|
6,600
|
|
|
$
|
7,469
|
|
Due to related parties
|
|
—
|
|
|
226
|
|
||
Accrued liabilities
|
|
6,345
|
|
|
10,142
|
|
||
Accrued purchase consideration payable
|
|
14,579
|
|
|
—
|
|
||
Current operating lease liabilities
|
|
1,745
|
|
|
—
|
|
||
Current portion of deferred revenue, and other
|
|
2,930
|
|
|
2,526
|
|
||
Total current liabilities
|
|
32,199
|
|
|
20,363
|
|
||
Convertible note, long-term, net
|
|
45,348
|
|
|
—
|
|
||
Deferred revenue, net of current portion
|
|
5,966
|
|
|
7,082
|
|
||
Line of credit and other long-term borrowings
|
|
1,121
|
|
|
6,000
|
|
||
Non-current operating lease liabilities
|
|
4,413
|
|
|
—
|
|
||
Deferred tax liability
|
|
691
|
|
|
—
|
|
||
Other liabilities
|
|
152
|
|
|
598
|
|
||
Total liabilities
|
|
89,890
|
|
|
34,043
|
|
||
|
|
|
|
|
||||
Redeemable non-controlling interest and mezzanine equity
|
|
170
|
|
|
—
|
|
||
|
|
|
|
|
||||
Stockholders' equity:
|
|
|
|
|
|
|
||
Preferred stock, $.01 par value, 2,500,000 and 2,500,000 shares authorized, respectively, none issued or outstanding
|
|
—
|
|
|
—
|
|
||
Original common stock, $.01 par value, 10,250,000 and 10,250,000 shares authorized,
respectively, none issued or outstanding |
|
—
|
|
|
—
|
|
||
Public common stock, $.01 par value, 10,250,000 and 10,250,000 shares authorized, 7,881,928 and 7,675,692 shares issued and outstanding, respectively
|
|
79
|
|
|
77
|
|
||
Additional paid-in capital
|
|
290,216
|
|
|
257,034
|
|
||
Accumulated other comprehensive income
|
|
513
|
|
|
277
|
|
||
Accumulated deficit
|
|
(136,444
|
)
|
|
(134,979
|
)
|
||
Total stockholders' equity
|
|
154,364
|
|
|
122,409
|
|
||
Total liabilities and stockholders' equity
|
|
$
|
244,424
|
|
|
$
|
156,452
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
Revenue:
|
|
|
|
|
|
|
|
|
|
|||
Core companion animal
|
|
$
|
106,570
|
|
|
$
|
108,924
|
|
|
$
|
105,191
|
|
Other vaccines and pharmaceuticals
|
|
16,091
|
|
|
18,522
|
|
|
24,150
|
|
|||
Total revenue, net
|
|
122,661
|
|
|
127,446
|
|
|
129,341
|
|
|||
|
|
|
|
|
|
|
||||||
Cost of revenue
|
|
68,212
|
|
|
70,808
|
|
|
71,080
|
|
|||
|
|
|
|
|
|
|
||||||
Gross profit
|
|
54,449
|
|
|
56,638
|
|
|
58,261
|
|
|||
|
|
|
|
|
|
|
||||||
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|||
Selling and marketing
|
|
27,678
|
|
|
24,663
|
|
|
23,225
|
|
|||
Research and development
|
|
8,240
|
|
|
3,334
|
|
|
2,004
|
|
|||
General and administrative
|
|
18,204
|
|
|
24,847
|
|
|
14,813
|
|
|||
Total operating expenses
|
|
54,122
|
|
|
52,844
|
|
|
40,042
|
|
|||
Operating income
|
|
327
|
|
|
3,794
|
|
|
18,219
|
|
|||
Interest and other expense (income), net
|
|
2,910
|
|
|
(13
|
)
|
|
(150
|
)
|
|||
(Loss) income before income taxes and equity in losses of unconsolidated affiliates
|
|
(2,583
|
)
|
|
3,807
|
|
|
18,369
|
|
|||
Income tax (benefit) expense:
|
|
|
|
|
|
|
|
|
|
|||
Current income tax expense
|
|
359
|
|
|
140
|
|
|
49
|
|
|||
Deferred income tax (benefit) expense
|
|
(1,805
|
)
|
|
(2,255
|
)
|
|
8,864
|
|
|||
Total income tax (benefit) expense
|
|
(1,446
|
)
|
|
(2,115
|
)
|
|
8,913
|
|
|||
|
|
|
|
|
|
|
||||||
Net (loss) income before equity in losses of unconsolidated affiliates
|
|
(1,137
|
)
|
|
5,922
|
|
|
9,456
|
|
|||
Equity in losses of unconsolidated affiliates
|
|
(594
|
)
|
|
(72
|
)
|
|
—
|
|
|||
Net (loss) income, after equity in losses of unconsolidated affiliates
|
|
(1,731
|
)
|
|
5,850
|
|
|
9,456
|
|
|||
Net loss attributable to non-controlling interest
|
|
(266
|
)
|
|
—
|
|
|
(497
|
)
|
|||
Net (loss) income attributable to Heska Corporation
|
|
$
|
(1,465
|
)
|
|
$
|
5,850
|
|
|
$
|
9,953
|
|
|
|
|
|
|
|
|
||||||
Basic (loss) earnings per share attributable to Heska Corporation
|
|
$
|
(0.20
|
)
|
|
$
|
0.81
|
|
|
$
|
1.42
|
|
Diluted (loss) earnings per share attributable to Heska Corporation
|
|
$
|
(0.20
|
)
|
|
$
|
0.74
|
|
|
$
|
1.30
|
|
|
|
|
|
|
|
|
||||||
Weighted average outstanding shares used to compute basic (loss) earnings per share attributable to Heska Corporation
|
|
7,446
|
|
|
7,220
|
|
|
7,026
|
|
|||
Weighted average outstanding shares used to compute diluted (loss) earnings per share attributable to Heska Corporation
|
|
7,446
|
|
|
7,856
|
|
|
7,642
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
|
|
|
|
|
|
|
||||||
Net (loss) income, after equity in losses of unconsolidated affiliates
|
|
$
|
(1,731
|
)
|
|
$
|
5,850
|
|
|
$
|
9,456
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|||
Minimum pension liability
|
|
73
|
|
|
70
|
|
|
12
|
|
|||
Foreign currency translation
|
|
163
|
|
|
(25
|
)
|
|
123
|
|
|||
Comprehensive (loss) income
|
|
(1,495
|
)
|
|
5,895
|
|
|
9,591
|
|
|||
|
|
|
|
|
|
|
||||||
Comprehensive loss attributable to non-controlling interest
|
|
(266
|
)
|
|
—
|
|
|
(497
|
)
|
|||
Comprehensive (loss) income attributable to Heska Corporation
|
|
$
|
(1,229
|
)
|
|
$
|
5,895
|
|
|
$
|
10,088
|
|
|
|
Common Stock
|
|
Additional
Paid-in
Capital
|
|
Accumulated
Other
Comprehensive
Income
|
|
Accumulated
Deficit
|
|
Total Stockholders' Equity |
|||||||||||||
|
|
Shares
|
|
Amount
|
|
||||||||||||||||||
Balances, January 1, 2017
|
|
7,026
|
|
|
$
|
70
|
|
|
$
|
238,635
|
|
|
$
|
97
|
|
|
$
|
(151,827
|
)
|
|
$
|
86,975
|
|
Net income attributable to Heska Corporation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9,456
|
|
|
9,456
|
|
|||||
Issuance of common stock, net of shares withheld for employee taxes
|
|
277
|
|
|
3
|
|
|
1,373
|
|
|
—
|
|
|
—
|
|
|
1,376
|
|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
2,745
|
|
|
—
|
|
|
—
|
|
|
2,745
|
|
|||||
Accretion of non-controlling interest
|
|
—
|
|
|
—
|
|
|
845
|
|
|
—
|
|
|
—
|
|
|
845
|
|
|||||
Distribution for Heska Imaging minority
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,092
|
)
|
|
(1,092
|
)
|
|||||
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
135
|
|
|
—
|
|
|
135
|
|
|||||
Balances, December 31, 2017
|
|
7,303
|
|
|
$
|
73
|
|
|
$
|
243,598
|
|
|
$
|
232
|
|
|
$
|
(143,463
|
)
|
|
$
|
100,440
|
|
Adoption of accounting standards
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,634
|
|
|
2,634
|
|
|||||
Balances, January 1, 2018, as adjusted
|
|
7,303
|
|
|
73
|
|
|
243,598
|
|
|
232
|
|
|
(140,829
|
)
|
|
103,074
|
|
|||||
Net income attributable to Heska Corporation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,850
|
|
|
5,850
|
|
|||||
Issuance of common stock, net of shares withheld for employee taxes
|
|
318
|
|
|
3
|
|
|
2,759
|
|
|
—
|
|
|
—
|
|
|
2,762
|
|
|||||
Issuance of common stock related to acquisition of assets from Cuattro, LLC
|
|
55
|
|
|
1
|
|
|
5,450
|
|
|
—
|
|
|
—
|
|
|
5,451
|
|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
5,227
|
|
|
—
|
|
|
—
|
|
|
5,227
|
|
|||||
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45
|
|
|
—
|
|
|
45
|
|
|||||
Balances, December 31, 2018
|
|
7,676
|
|
|
77
|
|
|
257,034
|
|
|
277
|
|
|
(134,979
|
)
|
|
122,409
|
|
|||||
Net loss attributable to Heska Corporation
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,465
|
)
|
|
(1,465
|
)
|
|||||
Issuance of common stock, net of shares withheld for employee taxes
|
|
206
|
|
|
2
|
|
|
(1,620
|
)
|
|
—
|
|
|
—
|
|
|
(1,618
|
)
|
|||||
Stock-based compensation
|
|
—
|
|
|
—
|
|
|
4,968
|
|
|
—
|
|
|
—
|
|
|
4,968
|
|
|||||
Convertible notes, equity
|
|
—
|
|
|
—
|
|
|
29,834
|
|
|
—
|
|
|
—
|
|
|
29,834
|
|
|||||
Other comprehensive income
|
|
—
|
|
|
—
|
|
|
—
|
|
|
236
|
|
|
—
|
|
|
236
|
|
|||||
Balances, December 31, 2019
|
|
7,882
|
|
|
$
|
79
|
|
|
$
|
290,216
|
|
|
$
|
513
|
|
|
$
|
(136,444
|
)
|
|
$
|
154,364
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
||||||
Net (loss) income, after equity in losses from unconsolidated affiliates
|
|
$
|
(1,731
|
)
|
|
$
|
5,850
|
|
|
$
|
9,456
|
|
Adjustments to reconcile net income to cash provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|||
Depreciation and amortization
|
|
4,916
|
|
|
4,595
|
|
|
4,754
|
|
|||
Non-cash impact of operating leases
|
|
1,565
|
|
|
—
|
|
|
—
|
|
|||
Deferred income tax (benefit) expense
|
|
(1,805
|
)
|
|
(2,255
|
)
|
|
8,864
|
|
|||
Stock-based compensation
|
|
4,968
|
|
|
5,227
|
|
|
2,745
|
|
|||
Equity in losses of unconsolidated affiliates
|
|
594
|
|
|
72
|
|
|
—
|
|
|||
Amortization of debt discount and issuance costs
|
|
1,842
|
|
|
—
|
|
|
—
|
|
|||
Accretion of non-controlling interest
|
|
14
|
|
|
—
|
|
|
—
|
|
|||
Unrealized foreign currency transaction loss on purchase consideration payable
|
|
159
|
|
|
—
|
|
|
—
|
|
|||
Other losses (gains)
|
|
387
|
|
|
8
|
|
|
(46
|
)
|
|||
Changes in operating assets and liabilities (net of effect of acquisitions):
|
|
|
|
|
|
|
|
|
|
|||
Accounts receivable
|
|
3,796
|
|
|
(1,076
|
)
|
|
5,243
|
|
|||
Inventories
|
|
918
|
|
|
6,046
|
|
|
(13,834
|
)
|
|||
Due from related parties
|
|
—
|
|
|
1
|
|
|
99
|
|
|||
Lease receivable, current
|
|
(846
|
)
|
|
(920
|
)
|
|
(1,244
|
)
|
|||
Other current assets
|
|
(394
|
)
|
|
(505
|
)
|
|
(474
|
)
|
|||
Accounts payable
|
|
(1,686
|
)
|
|
(2,020
|
)
|
|
3,143
|
|
|||
Due to related parties
|
|
(226
|
)
|
|
(1,477
|
)
|
|
250
|
|
|||
Accrued liabilities and other
|
|
(5,883
|
)
|
|
6,146
|
|
|
(1,380
|
)
|
|||
Lease receivable, non-current
|
|
(2,283
|
)
|
|
(2,294
|
)
|
|
(4,782
|
)
|
|||
Other non-current assets
|
|
(57
|
)
|
|
(871
|
)
|
|
(984
|
)
|
|||
Deferred revenue and other
|
|
(952
|
)
|
|
(3,240
|
)
|
|
(1,401
|
)
|
|||
Net cash provided by operating activities
|
|
3,296
|
|
|
13,287
|
|
|
10,409
|
|
|||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
||||||
Investment in subsidiary, net of cash acquired
|
|
(622
|
)
|
|
—
|
|
|
—
|
|
|||
Cash acquired from acquisition of CVM
|
|
927
|
|
|
—
|
|
|
—
|
|
|||
Acquisition of intangible asset
|
|
—
|
|
|
(2,750
|
)
|
|
—
|
|
|||
Investments in unconsolidated affiliates
|
|
—
|
|
|
(8,091
|
)
|
|
—
|
|
|||
Purchase of minority interest
|
|
—
|
|
|
—
|
|
|
(13,757
|
)
|
|||
Real estate asset acquisition
|
|
(1,184
|
)
|
|
—
|
|
|
—
|
|
|||
Purchases of property and equipment
|
|
(1,044
|
)
|
|
(1,358
|
)
|
|
(3,469
|
)
|
|||
Proceeds from disposition of property and equipment
|
|
—
|
|
|
25
|
|
|
57
|
|
|||
Net cash used in investing activities
|
|
(1,923
|
)
|
|
(12,174
|
)
|
|
(17,169
|
)
|
|||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
||||||
Proceeds from issuance of common stock
|
|
1,829
|
|
|
4,034
|
|
|
2,452
|
|
|||
Repurchase of common stock
|
|
(3,447
|
)
|
|
(1,271
|
)
|
|
(1,076
|
)
|
|||
Distributions to non-controlling interest members
|
|
—
|
|
|
(126
|
)
|
|
(965
|
)
|
|||
Convertible debt proceeds
|
|
86,250
|
|
|
—
|
|
|
—
|
|
|||
Proceeds from line of credit borrowings
|
|
6,750
|
|
|
3,000
|
|
|
40,307
|
|
|||
Repayments of line of credit borrowings
|
|
(12,750
|
)
|
|
(3,000
|
)
|
|
(34,979
|
)
|
|||
Repayments of other debt
|
|
(1,191
|
)
|
|
(10
|
)
|
|
(68
|
)
|
|||
Payment of debt issuance costs
|
|
(3,177
|
)
|
|
—
|
|
|
(120
|
)
|
|||
Net cash provided by financing activities
|
|
74,264
|
|
|
2,627
|
|
|
5,551
|
|
|||
NET EFFECT OF EXCHANGE RATE CHANGES ON CASH
|
|
4
|
|
|
(10
|
)
|
|
74
|
|
|||
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
|
|
75,641
|
|
|
3,730
|
|
|
(1,135
|
)
|
|||
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
|
13,389
|
|
|
9,659
|
|
|
10,794
|
|
|||
CASH AND CASH EQUIVALENTS, END OF YEAR
|
|
$
|
89,030
|
|
|
$
|
13,389
|
|
|
$
|
9,659
|
|
NON-CASH TRANSACTIONS:
|
|
|
|
|
|
|
||||||
Transfers of equipment between inventory and property and equipment, net
|
|
$
|
827
|
|
|
$
|
1,449
|
|
|
$
|
1,637
|
|
Consideration payable for CVM Acquisition (See Note 3)
|
|
$
|
14,420
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Common stock issued as partial consideration of Cuattro acquisition transactions (See Note 3)
|
|
$
|
—
|
|
|
$
|
5,450
|
|
|
$
|
—
|
|
|
Years Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Balances at beginning of period
|
$
|
245
|
|
|
$
|
215
|
|
|
$
|
237
|
|
Additions - charged to expense
|
113
|
|
|
104
|
|
|
168
|
|
|||
Deductions - write offs, net of recoveries
|
(172
|
)
|
|
(74
|
)
|
|
(190
|
)
|
|||
Balances at end of period
|
$
|
186
|
|
|
$
|
245
|
|
|
$
|
215
|
|
|
As of December 31,
|
||||
|
2019
|
|
2018
|
||
European Union Euros
|
1,773
|
|
|
1,615
|
|
Swiss Francs
|
124
|
|
|
156
|
|
Canadian Dollars
|
88
|
|
|
—
|
|
Australian Dollars
|
54
|
|
|
—
|
|
•
|
Point of Care laboratory products including instruments, consumables and services;
|
•
|
Point of Care imaging products including instruments, software and services;
|
•
|
Single use pharmaceuticals, vaccines and diagnostic tests primarily related to companion animals; and
|
•
|
Other vaccines and pharmaceuticals.
|
•
|
Contract manufacturing agreements; and
|
•
|
Other license, research and development revenue.
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Point of Care laboratory revenue:
|
$
|
67,132
|
|
|
$
|
57,375
|
|
|
$
|
54,855
|
|
Consumables
|
53,590
|
|
|
44,771
|
|
|
39,161
|
|
|||
Sales-type leases
|
6,890
|
|
|
5,888
|
|
|
7,382
|
|
|||
Outright instrument sales
|
5,247
|
|
|
4,922
|
|
|
6,391
|
|
|||
Other
|
1,405
|
|
|
1,794
|
|
|
1,921
|
|
|||
|
|
|
|
|
|
||||||
Point of Care imaging revenue:
|
25,652
|
|
|
22,832
|
|
|
21,907
|
|
|||
Outright instrument sales
|
22,594
|
|
|
19,746
|
|
|
19,187
|
|
|||
Other
|
3,058
|
|
|
3,086
|
|
|
2,720
|
|
|||
|
|
|
|
|
|
||||||
Other CCA revenue:
|
13,786
|
|
|
28,717
|
|
|
28,429
|
|
|||
Other pharmaceuticals, vaccines and diagnostic tests
|
13,495
|
|
|
28,265
|
|
|
28,008
|
|
|||
Research and development, license and royalty revenue
|
291
|
|
|
452
|
|
|
421
|
|
|||
|
|
|
|
|
|
||||||
Total CCA revenue
|
$
|
106,570
|
|
|
$
|
108,924
|
|
|
$
|
105,191
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Contract manufacturing
|
$
|
15,374
|
|
|
$
|
17,508
|
|
|
$
|
23,490
|
|
License, research and development
|
717
|
|
|
1,014
|
|
|
660
|
|
|||
Total OVP revenue
|
$
|
16,091
|
|
|
$
|
18,522
|
|
|
$
|
24,150
|
|
Year Ending December 31,
|
Revenue
|
|
|
2020
|
$
|
26,939
|
|
2021
|
23,808
|
|
|
2022
|
20,724
|
|
|
2023
|
17,815
|
|
|
2024
|
13,626
|
|
|
Thereafter
|
14,897
|
|
|
|
$
|
117,809
|
|
Purchase Price
|
December 5, 2019
|
||
Consideration payable to former owners
|
$
|
14,420
|
|
Total
|
$
|
14,420
|
|
|
|
||
Net Assets Acquired
|
|
||
Cash and cash equivalents
|
$
|
927
|
|
Accounts receivable
|
2,392
|
|
|
Inventories
|
1,494
|
|
|
Other current assets
|
10
|
|
|
Property and equipment
|
382
|
|
|
Other intangible assets
|
2,551
|
|
|
Other non-current assets
|
178
|
|
|
Accounts payable
|
(250
|
)
|
|
Current portion of deferred revenue, and other
|
(164
|
)
|
|
Deferred tax liability
|
(683
|
)
|
|
Other long-term borrowings
|
(1,109
|
)
|
|
Other liabilities
|
(157
|
)
|
|
Total fair value of net assets acquired
|
5,571
|
|
|
Goodwill
|
8,849
|
|
|
Total fair value of consideration transferred
|
$
|
14,420
|
|
|
Useful Life
|
|
Amortization Method
|
|
Fair Value
|
Customer relationships
|
6 years
|
|
Straight-line
|
|
$2,440
|
Trade name
|
4 years
|
|
Straight-line
|
|
$111
|
|
Year Ended December 31,
|
||||||
|
2019
|
|
2018
|
||||
Total revenue, net
|
$
|
130,434
|
|
|
$
|
135,344
|
|
Net (loss) income attributable to Heska Corporation
|
(788
|
)
|
|
5,970
|
|
|
December 31, 2019
|
|
December 31, 2018
|
||||
Equity method investment
|
$
|
4,406
|
|
|
$
|
5,000
|
|
Non-marketable equity security investment
|
3,018
|
|
|
3,018
|
|
||
|
$
|
7,424
|
|
|
$
|
8,018
|
|
|
|
December 31,
|
||||||
|
|
2019
|
|
2018
|
||||
Inventory
|
|
$
|
2,005
|
|
|
$
|
1,249
|
|
Accrued compensation
|
|
122
|
|
|
110
|
|
||
Stock options
|
|
1,858
|
|
|
1,281
|
|
||
Research and development
|
|
990
|
|
|
476
|
|
||
Legal settlement
|
|
—
|
|
|
1,678
|
|
||
Research and development expense
|
|
1,417
|
|
|
—
|
|
||
Deferred revenue
|
|
2,052
|
|
|
3,305
|
|
||
Property and equipment
|
|
3,469
|
|
|
3,065
|
|
||
Net operating loss carryforwards
|
|
11,676
|
|
|
17,088
|
|
||
Foreign tax credit carryforward
|
|
64
|
|
|
38
|
|
||
Sales-type leases
|
|
(1,968
|
)
|
|
(3,936
|
)
|
||
Convertible debt equity component
|
|
(9,421
|
)
|
|
—
|
|
||
Foreign intangible
|
|
(691
|
)
|
|
—
|
|
||
Other
|
|
(179
|
)
|
|
—
|
|
||
|
|
11,394
|
|
|
24,354
|
|
||
Valuation allowance
|
|
(5,656
|
)
|
|
(10,233
|
)
|
||
Total net deferred tax assets
|
|
$
|
5,738
|
|
|
$
|
14,121
|
|
|
|
Year Ended December 31,
|
||||||||||
|
|
2019
|
|
2018
|
|
2017
|
||||||
Current income tax expense:
|
|
|
|
|
|
|
|
|
|
|||
Federal
|
|
$
|
—
|
|
|
$
|
(115
|
)
|
|
$
|
—
|
|
State
|
|
189
|
|
|
192
|
|
|
6
|
|
|||
Foreign
|
|
170
|
|
|
63
|
|
|
43
|
|
|||
Total current expense
|
|
$
|
359
|
|
|
$
|
140
|
|
|
$
|
49
|
|
Deferred income tax (benefit) expense:
|
|
|
|
|
|
|
|
|
|
|||
Federal
|
|
$
|
(1,610
|
)
|
|
$
|
(1,877
|
)
|
|
$
|
9,736
|
|
State
|
|
(307
|
)
|
|
(378
|
)
|
|
(872
|
)
|
|||
Foreign
|
|
112
|
|
|
—
|
|
|
—
|
|
|||
Total deferred (benefit) expense
|
|
(1,805
|
)
|
|
(2,255
|
)
|
|
8,864
|
|
|||
Total income tax (benefit) expense
|
|
$
|
(1,446
|
)
|
|
$
|
(2,115
|
)
|
|
$
|
8,913
|
|
|
Year Ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
2017
|
|||
Statutory federal tax rate
|
21
|
%
|
|
21
|
%
|
|
34
|
%
|
State income taxes, net of federal benefit
|
9
|
%
|
|
(8
|
)%
|
|
(5
|
)%
|
Non-controlling interest in Heska Imaging US, LLC
|
—
|
%
|
|
—
|
%
|
|
1
|
%
|
Non-controlling interest in Optomed
|
(2
|
)%
|
|
—
|
%
|
|
—
|
%
|
Non-temporary stock option benefit
|
48
|
%
|
|
(50
|
)%
|
|
(30
|
)%
|
Meals and entertainment permanent difference
|
(2
|
)%
|
|
1
|
%
|
|
—
|
%
|
GILTI permanent difference
|
2
|
%
|
|
1
|
%
|
|
—
|
%
|
Other permanent differences
|
(1
|
)%
|
|
1
|
%
|
|
1
|
%
|
Foreign tax rate differences
|
6
|
%
|
|
—
|
%
|
|
—
|
%
|
Change in tax rate
|
(6
|
)%
|
|
—
|
%
|
|
32
|
%
|
Change in valuation allowance
|
(17
|
)%
|
|
—
|
%
|
|
16
|
%
|
Other deferred differences
|
(9
|
)%
|
|
(21
|
)%
|
|
—
|
%
|
Transaction costs
|
(6
|
)%
|
|
—
|
%
|
|
—
|
%
|
Executive compensation limit
|
(7
|
)%
|
|
—
|
%
|
|
—
|
%
|
Research & development credit
|
20
|
%
|
|
—
|
%
|
|
—
|
%
|
Other
|
—
|
%
|
|
(1
|
)%
|
|
—
|
%
|
Effective income tax rate
|
56
|
%
|
|
(56
|
)%
|
|
49
|
%
|
Cash paid for amounts included in the measurement of operating lease liabilities
|
$
|
1,800
|
|
ROU assets obtained in exchange for operating lease obligations
|
604
|
|
Weighted average remaining lease term
|
3.8 years
|
|
Weighted average discount rate
|
4.44
|
%
|
Year Ending December 31,
|
|
||
2020
|
$
|
1,792
|
|
2021
|
1,639
|
|
|
2022
|
1,413
|
|
|
2023
|
1,796
|
|
|
2024
|
30
|
|
|
Thereafter
|
57
|
|
|
Total operating lease payments
|
6,727
|
|
|
Less: imputed interest
|
569
|
|
|
Total operating lease liabilities
|
$
|
6,158
|
|
Year Ending December 31,
|
|
||
2020
|
$
|
3,856
|
|
2021
|
4,087
|
|
|
2022
|
3,758
|
|
|
2023
|
3,047
|
|
|
2024
|
2,118
|
|
|
Thereafter
|
1,297
|
|
|
|
$
|
18,163
|
|
|
Years ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Net (loss) income attributable to Heska Corporation
|
$
|
(1,465
|
)
|
|
$
|
5,850
|
|
|
$
|
9,953
|
|
|
|
|
|
|
|
||||||
Basic weighted-average common shares outstanding
|
7,446
|
|
|
7,220
|
|
|
7,026
|
|
|||
Assumed exercise of dilutive stock options and restricted shares
|
—
|
|
|
636
|
|
|
616
|
|
|||
Diluted weighted-average common shares outstanding
|
7,446
|
|
|
7,856
|
|
|
7,642
|
|
|||
|
|
|
|
|
|
||||||
Basic (loss) earnings per share attributable to Heska Corporation
|
$
|
(0.20
|
)
|
|
$
|
0.81
|
|
|
$
|
1.42
|
|
Diluted (loss) earnings per share attributable to Heska Corporation
|
$
|
(0.20
|
)
|
|
$
|
0.74
|
|
|
$
|
1.30
|
|
|
Years ended December 31,
|
|||||||
|
2019
|
|
2018
|
|
2017
|
|||
Stock options and restricted shares
|
300
|
|
|
111
|
|
|
123
|
|
Carrying amount, December 31, 2017
|
$
|
26,687
|
|
Foreign currency adjustments
|
(8
|
)
|
|
Carrying amount, December 31, 2018
|
$
|
26,679
|
|
Goodwill attributable to acquisitions (subject to change)
|
9,396
|
|
|
Foreign currency adjustments
|
129
|
|
|
Carrying amount, December 31, 2019
|
$
|
36,204
|
|
|
2019
|
|
2018
|
||||||||||||||||||||
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Net Carrying Amount
|
||||||||||||
Developed technology
|
$
|
8,200
|
|
|
$
|
(819
|
)
|
|
$
|
7,381
|
|
|
$
|
8,200
|
|
|
$
|
—
|
|
|
$
|
8,200
|
|
Customer relationships and other
|
6,317
|
|
|
(2,226
|
)
|
|
4,091
|
|
|
3,303
|
|
|
(1,739
|
)
|
|
1,564
|
|
||||||
Total intangible assets
|
$
|
14,517
|
|
|
$
|
(3,045
|
)
|
|
$
|
11,472
|
|
|
$
|
11,503
|
|
|
$
|
(1,739
|
)
|
|
$
|
9,764
|
|
|
Years Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Amortization expense
|
$
|
1,278
|
|
|
$
|
388
|
|
|
$
|
388
|
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Land
|
$
|
694
|
|
|
$
|
377
|
|
Building
|
3,845
|
|
|
2,978
|
|
||
Machinery and equipment
|
28,777
|
|
|
33,087
|
|
||
Office furniture and equipment
|
1,345
|
|
|
1,687
|
|
||
Computer hardware and software
|
3,408
|
|
|
4,704
|
|
||
Leasehold and building improvements
|
10,558
|
|
|
9,953
|
|
||
Construction in progress
|
671
|
|
|
1,274
|
|
||
Property and equipment, gross
|
49,298
|
|
|
54,060
|
|
||
Less accumulated depreciation
|
(33,829
|
)
|
|
(38,079
|
)
|
||
Total property and equipment, net
|
$
|
15,469
|
|
|
$
|
15,981
|
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Raw materials
|
$
|
15,320
|
|
|
$
|
15,000
|
|
Work in process
|
2,802
|
|
|
3,592
|
|
||
Finished goods
|
9,786
|
|
|
8,085
|
|
||
Allowance for excess or obsolete inventory
|
(1,307
|
)
|
|
(1,573
|
)
|
||
Total inventory, net
|
$
|
26,601
|
|
|
$
|
25,104
|
|
|
December 31,
|
||||||
|
2019
|
|
2018
|
||||
Accrued payroll and employee benefits
|
$
|
1,175
|
|
|
$
|
759
|
|
Accrued property taxes
|
681
|
|
|
632
|
|
||
Accrued settlement (see Note 14)
|
—
|
|
|
6,750
|
|
||
Accrued purchase orders
|
739
|
|
|
699
|
|
||
Other
|
3,750
|
|
|
1,302
|
|
||
Total accrued liabilities
|
$
|
6,345
|
|
|
$
|
10,142
|
|
|
2019
|
|
2018
|
|
2017
|
Risk-free interest rate
|
1.62%
|
|
2.66%
|
|
1.76%
|
Expected lives
|
4.7 years
|
|
4.9 years
|
|
4.8 years
|
Expected volatility
|
40%
|
|
40%
|
|
41%
|
Expected dividend yield
|
0%
|
|
0%
|
|
0%
|
|
Year Ended December 31,
|
|||||
|
2019
|
|||||
|
Options
|
|
Weighted Average Exercise Price
|
|||
Outstanding at beginning of period
|
620,553
|
|
|
$
|
40.741
|
|
Granted at market
|
88,200
|
|
|
$
|
84.234
|
|
Forfeited
|
(1,353
|
)
|
|
$
|
98.660
|
|
Expired
|
(716
|
)
|
|
$
|
98.660
|
|
Exercised
|
(170,369
|
)
|
|
$
|
18.125
|
|
Outstanding at end of period
|
536,315
|
|
|
$
|
54.855
|
|
Exercisable at end of period
|
315,964
|
|
|
$
|
37.644
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
||||||||||||||
Exercise Prices
|
|
Number of
Options Outstanding at December 31, 2019 |
|
Weighted
Average Remaining Contractual Life in Years |
|
Weighted
Average Outstanding Price |
|
Number of
Options Exercisable at December 31, 2019 |
|
Weighted
Average Remaining Contractual Life in Years |
|
Weighted
Average Exercise Price |
||||||
$4.96 - $7.36
|
|
85,552
|
|
|
3.18
|
|
$
|
7.043
|
|
|
85,552
|
|
|
3.18
|
|
$
|
7.043
|
|
$7.37 - $32.21
|
|
74,668
|
|
|
4.25
|
|
$
|
15.697
|
|
|
74,668
|
|
|
4.25
|
|
$
|
15.697
|
|
$32.22 - $62.50
|
|
52,939
|
|
|
6.07
|
|
$
|
39.800
|
|
|
52,771
|
|
|
6.07
|
|
$
|
39.752
|
|
$62.51 - $69.77
|
|
128,333
|
|
|
8.18
|
|
$
|
69.770
|
|
|
41,670
|
|
|
8.18
|
|
$
|
69.770
|
|
$69.78 - $108.25
|
|
194,823
|
|
|
8.46
|
|
$
|
85.125
|
|
|
61,303
|
|
|
7.18
|
|
$
|
83.428
|
|
$4.96 - $108.25
|
|
536,315
|
|
|
6.73
|
|
$
|
54.855
|
|
|
315,964
|
|
|
5.35
|
|
$
|
37.644
|
|
|
2019
|
|
2018
|
|
2017
|
Risk-free interest rate
|
2.09%
|
|
1.67%
|
|
0.74%
|
Expected lives
|
1.1 years
|
|
1.2 years
|
|
1.2 years
|
Expected volatility
|
40%
|
|
42%
|
|
45%
|
Expected dividend yield
|
0%
|
|
0%
|
|
0%
|
|
|
Restricted Stock
|
|
Weighted-Average Grant Date Fair Value Per Award
|
|||
Non-vested as of December 31, 2018
|
|
259,430
|
|
|
$
|
74.26
|
|
Granted
|
|
83,567
|
|
|
$
|
74.93
|
|
Vested
|
|
(4,230
|
)
|
|
$
|
85.09
|
|
Forfeited
|
|
(3,100
|
)
|
|
$
|
80.90
|
|
Non-vested as of December 31, 2019
|
|
335,667
|
|
|
$
|
74.29
|
|
|
Minimum pension liability
|
|
Foreign currency translation
|
|
Total accumulated other comprehensive income
|
||||||
Balances at December 31, 2017
|
$
|
(489
|
)
|
|
$
|
721
|
|
|
$
|
232
|
|
Other comprehensive income
|
70
|
|
|
(25
|
)
|
|
45
|
|
|||
Balances at December 31, 2018
|
(419
|
)
|
|
696
|
|
|
277
|
|
|||
Other comprehensive income
|
73
|
|
|
163
|
|
|
236
|
|
|||
Balances at December 31, 2019
|
$
|
(346
|
)
|
|
$
|
859
|
|
|
$
|
513
|
|
|
Year Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
Interest income
|
$
|
(661
|
)
|
|
$
|
(261
|
)
|
|
$
|
(167
|
)
|
Interest expense
|
3,089
|
|
|
310
|
|
|
245
|
|
|||
Other expense (income), net
|
482
|
|
|
(62
|
)
|
|
(228
|
)
|
|||
Interest and other expense (income), net
|
$
|
2,910
|
|
|
$
|
(13
|
)
|
|
$
|
(150
|
)
|
|
December 31, 2019
|
||
Carrying amount of equity component
|
$
|
39,508
|
|
|
|
||
Principal amount of the Notes
|
86,250
|
|
|
Unamortized debt discount
|
(40,902
|
)
|
|
Net carrying amount
|
$
|
45,348
|
|
|
Twelve Months Ended December 31, 2019
|
||
Interest expense related to contractual coupon interest
|
$
|
925
|
|
Interest expense related to amortization of the debt discount
|
1,744
|
|
|
|
$
|
2,669
|
|
Year Ended December 31, 2019
|
|
Core
Companion Animal |
|
Other Vaccines and
Pharmaceuticals |
|
Total |
||||||
Total revenue
|
|
$
|
106,570
|
|
|
$
|
16,091
|
|
|
$
|
122,661
|
|
Operating income (loss)
|
|
1,358
|
|
|
(1,031
|
)
|
|
327
|
|
|||
(Loss) income before income taxes
|
|
(1,552
|
)
|
|
(1,031
|
)
|
|
(2,583
|
)
|
|||
Investments in unconsolidated affiliates
|
|
7,424
|
|
|
—
|
|
|
7,424
|
|
|||
Total assets
|
|
223,980
|
|
|
20,444
|
|
|
244,424
|
|
|||
Net assets
|
|
137,072
|
|
|
17,292
|
|
|
154,364
|
|
|||
Capital expenditures
|
|
259
|
|
|
785
|
|
|
1,044
|
|
|||
Depreciation and amortization
|
|
3,611
|
|
|
1,305
|
|
|
4,916
|
|
Year Ended December 31, 2018
|
|
Core
Companion Animal |
|
Other Vaccines and
Pharmaceuticals |
|
Total |
||||||
Total revenue
|
|
$
|
108,924
|
|
|
$
|
18,522
|
|
|
$
|
127,446
|
|
Operating income
|
|
2,040
|
|
|
1,754
|
|
|
3,794
|
|
|||
Income before income taxes
|
|
2,053
|
|
|
1,754
|
|
|
3,807
|
|
|||
Investments in unconsolidated affiliates
|
|
8,018
|
|
|
—
|
|
|
8,018
|
|
|||
Total assets
|
|
133,586
|
|
|
22,866
|
|
|
156,452
|
|
|||
Net assets
|
|
96,129
|
|
|
26,280
|
|
|
122,409
|
|
|||
Capital expenditures
|
|
180
|
|
|
1,178
|
|
|
1,358
|
|
|||
Depreciation and amortization
|
|
3,369
|
|
|
1,226
|
|
|
4,595
|
|
Year Ended December 31, 2017
|
|
Core
Companion Animal |
|
Other Vaccines and
Pharmaceuticals |
|
Total |
||||||
Total revenue
|
|
$
|
105,191
|
|
|
$
|
24,150
|
|
|
$
|
129,341
|
|
Operating income
|
|
12,656
|
|
|
5,563
|
|
|
18,219
|
|
|||
Income before income taxes
|
|
12,828
|
|
|
5,541
|
|
|
18,369
|
|
|||
Investments in unconsolidated affiliates
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total assets
|
|
111,625
|
|
|
23,819
|
|
|
135,444
|
|
|||
Net assets
|
|
75,984
|
|
|
24,456
|
|
|
100,440
|
|
|||
Capital expenditures
|
|
209
|
|
|
3,260
|
|
|
3,469
|
|
|||
Depreciation and amortization
|
|
3,736
|
|
|
1,018
|
|
|
4,754
|
|
|
For the Years Ended December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
U.S.
|
$
|
108,469
|
|
|
$
|
115,543
|
|
|
$
|
116,823
|
|
Canada
|
3,042
|
|
|
2,992
|
|
|
2,924
|
|
|||
Europe
|
8,289
|
|
|
5,995
|
|
|
4,780
|
|
|||
Other International
|
2,861
|
|
|
2,916
|
|
|
4,814
|
|
|||
Total
|
$
|
122,661
|
|
|
$
|
127,446
|
|
|
$
|
129,341
|
|
|
As of December 31,
|
||||||||||
|
2019
|
|
2018
|
|
2017
|
||||||
U.S.
|
$
|
14,712
|
|
|
$
|
15,933
|
|
|
$
|
17,288
|
|
Europe
|
576
|
|
|
37
|
|
|
18
|
|
|||
Other International
|
181
|
|
|
11
|
|
|
25
|
|
|||
Total
|
$
|
15,469
|
|
|
$
|
15,981
|
|
|
$
|
17,331
|
|
|
Q1
|
|
Q2
|
|
Q3
|
|
Q4
|
|
Total
|
||||||||||
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total revenue
|
$
|
29,511
|
|
|
$
|
28,146
|
|
|
$
|
31,237
|
|
|
$
|
33,767
|
|
|
$
|
122,661
|
|
Gross profit
|
12,543
|
|
|
12,412
|
|
|
13,664
|
|
|
15,830
|
|
|
54,449
|
|
|||||
Operating income (loss)
|
(75
|
)
|
|
(566
|
)
|
|
193
|
|
|
775
|
|
|
327
|
|
|||||
Net income (loss) before equity in losses of unconsolidated affiliates
|
951
|
|
|
(161
|
)
|
|
(204
|
)
|
|
(1,723
|
)
|
|
(1,137
|
)
|
|||||
Net income (loss), after equity in losses of unconsolidated affiliates
|
770
|
|
|
(288
|
)
|
|
(351
|
)
|
|
(1,862
|
)
|
|
(1,731
|
)
|
|||||
Net income (loss) attributable to Heska Corporation
|
814
|
|
|
(241
|
)
|
|
(310
|
)
|
|
(1,728
|
)
|
|
(1,465
|
)
|
|||||
Basic earnings (loss) per share attributable to Heska Corporation
|
0.11
|
|
|
(0.03
|
)
|
|
(0.04
|
)
|
|
(0.23
|
)
|
|
(0.20
|
)
|
|||||
Diluted earnings (loss) per share attributable to Heska Corporation
|
0.10
|
|
|
(0.03
|
)
|
|
(0.04
|
)
|
|
(0.23
|
)
|
|
(0.20
|
)
|
|||||
|
|
|
|
|
|
|
|
|
|
||||||||||
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Total revenue
|
$
|
32,765
|
|
|
$
|
29,662
|
|
|
$
|
30,955
|
|
|
$
|
34,064
|
|
|
$
|
127,446
|
|
Gross profit
|
13,307
|
|
|
13,065
|
|
|
14,794
|
|
|
15,472
|
|
|
56,638
|
|
|||||
Operating income (loss)
|
1,871
|
|
|
2,204
|
|
|
(3,595
|
)
|
|
3,314
|
|
|
3,794
|
|
|||||
Net income (loss) before equity in losses of unconsolidated affiliates
|
2,155
|
|
|
1,897
|
|
|
(1,670
|
)
|
|
3,540
|
|
|
5,922
|
|
|||||
Net income (loss), after equity in losses of unconsolidated affiliates
|
2,155
|
|
|
1,897
|
|
|
(1,670
|
)
|
|
3,468
|
|
|
5,850
|
|
|||||
Net income (loss) attributable to Heska Corporation
|
2,155
|
|
|
1,897
|
|
|
(1,670
|
)
|
|
3,468
|
|
|
5,850
|
|
|||||
Basic earnings (loss) per share attributable to Heska Corporation
|
0.30
|
|
|
0.26
|
|
|
(0.23
|
)
|
|
0.47
|
|
|
0.81
|
|
|||||
Diluted earnings (loss) per share attributable to Heska Corporation
|
0.28
|
|
|
0.24
|
|
|
(0.23
|
)
|
|
0.44
|
|
|
0.74
|
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
Item 9A.
|
Controls and Procedures
|
Item 9B.
|
Other Information
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
Item 11.
|
Executive Compensation
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
Plan Category
|
(a) Number of Securities to be Issued Upon Exercise of Outstanding Options and Rights
|
|
(b) Weighted-Average Exercise Price of Outstanding Options and Rights
|
|
(c) Number of Securities
Remaining Available for Future Issuance Under Equity Compensation Plans |
Equity Compensation Plans Approved by Stockholders
|
536,315
|
|
$54.86
|
|
95,423
|
Equity Compensation Plans Not Approved
by Stockholders |
None |
|
None |
|
None |
Total
|
536,315
|
|
$54.86
|
|
95,423
|
Item 13.
|
Certain Relationships and Related Transactions and Director Independence
|
Item 14.
|
Principal Accountant Fees and Services
|
Item 15.
|
Exhibits and Financial Statement Schedules
|
|
Exhibit Number
|
|
Notes
|
|
Description of Document
|
|
2.1#++
|
|
|
|
|
|
3(i)
|
|
(8)
|
|
|
|
3(ii)
|
|
(8)
|
|
|
|
3(iii)
|
|
(8)
|
|
|
|
3(iv)
|
|
(19)
|
|
|
|
3(v)
|
|
(20)
|
|
|
|
3(vi)
|
|
(25)
|
|
|
|
3(vii)
|
|
(29)
|
|
|
|
3(viii)
|
|
(29)
|
|
|
|
4.1
|
|
(32)
|
|
|
|
4.2
|
|
|
|
|
|
10.1*
|
|
(29)
|
|
|
|
10.2*
|
|
(31)
|
|
|
|
10.3*
|
|
(31)
|
|
|
|
10.4*
|
|
(31)
|
|
|
|
10.5*
|
|
(31)
|
|
|
10.6*
|
|
(31)
|
|
|
|
10.7*
|
|
(31)
|
|
|
|
10.8*
|
|
(6)
|
|
|
|
10.09*
|
|
(19)
|
|
|
|
10.10*
|
|
(19)
|
|
|
|
10.11*
|
|
(19)
|
|
|
|
10.12*
|
|
(19)
|
|
|
|
10.13*
|
|
(19)
|
|
|
|
10.14*
|
|
(14)
|
|
|
|
10.15*
|
|
(13)
|
|
|
|
10.16*
|
|
|
|
|
|
10.17*
|
|
(5)
|
|
|
|
10.18*
|
|
(24)
|
|
|
|
10.19*
|
|
(11)
|
|
|
|
10.20*
|
|
(13)
|
|
|
|
10.21*
|
|
(23)
|
|
|
|
10.22*
|
|
(24)
|
|
|
|
10.23*
|
|
(26)
|
|
|
|
10.24*
|
|
(1)
|
|
|
|
10.25*
|
|
(5)
|
|
|
|
10.26*
|
|
|
|
|
|
10.27*
|
|
(30)
|
|
|
|
10.28*
|
|
(4)
|
|
|
|
10.29*
|
|
(5)
|
|
|
|
10.30*
|
|
(11)
|
|
|
|
10.31*
|
|
(24)
|
|
|
|
10.32*
|
|
(8)
|
|
|
10.33*
|
|
(13)
|
|
|
|
10.34*
|
|
(24)
|
|
|
|
10.35*
|
|
|
|
|
|
10.36*
|
|
(8)
|
|
|
|
10.37*
|
|
(13)
|
|
|
|
10.38*
|
|
(24)
|
|
|
|
10.39*
|
|
|
|
|
|
10.40*
|
|
(26)
|
|
|
|
10.41*
|
|
(27)
|
|
|
|
10.42*
|
|
(24)
|
|
|
|
10.43*
|
|
(24)
|
|
|
|
10.44
|
|
(2)
|
|
|
|
10.45
|
|
(3)
|
|
|
|
10.46
|
|
(3)
|
|
|
|
10.47
|
|
(7)
|
|
|
|
10.48+
|
|
(4)
|
|
|
|
10.49+
|
|
(6)
|
|
|
|
10.50+
|
|
(8)
|
|
|
|
10.51+
|
|
(10)
|
|
|
|
10.52+
|
|
(11)
|
|
|
|
10.53+
|
|
(17)
|
|
|
|
10.54+
|
|
(23)
|
|
|
|
10.55+
|
|
(12)
|
|
|
|
10.56
|
|
(14)
|
|
|
10.57++
|
|
|
|
|
|
10.58
|
|
(28)
|
|
|
|
10.59+
|
|
(9)
|
|
|
|
10.60++
|
|
(29)
|
|
|
|
10.61++
|
|
(29)
|
|
|
|
10.62+
|
|
(15)
|
|
|
|
10.63+
|
|
(15)
|
|
|
|
10.64++
|
|
(29)
|
|
|
|
10.65+
|
|
(23)
|
|
|
|
10.66+
|
|
(23)
|
|
|
|
10.67+
|
|
(23)
|
|
|
|
10.68#
|
|
|
|
|
|
21.1
|
|
|
|
|
|
23.1
|
|
|
|
|
|
23.2
|
|
|
|
|
|
24.1
|
|
|
|
|
|
31.1
|
|
|
|
|
|
31.2
|
|
|
|
|
|
32.1**
|
|
|
|
|
|
101.INS
|
|
|
|
XBRL Instance Document.
|
|
101.SCH
|
|
|
|
XBRL Taxonomy Extension Schema Document.
|
|
101.CAL
|
|
|
|
XBRL Taxonomy Extension Calculation Linkbase Document.
|
|
101.DEF
|
|
|
|
XBRL Taxonomy Extension Definition Linkbase Document.
|
|
101.PRE
|
|
|
|
XBRL Taxonomy Extension Presentation Linkbase Document.
|
|
101.LAB
|
|
|
|
XBRL Taxonomy Extension Label Linkbase Document.
|
Notes
|
|
*
|
Indicates management contract or compensatory plan or arrangement.
|
+
|
Portions of the exhibit have been omitted pursuant to a request for confidential treatment.
|
++
|
Certain confidential information contained in this exhibit has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed.
|
#
|
Certain personally identifiable information has been omitted from this exhibit pursuant to Item 601(a)(6) under Regulation S-K.
|
**
|
Furnished herewith but not filed.
|
(1)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2002.
|
(2)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2004.
|
(3)
|
Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2005.
|
(4)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2006.
|
(5)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2007.
|
(6)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2008.
|
(7)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2011.
|
(8)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2012.
|
(9)
|
Filed with the Registrant's Form 8-K/A on August 29, 2013.
|
(10)
|
Filed with the Registrant's Form 10-Q for the quarter ended September 30, 2013.
|
(11)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2013.
|
(12)
|
Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2014.
|
(13)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2014.
|
(14)
|
Filed with the Registrant's Form 10-Q for the quarter ended March 31, 2015.
|
(15)
|
Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2015.
|
(16)
|
Filed with the Registrant's Form 10-Q for the quarter ended September 30, 2015.
|
(17)
|
Filed with the Registrant's Form 10-Q for the quarter ended March 31, 2016.
|
(18)
|
Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2016.
|
(19)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2016.
|
(20)
|
Filed with the Registrant's Form 10-Q for the quarter ended March 31, 2017.
|
(21)
|
Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2017.
|
(22)
|
Filed with the Registrant's Form 8-K on August 2, 2017.
|
(23)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2017.
|
(24)
|
Filed with the Registrant's Form 10-Q for the quarter ended March 31, 2018.
|
(25)
|
Filed with the Registrant's Form 8-K on May 9, 2018.
|
(26)
|
Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2018.
|
(27)
|
Filed with the Registrant's Form 10-Q for the quarter ended September 30, 2018.
|
(28)
|
Filed with the Registrant's Form 8-K on November 30, 2018.
|
(29)
|
Filed with the Registrant's Form 10-Q for the quarter ended June 30, 2019.
|
(30)
|
Filed with the Registrant's Form 8-K on June 1, 2019.
|
(31)
|
Filed with the Registrant's Form 10-K for the year ended December 31, 2018.
|
(32)
|
Filed with the Registrant's Form 8-K on September 17, 2019.
|
Item 16.
|
Form 10-K Summary
|
|
HESKA CORPORATION
|
|
|
|
By: /s/ KEVIN S. WILSON
Kevin S. Wilson
Chief Executive Officer and President
|
Signature
|
Title
|
Date
|
/s/ KEVIN S. WILSON
Kevin S. Wilson
|
Chief Executive Officer, President and Director (Principal Executive Officer)
|
February 28, 2020
|
/s/ CATHERINE GRASSMAN
Catherine Grassman
|
Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)
|
February 28, 2020
|
/s/ SCOTT HUMPHREY
Scott Humphrey
|
Chair
|
February 28, 2020
|
/s/ MARK F. FURLONG
Mark F. Furlong
|
Director
|
February 28, 2020
|
/s/ SHARON J. LARSON
Sharon J. Larson
|
Director
|
February 28, 2020
|
/s/ DAVID E. SVEEN
David E. Sveen, Ph.D.
|
Director
|
February 28, 2020
|
/s/ BONNIE J. TROWBRIDGE
Bonnie J. Trowbridge
|
Director
|
February 28, 2020
|
Exhibit 2.1
Certain confidential information contained in this document, marked by brackets as [***], has been omitted because it is both (i) not material and (ii) would be competitively harmful if publicly disclosed. In addition, certain personally identifiable information contained in this document, marked by brackets as [***], has been omitted from this exhibit pursuant to Item 601(a)(6) under Regulation S-K.
|
||
|
AGREEMENT
|
|
|
regarding the sale and purchase of the sole share in
scil animal care company GmbH |
|
|
CORPORATE STRUCTURE 2
|
The Company 2
|
Subsidiaries and Participation of the Company 2
|
No Affiliation Agreements 2
|
Financing 2
|
SALE, PURCHASE AND TRANSFER 2
|
Sale and Purchase of the Share 2
|
Transfer of the Share 3
|
Right to Profits 3
|
Closing, Closing Date 3
|
CONSIDERATION 4
|
Purchase Price 4
|
Definitions of Items for the Purchase Price Calculation 4
|
Escrow 8
|
Estimated Purchase Price 8
|
Purchase Price Adjustment 9
|
Payment Procedures 9
|
No Set-Off 10
|
Default Interest; Interest 10
|
VAT 10
|
CLOSING CONDITION, NEGATIVE CLOSING CONDITIONS AND CLOSING ACTIONS 10
|
Closing Condition 10
|
Additional Purchaser Closing Conditions 11
|
Consequences of Non-Occurrence of the Closing 12
|
Closing Actions 12
|
PURCHASE PRICE DETERMINATION STATEMENT 14
|
Preparation of Purchase Price Determination Statement 14
|
Resolution of Disputes 15
|
SELLER'S GUARANTEES 16
|
Form and Scope of Seller’s Guarantees 16
|
Seller's Guarantees 16
|
No other Seller's Guarantees 32
|
Seller’s Knowledge 33
|
REMEDIES FOR BREACH OF SELLER'S GUARANTEES 33
|
General/Recoverable Damages 33
|
Thresholds for claims regarding Breaches 34
|
Overall Scope of Seller's Liability pursuant to this Agreement 34
|
Exclusion of Claims due to Purchaser's Knowledge 34
|
Notification of Seller; Third Party Claims 35
|
Mitigation 36
|
Limitation Periods 37
|
Exclusion of Further Remedies; no Double Counting 37
|
Treatment of Payments 37
|
TAX 38
|
Definitions 38
|
Tax Indemnification by Seller 39
|
Tax Returns 41
|
Tax Proceedings 41
|
Tax Refunds 42
|
Tax Limitation Periods 42
|
Tax Threshold 42
|
United States Tax Covenants 43
|
PURCHASER'S GUARANTEES 44
|
Guarantees 44
|
Indemnification 44
|
INTENTIONALLY LEFT BLANK 44
|
ADDITIONAL OBLIGATIONS OF THE PARTIES 44
|
Access to Financial Information 44
|
Obligations between Signing Date and Closing Date 45
|
Domains 49
|
Specific Indemnities by the Seller 49
|
Restrictive Covenants 51
|
PURCHASER’S GUARANTOR; SELLER’S GUARANTOR 51
|
Purchaser’s Guarantor 51
|
Seller’s Guarantor 51
|
CONFIDENTIALITY AND PRESS RELEASES 52
|
Confidentiality; Press Releases; Public Disclosure 52
|
Seller's Confidentiality 52
|
Purchaser's Confidentiality 52
|
ASSIGNMENT OF RIGHTS AND OBLIGATIONS 52
|
Assignment by Purchaser 53
|
Assignment by Seller 53
|
TRANSFER TAXES AND COSTS 53
|
Transfer Taxes and Costs 53
|
Costs of Advisors 53
|
NOTICES 54
|
Form of Notices 54
|
Notices to the Seller and the Seller’s Guarantor 54
|
Notices to the Purchaser and the Purchaser’s Guarantor 54
|
Change of Address 55
|
Copies to Advisors 55
|
MISCELLANEOUS 55
|
Governing Law 55
|
Place of Jurisdiction 55
|
Certain Definitions 55
|
Amendments; Supplements; Termination 56
|
Headings; References to German Legal Terms; Interpretation; References to Clauses 56
|
Schedules 56
|
Entire Agreement 57
|
Rights of Third Parties 57
|
Severability 57
|
Schedule
|
Description
|
Schedule 1.2.1
|
Subsidiaries
|
Schedule 1.2.2
|
Participation
|
Schedule 3.3.1
|
Escrow Agreement
|
Schedule 4.4.1(c)
|
Form of Master Services Agreement and Transitional Services Agreement
|
Schedule 4.4.1(k)
|
Form of Shareholder’s PoA
|
Schedule 6.2.1(c)
|
Commercial register excerpts
|
Schedule 6.2.1(d)
|
Affiliation agreements
|
Schedule 6.2.2(b)
|
Potential Contribution Obligation
|
Schedule 6.2.4(b)
|
Over Indebtedness
|
Schedule 6.2.5(a)
|
Financial Statements
|
Schedule 6.2.5(f)
|
Management Accounts
|
Schedule 6.2.5(g)
|
Outstanding Liabilities
|
Schedule 6.2.5(i)
|
Outstanding Debt
|
Schedule 6.2.5(ii)
|
Assumption of Debt
|
Schedule 6.2.6(a)
|
Owned Real Property
|
Schedule 6.2.6(c)
|
Leased Real Property
|
Schedule 6.2.8(c)
|
Compliance Policies
|
Schedule 6.2.8(d)
|
Subsidies
|
Schedule 6.2.8(e)
|
Warranty and product liability claims
|
Schedule 6.2.9
|
Material Agreements
|
Schedule 6.2.10(a)(i)
|
List of Employees
|
Schedule 6.2.10(a)(ii)
|
Unpaid Salaries and Remuneration
|
Schedule 6.2.10(b)
|
Key Employees
|
Schedule 6.2.10(e)(i)
|
Material Collective Agreements
|
Schedule 6.2.10(e)(ii)
|
Employee Litigation
|
Schedule 6.2.10(f)
|
Bonus, commission, profit-sharing or similar schemes
|
Schedule 6.2.10(g)
|
Stock option or similar incentive scheme
|
Schedule 6.2.10(i)
|
Loans to employees
|
Schedule 6.2.11
|
Litigation
|
Schedule 6.2.12(a)
|
Owned Intellectual Property Rights
|
Schedule 6.2.12(c)
|
Scil Software
|
Schedule 6.2.12(b)
|
IP License Agreements
|
Schedule 6.2.12(h)
|
Licenses to third parties
|
Schedule 6.2.14
|
Certain transaction related fees and expenses
|
Schedule 6.2.15
|
Transactions outside the ordinary course of business
|
Schedule 6.2.16
|
Insurance Policies
|
Schedule 6.2.17(a)
|
Obligations towards Seller’s Group
|
Schedule 6.2.17(b)
|
Contractual relationships with Seller’s Group
|
Schedule 6.2.18(b)
|
Shareholders’ Agreement Participation
|
Schedule 6.4(i)
|
Persons relevant for Seller’s Knowledge
|
Schedule 6.4(ii)
|
Persons to be inquired for Seller’s Knowledge
|
Schedule 7.4.2(b)
|
Purchaser’s Representatives
|
Schedule 11.5
|
Restrictive Covenant Agreement
|
1.
|
Covetrus Animal Health Holdings Limited, The Point Building, 9th Floor, 37 North Wharf Road, Paddington, London W2 1AF, UK, registered with the Company House Cardiff under company no. 07402799 (the Seller);
|
2.
|
Covetrus, Inc., a Delaware corporation, 7 Custom House St., Portland, ME 04101, U.S.A. (the Seller’s Guarantor);
|
3.
|
Heska GmbH, c/o Heussen Rechtsanwaltsgesellschaft mbH, Seidenstrasse 19, 70174 Stuttgart, Germany, registered with the commercial register of the lower court of Stuttgart under docket number HRB 760321 (the Purchaser); and
|
4.
|
Heska Corporation, a Delaware corporation, 3760 Rocky Mountain Ave, Loveland, CO 80538 (the Purchaser’s Guarantor)
|
1.1
|
The Company
|
1.2
|
Subsidiaries and Participation of the Company
|
1.3
|
No Affiliation Agreements
|
1.4
|
Financing
|
2.1
|
Sale and Purchase of the Share
|
2.2
|
Transfer of the Share
|
(a)
|
payment of the Estimated Purchase Price (as defined in Clause 3.4) less the Escrow Amount (as defined in Clause 3.3) to the Seller’s Account by or on behalf of the Purchaser; and
|
(b)
|
payment of the Escrow Amount to the Escrow Account by or on behalf of the Purchaser.
|
2.3
|
Right to Profits
|
2.4
|
Closing, Closing Date
|
3.1
|
Purchase Price
|
(a)
|
a fixed amount of USD 125,000,000 (in words: one hundred twenty five million U.S. Dollars) (the Enterprise Value);
|
(b)
|
less the aggregate of the Financial Debt (as defined in Clause 3.2.1) of the Scil Group as of the Closing Date;
|
(c)
|
plus the aggregate of the Cash (as defined in Clause 3.2.2) of the Scil Group as of the Closing Date; and
|
(d)
|
less the amount by which the consolidated Net Working Capital of the Scil Group as of the Closing Date, falls short of EUR 9,000,000 (in words: nine million euros) (the Target Net Working Capital), or, as the case may be, plus the amount by which the consolidated Net Working Capital of the Scil Group as of the Closing Date exceeds the Target Net Working Capital (the resulting amount being the Closing Date Working Capital Deviation).
|
3.2
|
Definitions of Items for the Purchase Price Calculation
|
(a)
|
liabilities, borrowings and indebtedness in the nature of borrowing (including by way of acceptance credits, discounting or similar facilities, deposits, advances of any kind, loans, loan stocks, bonds, debentures, notes, checks, overdrafts or similar facilities) owed to any banking, financial, acceptance credit, lending or similar institution or other source of debt funding;
|
(b)
|
any obligations under employee incentive arrangements or arrangements with other third parties triggered by or in relation to the transactions contemplated in this Agreement, or any other transaction bonus, change in control bonus, retention, severance or (cash or non-cash) benefit becoming payable or due in connection with the transactions contemplated in this Agreement (including the employer portion of any payroll, social security, unemployment or similar Taxes) or any other Transaction Expenses. Transaction Expenses means any fees, costs and expenses payable or subject to reimbursement by the Scil Entities, whether accrued for or not, in each case in connection with the transactions contemplated by this Agreement and not paid prior to the Closing, including (a) any brokerage fees, commissions, finders’ fees, financial advisory fees, and, in each case, related costs and expenses, (b) any fees, costs and expenses of counsel, accountants or other advisors or service providers, (c) any travel expenses and costs for the data room and (d) any costs and expenses for the preparation of the Audited Financial Statements (including costs for the Retained Auditors), but excluding any such fees, costs and expenses incurred, payable or subject to reimbursement by the Scil Entities in connection with the cooperation provided by the Scil Entities in relation to the preparation and receipt of the Financing by the Purchaser pursuant to Clause 11.2.5 as requested by the Purchaser. It is being understood that Transaction Expenses includes any and all amounts paid or payable under or in connection with (including by way of reimbursement) (i) the Letter of Intent [***] and any other arrangement by a Scil Entity or a member of the Seller’s Group with [***] made on or prior to the Closing Date, (ii) the Long Term Incentive Program (LTIP), (iii) arrangements with employees and managers as listed on Schedule 6.2.14 (but in the amount which is paid or payable) (together with the LTIP, the Employee Incentive Payment Amount), and (iv) the engagement(s) of PwC in connection with the Transaction (as shown in Schedule 6.2.14, but in the amount which is paid or payable), provided, however, that the amount of Transaction Expenses shall be adjusted by deducting 50% of the Employee Incentive Payment Amount;
|
(c)
|
liabilities (other than trade payables to the extent included in the calculation of the Net Working Capital) owed to any member of the Seller’s Group (other than the Scil Entities), including any management, group, monitoring or similar fees or charges;
|
(d)
|
liabilities from bonds, profit-related, convertible, warrant-linked and other debt securities and profit participation certificates of any kind;
|
(e)
|
liabilities relating to bills of exchange;
|
(f)
|
any obligation for a lease classified as a capital or finance lease or required to be categorized as a capital or finance lease in accordance with US GAAP and consistent with US GAAP and the non-audited consolidated financial statements of the Scil Group attached in Schedule 6.2.5(a) (the Capital Leases) and any sale of receivables and any factoring;
|
(g)
|
market-to-market loss provisions for interest rate and currency swaps, including any termination costs;
|
(h)
|
liabilities relating to accrued or non-accrued severance obligations or provisions for severance (other than amounts under (i) below);
|
(i)
|
the following amounts:
|
(i)
|
an amount of EUR 200,000 (in words: two hundred thousand Euros) (the [***] Amount) in relation to [***] (the [***]) in connection with [***] (including with respect to [***] Taxes, legal fees and costs for litigation, arbitration and any other cost or liability of the Scil Entities) (together, the [***] Amounts). It is being understood that the [***] Amount shall be a lump sum. [***];
|
(ii)
|
an amount of EUR 800,000 (in words: eight hundred thousand) (the [***] Amount) in relation to [***] (the [***]), in connection with any claims of, and proceedings, settlements and disputes with, the [***] (including with respect to [***] Taxes) (together, the [***] Amounts). It is being understood that the [***] Amount shall be a lump sum. [***];
|
(iii)
|
an amount of EUR 500,000 (in words: five hundred thousand Euros) (the [***] Amount) in relation to [***] (the [***]), in connection with [***] (including without limitation [***] Taxes) (together, the [***] Amounts). It being understood that the [***] Amount shall be a lump sum. [***].
|
(j)
|
any pension obligations and similar obligations (including in connection with early retirements (Altersteilzeit) or other early retirement arrangements), but excluding any payments made or to be made by the Scil Entities for German employees to direct insurances (Direktversicherungen) in accordance with past practice (the Direct Insurance Amounts);
|
(k)
|
(i) any amount, which shall not be less than zero, for any income Tax liabilities (excluding any amounts for deferred Tax liabilities or deferred Tax assets and any amounts in respect of speculative or contingent liabilities for income Taxes) net of any prepaid income Taxes, but only to the extent that such payments have the effect of reducing (not below zero) the particular income Tax liability in respect of which such payments were made, and (ii) any Tax liability with respect to Transaction Expenses (irrespective of whether the Transaction Expenses have been paid or are payable prior to, on the Closing Date or thereafter);
|
(l)
|
any obligation for deferred purchase price with respect to the acquisition of any business, asset, or securities in the context of M&A transactions, whether contingent or otherwise, including all Tax-related payments and amounts owed under any earn-out or similar performance payment, at the maximum value, whether contingent or not, or any seller notes or post-closing true-up obligations;
|
(m)
|
any liabilities for any drawn letters of credit, performance bonds, surety bonds and similar obligations; and
|
(n)
|
contingent liabilities and off balance sheet contingencies or similar obligations in accordance with US GAAP
|
3.3
|
Escrow
|
3.4
|
Estimated Purchase Price
|
3.5
|
Purchase Price Adjustment
|
3.6
|
Payment Procedures
|
3.7
|
No Set-Off
|
3.8
|
Default Interest; Interest
|
3.9
|
VAT
|
4.1
|
Closing Condition
|
4.2
|
Additional Purchaser Closing Conditions
|
4.3
|
Consequences of Non-Occurrence of the Closing
|
4.4
|
Closing Actions
|
(a)
|
the Seller shall deliver to the Purchaser a board resolution of the Seller approving the consummation of this Agreement and the performance of the transactions contemplated hereunder;
|
(b)
|
the Seller, the Purchaser and the Escrow Agent shall enter into the Escrow Agreement substantially in the form as set out in Schedule 3.3.1;
|
(c)
|
the Seller and the Purchaser shall enter into a master services agreement, substantially in the form as set out in Schedule 4.4.1(c), with effect as of the Closing Date.
|
(d)
|
the Seller shall hand out to the Purchaser a copy of a shareholder's resolution of the Company according to which the managing directors (Geschäftsführer) of the Company are being granted discharge (Entlastung) for the time period up to the Closing Date;
|
(e)
|
the Seller and the Purchaser shall enter into the Restrictive Covenant Agreement;
|
(f)
|
the Seller shall deliver evidence to the Purchaser that the Scil Entities have ceased to participate in the Cash Pool as set forth in Clause 11.2.9;
|
(g)
|
the Seller shall confirm to the Purchaser in writing that to the Seller’s Knowledge, no Negative Closing Condition has occurred and shall deliver to the Purchaser a written statement (duly executed by the legal representatives of the Seller) confirming that to the Seller’s Knowledge no Material Guarantee Breach has occurred;
|
(h)
|
the Seller and the Purchaser shall enter into the Share Transfer Deed;
|
(i)
|
the Purchaser or an Affiliate acting on behalf of the Purchaser shall pay the Estimated Purchase Price less the Escrow Amount in accordance with Clause 3 to the Seller’s Account;
|
(j)
|
the Purchaser or an Affiliate acting on behalf of the Purchaser shall pay the Escrow Amount to the Escrow Account in accordance with the Escrow Agreement; and
|
(k)
|
upon confirmation of receipt of the Estimated Purchase Price by the Seller and the Escrow Amount by the Escrow Agent, the Seller shall deliver to the Purchaser a power of attorney substantially in the form as attached in Schedule 4.4.1(k) granting the Purchaser the right to exercise the Seller’s rights as shareholder of the Company after the Closing with respect to the Share.
|
5.1
|
Preparation of Purchase Price Determination Statement
|
5.2
|
Resolution of Disputes
|
6.1
|
Form and Scope of Seller’s Guarantees
|
6.2
|
Seller's Guarantees
|
(a)
|
The statements in Clauses 1.1 through 1.3 (including the related Schedules) regarding the Scil Entities and the Participation are complete and correct. The Share is the sole share in the Company and represents 100% of the Company’s share capital. With respect to each Subsidiary, the relevant Subsidiary Shares are the sole shares in such Subsidiary and represent 100% of such Subsidiary’s share capital.
|
(b)
|
The Scil Entities were duly established in the legal form as set out in Schedule 1.2.1 and are validly existing under the Laws of their jurisdiction and have the corporate power to own their respective properties and to carry on its respective businesses as presently conducted. Law or Laws shall mean any law, statute, rule, treaty, regulation, ordinance (Verwaltungsvorschrift), code, judgment, constitution, principle of common law or case law, edict, ruling, directive or similar regulation of general applicability of any relevant country or state, province, county, city, municipality, government, governmental authority, regulatory authority or other body entrusted with governmental responsibilities (including, for the avoidance of doubt, any legislative body).
|
(c)
|
Schedule 6.2.1(c) contains copies of excerpts from the commercial register (or any other relevant public register) of most recent date available to the Seller of the Scil Entities and the Participation attached for information purposes. All facts required to be entered in the relevant registers have been entered therein and no resolutions or other measures have been taken which would require registration in such registers and no filings with such registers are currently pending.
|
(d)
|
None of the Scil Entities is, or has agreed to become, a party to any shareholder agreement, trust agreement, silent partnership agreement, sub-participation agreement, profit participation right agreement or any affiliation agreement (Unternehmensvertrag) within the meaning of sec. 291 et seq. AktG or any comparable agreement pursuant to foreign applicable Law, except as listed in Schedule 6.2.1(d).
|
(e)
|
The Company does not hold, either directly or indirectly (nor through an escrow agent (Treuhänder)), any shares, interests or participations in other corporations, partnerships, enterprises or other persons other than the Subsidiary Shares and the Minority Shares and has no legal obligation to acquire any such shares, interests or participations. The Subsidiaries do not hold, neither directly nor indirectly (nor through an escrow agent), shares, interests or participations in other corporations, partnerships, enterprises or other persons and have no legal obligation to acquire any such shares, interests or participations.
|
(f)
|
None of the Scil Entities has any branches or representative offices inside or outside of its jurisdiction of incorporation.
|
(a)
|
The Seller is the sole and unrestricted legal and beneficial owner of the Share and the Company is the sole and unrestricted legal and beneficial owner of the Subsidiary Shares. The Seller is entitled to freely dispose of the Share and the Company is entitled to freely dispose of the Subsidiary Shares, in each case without such disposal infringing any rights of a third party.
|
(b)
|
The Share and the Subsidiary Shares have been validly issued, are fully paid up, either in cash or in kind, and have not been repaid, neither in whole nor in part, neither to the Seller nor to any of its Affiliates. Except as set out in Schedule 6.2.2(b), there is no shareholder obligation (actual or contingent) to make any additional payment or other contribution with respect to the Share or any of the Subsidiary Shares.
|
(c)
|
The Share and the Subsidiary Shares are free and clear from any liens, pledges, charges, security interests, encumbrances, other rights of third parties or other defects of title (Rechtsmängel) (together the Liens). There are no pre-emptive rights, rights of first refusal, options, subscription rights or other rights (actual or contingent) of any third party to purchase or acquire, or otherwise in respect of, any or all of the Share and the Subsidiary Shares.
|
(d)
|
The Seller is, with respect to the Share, not bound by any agreement (including voting trust agreements – Stimmbindungsverträge), restrictions or obligations relating to any rights under the Share. There are no trust agreements or silent partnerships in respect of the Company or any of the Subsidiaries and no third party owns any indirect participations (Unterbeteiligungen) in the Share or any of the Subsidiary Shares.
|
(e)
|
The liquidation of former subsidiaries of any member of the Scil Group has been implemented and finalized in accordance with applicable Law with no outstanding rights, obligations or liabilities in connection therewith for any member of the Scil Group. There are no outstanding rights, obligations or liabilities in connection with any member of the Scil Group (or any subsidiary of any member of the Scil Group) which is not operative (including scil animal care company Ltd., United Kingdom).
|
(a)
|
The Seller is duly incorporated and validly existing under the Laws of the United Kingdom, the Seller’s Guarantor is duly incorporated and validly existing under the Laws of Delaware and the Seller and the Seller’s Guarantor have all requisite corporate power and authority to execute and consummate this Agreement and to perform their obligations hereunder.
|
(b)
|
This Agreement has been duly and validly executed by the Seller and the Seller’s Guarantor and constitutes a legal, valid, and binding obligation of the Seller and the Seller’s Guarantor, enforceable under German Law against the Seller and the Seller’s Guarantor in accordance with its terms. The execution and consummation of this Agreement and the performance of the transactions contemplated hereunder do not violate any legal obligation of the Seller and the Seller’s Guarantor, any judicial or governmental order to which any of the Seller and the Seller’s Guarantor is bound or any provision of the Seller’s and/or the Seller’s Guarantor’s articles of association or similar corporate documents.
|
(c)
|
The execution and performance by the Seller and the Seller’s Guarantor of this Agreement have been validly authorized and the execution and performance of this Agreement by the Seller and the Seller’s Guarantor require no approval, consent or permit by any corporate body of any member of the Seller’s Group, governmental authority or other third party that would allow such corporate body, governmental authority or third party to prevent the consummation of this Agreement by legal means.
|
(a)
|
(i) No bankruptcy or insolvency or equivalent proceedings concerning any of the Seller, the Seller’s Guarantor, the Scil Entities have been applied for and (ii) no circumstances exist which would trigger the obligation to apply for any bankruptcy, insolvency or equivalent proceedings in any jurisdiction under applicable Law.
|
(b)
|
Neither the Seller or the Seller’s Guarantor nor any of the Scil Entities have stopped or suspended payment of their debts, become unable to pay their debts or otherwise become insolvent, illiquid or over-indebted (überschuldet), except as provided for in Schedule 6.2.4(b). No assets of the Seller, the Seller’s Guarantor or any of the Scil Entities have been seized by or on behalf of any third party nor are any foreclosure, forfeiture, execution or enforcement proceedings pending or threatened in writing with respect to any of the Seller, the Seller’s Guarantor or the Scil Entities or their respective assets.
|
(a)
|
The non-audited consolidated financial statements of the Scil Group and the audited or non-audited, as the case may be, individual financial statements of each of the Scil Entities for the fiscal years ending on 31 December 2017 and on 31 December 2018, including in each case the balance sheets, the income statements and the notes (collectively, the Financial Statements) are attached hereto for information purposes as Schedule 6.2.5(a).
|
(b)
|
With respect to the Financial Statements which were audited and certified (geprüft und testiert): The relevant auditor has issued an unqualified opinion and they were prepared in accordance with the statutory accounting provisions applicable in the relevant jurisdiction of the respective Scil Entity and the generally accepted accounting principles as applied in the respective jurisdictions (local GAAP), consistent with the principles used in the financial statements of the Scil Entities for the previous three years (unter Wahrung formeller und materieller Bilanzkontinuität) and applied on a consistent basis (e.g., with respect to the use of discretionary rights (Aktivierungs- und Passivierungswahlrechte)) and they present a true and fair view of the assets and liabilities (Vermögenslage), financial condition (Finanzlage) and results of operation (Ertragslage) of the relevant Scil Entity as of, and with respect to, the fiscal year ending on 31 December 2017 and on 31 December 2018, respectively.
|
(c)
|
The non-audited consolidated financial statements of the Scil Group were prepared in accordance with U.S. GAAP consistent with the principles used in the non-audited consolidated financial statements of the Scil Group for the previous three years (unter Wahrung formeller und materieller Bilanzkontinuität) and applied on a consistent basis (e.g., with respect to the use of discretionary rights (Aktivierungs- und Passivierungswahlrechte)) and present a true and fair view of, the assets and liabilities (Vermögenslage), financial condition (Finanzlage) and results of operation (Ertragslage) of the Scil Group as of, and with respect to, the fiscal year ending on 31 December 2017 and on 31 December 2018, respectively.
|
(d)
|
The non-audited Financial Statements of the Scil Entities were prepared in accordance with local GAAP consistent with the principles used in the non-audited Financial Statements of the Scil Entities for the previous three years (unter Wahrung formeller und materieller Bilanzkontinuität) and applied on a consistent basis (e.g., with respect to the use of discretionary rights (Aktivierungs- und Passivierungswahlrechte)) and present a true and fair view of, the assets and liabilities (Vermögenslage), financial condition (Finanzlage) and results of operation (Ertragslage) of the relevant Scil Entity as of, and with respect to, the fiscal year ending on 31 December 2017 and on 31 December 2018, respectively.
|
(e)
|
With respect to the Audited Financial Statements as of the Closing Date only: The relevant auditor has issued an unqualified opinion and they were prepared in accordance with the statutory accounting provisions applicable in the relevant jurisdiction of the respective Scil Entity and the generally accepted accounting principles as applied in the respective jurisdictions (local GAAP), consistent with the principles used in the financial statements of the Scil Entities for the previous three years (unter Wahrung formeller und materieller Bilanzkontinuität) and applied on a consistent basis (e.g., with respect to the use of discretionary rights (Aktivierungs- und Passivierungswahlrechte)) and they present a true and fair view of the assets and liabilities (Vermögenslage), financial condition (Finanzlage) and results of operation (Ertragslage) of the relevant Scil Entity as of, and with respect to, the fiscal year ending on 31 December 2018 and on 31 December 2019, respectively.
|
(f)
|
The consolidated management accounts of the Scil Group as of 30 November 2019 and for the period from 1 January 2019 through 30 November 2019 are attached hereto as Schedule 6.2.5(f) (the Management Accounts). The Management Accounts have been prepared in accordance with past accounting and consolidation practice as consistently applied for the preparation of the Financial Statements of the Scil Group in 2017 and 2018. They do not materially misstate the assets and liabilities (Vermögenslage) and the results of operations (Ertragslage) of the Scil Group as of 30 November 2019 and for the financial period then ended and, to the Seller’s Knowledge, are correct in all material respects.
|
(g)
|
Except for the liabilities shown in Schedule 6.2.5(g), no Scil Entity has (i) any liability (including uncertain and contingent liabilities) not required to be included as liabilities in the Financial Statements in accordance with local GAAP or U.S. GAAP, as applicable and (ii) since 1 January 2019 incurred any liability (whether actual, uncertain or contingent) which would have to be shown or accrued for in the Financial Statements, or to be disclosed in the notes to any financial statements, of such Scil Entity prepared as of the Signing Date, except for (x) any liability incurred in the ordinary course of the Business and (y) liabilities specifically disclosed to the Purchaser through the Management Accounts.
|
(h)
|
The books and records (including accounting and Tax records) of the Scil Entities have been prepared with the diligence of a prudent businessman (Sorgfalt eines ordentlichen Geschäftsmanns) and in accordance with applicable Law in all material respects and adequately reflect all transactions that are required to be reflected therein pursuant to applicable Law.
|
(i)
|
Schedule 6.2.5(i) contains a complete and correct overview of the Scil Entities’ outstanding debt towards banks and other financial institutions, specifying in each case the lender, the underlying loan or financial arrangement as well as the amount of outstanding principal and interest accrued. No Scil Entity is liable or has any financial obligation (whether actual or contingent) vis-à-vis, and/or for any liability or other obligation of the Seller’s Group and has not granted or is liable in respect of guarantees, indemnities, sureties, payment guarantees (Bürgschaften), assumptions of debt (Schuldübernahmen), collateral promises (Schuldbeitritte), letters of comfort (Patronatserklärungen) or similar obligations or instruments) except as disclosed in Schedule 6.2.5(ii).
|
(a)
|
Schedule 6.2.6(a) contains a complete and correct list of all land parcels and of rights equivalent to real property (Grundstücke und grundstücksgleiche Rechte) to which the Scil Entities hold legal title (together with the buildings and other structures (Aufbauten) erected thereon, the Owned Real Property), including any details regarding location, land register and Liens. The Scil Entities named as owners in Schedule 6.2.6(a) hold unrestricted title to the Owned Real Property and the latter is not encumbered except as set forth in Schedule 6.2.6(a).
|
(b)
|
The Scil Entities which own the Owned Real Property are not subject to any third party rights to use or occupy or dispose of the Owned Real Property. No such third party rights have been notified to the Scil Entities in writing and no legal proceedings are pending (rechtshängig) in respect of such third party rights. The existing encumbrances of the Owned Real Property do not impede the current use of the Owned Real Property for the Business.
|
(c)
|
Schedule 6.2.6(c) contains a complete and correct list of all land parcels leased to the Scil Entities as lessee (the Leased Real Property, together with the Owned Real Property, the Real Property). The Scil Entities have the right to use the Leased Real Property for the conduct of the Business. No Scil Entity has received, or given a written notice of termination in respect of a lease agreement regarding any Leased Real Property.
|
(d)
|
The Real Property comprises all real property necessary to conduct the Business from and after the Closing in the same manner as currently conducted.
|
(e)
|
All land parcels, buildings and structures located on the Real Property are in sound and useable condition and will allow the Scil Entities to continue the Business substantially in the same manner and scope as currently conducted.
|
(f)
|
No regulatory approval or other permit is missing with respect to the construction, installations and facilities located on the Owned Real Property, which is required by the Scil Entities to continue the Business substantially in the same manner and scope as currently conducted.
|
(g)
|
With regard to the Real Property, there are no proceedings under public Law (litigation, appellate proceedings or administrative proceedings reviewing an individual regulatory decision with a view to judicial review (Widerspruchsverfahren)) currently pending, including formally lodged neighbour disputes (Nachbarwidersprüche) and proceedings that aim to increase the requirements under the applicable construction and emission control legislation. There are currently no legal proceedings subject to civil or public Law with third parties relating to the Real Property.
|
(h)
|
To the Seller’s Knowledge, no environmental remediation measures under applicable Law are required to be performed on any of the Owned Real Property and no Scil Entity has been notified in writing that any environmental remediation measures under applicable Law is required to be performed on any of the Owned Real Property. To the Seller’s Knowledge, in the past no environmental pollution or contamination of the Owned Real Property by hazardous substance has occurred and no environmental remediation measures under applicable Law are required to be performed on any of the Owned Real Property.
|
(a)
|
The fixed and current assets (Gegenstände des Anlage- und Umlaufvermögens) reflected in the respective Financial Statements (except for the assets sold in the ordinary course of business after the reference date of the respective Financial Statements) are legally and economically owned without restrictions by the relevant Scil Entity and such assets and the fixed and current assets lawfully used by the Scil Entities (together the Assets) are sufficient and in good working order (regular wear and tear excepted) to continue the Business substantially in the same manner as presently conducted. The Assets are not encumbered with any Liens other than those imposed in the ordinary course of business consistent with past practice.
|
(b)
|
The inventory of the Scil Entities is of a quantity and quality suitable for the use in the Business (including its sale) in the ordinary course of business.
|
(a)
|
The Scil Entities hold all permits, licenses, authorizations and consents which are required, if any, under applicable Laws in order to conduct the Business substantially in the form as presently conducted (the Permits). No Permit has been cancelled, revoked or restricted by any competent authority in writing. No such authority or other third party has notified any of the Scil Entities in writing that it will or may cancel, revoke or restrict any Permit, nor, to the Seller’s Knowledge, are there any other circumstances which may reasonably be expected to result in any such cancellation, revocation or restriction.
|
(b)
|
To the Seller’s Knowledge, the business of the Scil Entities is conducted and has been conducted during the last five (5) years, in all material respects, in compliance with all applicable Laws (including radiation safety and compliance policies) and in compliance with all Permits. No Scil Entity has received any still extant notice in writing of any failure to comply with such Laws or Permits and has not been notified in writing about any investigation with respect to any such failure.
|
(c)
|
None of the Scil Entities is or has during the last five (5) years prior to the Closing Date been a party to any agreement or arrangement, or involved in any business conduct, that infringes any Sanctions or Export Controls, antitrust, competition, anti-money laundering, anti-bribery, regulatory or similar legislation in any jurisdiction in which any of the Scil Entities has assets or carries out business and, to the Seller’s Knowledge, there are no circumstances which could give rise to any liability of a Scil Entity or any of their former or current managing directors, officers, employees or agents, in connection with having acted on behalf of a Scil Entity, arising from willful criminal conduct under any applicable Law. All compliance policies of the Scil Entities are included in Schedule 6.2.8(c). To Seller’s Knowledge, no person who performs or has performed services for or on behalf of any Scil Entity has bribed another person intending to obtain or retain business or an advantage in the conduct of business for the Scil Entities.
|
(d)
|
Except as provided for in Schedule 6.2.8(d), no public aid, in particular subsidies, investment allowances (Investitionszulagen), investment subsidies (Investitionszuschüsse) or other government aids (Beihilfen) have been granted to any of the Scil Entities and no Scil Entity has applied for any of the foregoing. During the last twelve (12) months prior to the Signing Date, the respective Scil Entity has not received any written notice by any administrative authority claiming that any public aid granted will have to be repaid in part or in full or that such Scil Entity has breached obligations under the terms and conditions of any public aid.
|
(e)
|
Schedule 6.2.8(e) contains a complete and correct list of all (i) warranty claims (Gewährleistungsansprüche) pending or threatened in writing and (ii) all product liability claims (Produkthaftungsansprüche) asserted in the three (3) years preceding the Signing Date or the Closing Date, respectively, (irrespective of whether they are still pending), of customers of the Scil Group against any of the Scil Entities relating to products delivered by the Scil Entities and exceeding an amount of EUR 10,000 in each individual case or in a series of related cases. The Scil Entities have not produced, sold, imported, or supplied products which do not comply in all material respects (i) with applicable Laws and standards applicable to such products or (ii) are not fit for the purposes for which they are made, sold or supplied or (iii) are not free from contamination or other material defects or are otherwise unsafe, (iv) were the subject of any voluntary or mandatory recall or product warning or (v) did not comply with any warranties or representations made by the Scil Entities or on its behalf.
|
(a)
|
agreements relating to the acquisition or sale or disposal of shares or interests in other entities or businesses;
|
(b)
|
equity and non-equity joint venture, consortium, cooperation, collaboration, partnership and/or shareholder or comparable agreements;
|
(c)
|
agreements regarding the acquisition, sale or encumbrance of real property or rights equivalent to real property;
|
(d)
|
credit, loan agreements or similar instruments of debt extended by Scil Entities (other than consumer credits and/or deferred payment arrangements granted in the ordinary course of business consistent with past practice);
|
(e)
|
credit, loan agreements or similar instruments of debt granted to Scil Entities by any third party (other than the Scil Entities), in each case other than credits granted by suppliers or similar debt instruments granted to Scil Entities in the ordinary course of business consistent with past practice;
|
(f)
|
agreements relating to forward transactions, futures, finance options, swaps or other derivatives or hedging arrangements;
|
(g)
|
framework or master or other agreements with the top ten (10) non-distributor customers based on the aggregate annual revenue of the Scil Entities achieved with such customer in 2018;
|
(h)
|
framework or master or other agreements with the top ten (10) distributor customers based on the aggregate annual revenue of the Scil Entities achieved with such distributor customers in 2018;
|
(i)
|
framework, master or distribution or other agreements with the Key Suppliers;
|
(j)
|
guarantees, indemnities, sureties, payment guarantees (Bürgschaften), assumptions of debt (Schuldübernahmen), collateral promises (Schuldbeitritte), letters of comfort (Patronatserklärungen) or similar obligations or instruments under which any other security is granted (i) by which the debt of a third party (including any member of the Seller’s Group) is assumed or secured by any of the Scil Entities or (ii) by which the debt of any of the Scil Entities is assumed or secured by any third party (including any member of the Seller’s Group), other than any such security referenced in this paragraph granted by the Scil Entities to suppliers in the ordinary course of business consistent with past practice;
|
(k)
|
agreements with Key Suppliers and Key Customers which would terminate or be modified, or which would give the respective counterparty the right to terminate or modify such agreements, in each case upon the execution and/or the consummation of this Agreement or the transactions contemplated therein;
|
(l)
|
agreements with Key Suppliers imposing any exclusivity undertaking on any Scil Entity or providing for any other restriction of any Scil Entity’s ability to compete in any geography, region or product market;
|
(m)
|
agreements with governmental authorities (including antitrust authorities) or any entities controlled by any governmental authority which relate to any regulatory matter or other matter governed by public Law; and
|
(n)
|
any continuing obligations (Dauerschuldverhältnisse) other than those described in Clauses 6.2.9(a) through 6.2.9(m) which cannot be terminated by the Scil Entities with effect as of or prior to 30 June 2020 and which, in any given case, have a volume of more than EUR 50,000 (in words: fifty thousand euro).
|
(a)
|
Schedule 6.2.10(a)(i) contains a complete and correct list of all managing directors (Geschäftsführer), officers and employees of the Scil Entities (collectively, the Employees), prepared on an anonymous basis, indicating their functions, date of commencement of their employment, annual gross base salaries, contractual target bonus with respect to the current fiscal year, material benefits (company car), any special status under labour Law (e.g. severe disability (Schwerbehinderung), maternity protection (Mutterschutz), parental leave (Elternzeit)). Other than disclosed in Schedule 6.2.10(a)(ii), each Scil Entity has paid all salaries and other remuneration thereon as required to be paid under the Laws applicable to such Scil Entity, which were due prior to or on the Closing Date.
|
(b)
|
Schedule 6.2.10(b) contains a list of the names of the managing directors (Geschäftsführer), officers and other key Employees of the Scil Entities (the Key Employees), indicating the date of their employment agreement (and all supplemental and amendment agreements relating thereto). None of the Key Employees has given or received notice of termination of, or entered into a termination agreement regarding, his or her employment, and no Key Employee has expressed in writing the intention to terminate his or her employment with the Scil Entities. To the Seller's Knowledge, no party to the employment agreement of any Key Employee is in material breach of such agreement.
|
(c)
|
Each Employee is obligated, by contract or otherwise, to keep any know-how, business or trade secret and other information of confidential nature of the Scil Entities and/or pertaining to the Business confidential.
|
(d)
|
No Key Employee will be entitled to terminate his or her employment or service relationship with a Scil Entity as a result of the consummation of the transactions contemplated under this Agreement.
|
(e)
|
The Scil Entities are not bound by any collective bargaining agreements and other agreements with unions and similar organizational bodies. No works council (Betriebsrat), personnel committee (Sprecherausschuss) or similar employee representative body has been established at any Scil Entity other than the so called représenant du personnel in France. There are no material collective agreements (i.e., agreements with a group of employees) binding upon a Scil Entity, except as disclosed in Schedule 6.2.10(e)(i). Other than disclosed in Schedule 6.2.10(e)(ii), no Scil Entity is subject to any pending (rechtshängig) litigation with Employees or any dispute with trade unions and no such dispute is threatened in writing.
|
(f)
|
Schedule 6.2.10(f) contains a complete and correct list of all bonus, profit-sharing or similar schemes (excluding commission) that are offered by any Scil Entity and all commission offered by the Company to all or a specific group of its or their Employees.
|
(g)
|
Except as set out in Schedule 6.2.10(g), none of the Scil Entities or any member of the Seller’s Group has implemented, or is subject to liabilities (i) from a stock option, phantom stock or similar equity based or virtual incentive scheme or (ii) individual bonus agreements, long term incentive programs or similar incentive schemes for Employees.
|
(h)
|
No Scil Entity has pension obligations. No pension schemes with any Germany Employee whether of an individual or collective nature exist or have been made or promised by the Company except for obligations of the Company with respect to German employees in connection with direct insurances (Direktversicherungen) with an amount not exceeding EUR 2,000 per German Employee per annum. All obligations under, or in connection with, direct insurances have been duly fulfilled by the Company when due.
|
(i)
|
Except as set out in Schedule 6.2.10(i), no Scil Entity has granted any loan to any of the Employees or former managing directors, directors, officers or employees that are still outstanding.
|
(a)
|
Schedule 6.2.12(a) contains a complete and correct list of all patents, trademarks, internet domains and other registered or registerable intellectual property rights owned by any of the Scil Entities (the Owned Intellectual Property Rights), in each case specifying (i) the nature of such Owned Intellectual Property Right, (ii) the owner of such Owned Intellectual Property Right, and (iii) the registration or application number, and (iv) the duration of the protection. The relevant Scil Entity named as owner in Schedule 6.2.12(a) is the sole legal and beneficial owner of all Owned Intellectual Property Rights. The Owned Intellectual Property Rights are free and clear of any Liens, claims or other rights of any third party. The use of the Owned Intellectual Property Rights by the Scil Entities is not subject to any restrictions, including the consent of any third party, and no third party has or no patent attorney has notified any Scil Entity in writing that it would have any rights in respect of the Owned Intellectual Property Rights.
|
(b)
|
Schedule 6.2.12(b) contains a complete and correct list of all license agreements (other than of the shelf software licenses granted to a Scil Entity for products which are bundled with imaging hardware) (the IP License Agreements) under which the Scil Entities are granted the right to use any intellectual property rights (the Licensed Intellectual Property Rights), in each case specifying (i) the licensor of such Licensed Intellectual Property Right, (ii) the nature of such Licensed Intellectual Property Right, (iii) the license fee payable by the licensee, and (iv) whether the license is exclusive or non-exclusive, except for any standard business software (such as Microsoft Office), which is not materially related to the Business. All IP License Agreements are legal, valid, binding and enforceable, have not been terminated, all requirements under such licenses have been fully complied with by the Scil Entities and, to the Seller’s Knowledge, by the relevant contract partner thereto. To the Seller’s Knowledge, none of the Scil Entities is in material breach of any license or sublicense in respect of any Licensed Intellectual Property Right.
|
(c)
|
Schedule 6.2.12(c) contains a complete and correct list of all software programs owned by or licensed to any of the Scil Entities that are part of the product offering of any of the Scil Entities (Scil Software) in each case specifying (i) whether owned or licensed, (ii) if owned, the name of the developer, details regarding the economic rights of the Scil Entities to the Scil Software, and reference to the underlying development agreement, and (iii) if licensed the reference to the corresponding listing in Schedule 6.2.12(b).
|
(d)
|
The Scil Entities are the unrestricted owners of, and have unrestricted access to the know-how pertaining to the Business and required to conduct the Business as presently conducted, and no intellectual property rights other than the Owned Intellectual Property Rights, the rights to the Scil Software and the Licensed Intellectual Property Rights are required by the Scil Entities, to conduct the Business as presently conducted. No intellectual property right used or required by any Scil Entity to conduct the Business as presently conducted is owned or otherwise subject to rights by any Employee, except for compensation under mandatory employee invention rights provided by applicable Law.
|
(e)
|
The Owned Intellectual Property Rights, the Licensed Intellectual Property Rights and the Scil Software are not subject to any pending (rechtshängig) proceedings for opposition, cancellation, revocation or rectification nor have such proceedings been threatened in writing. All fees necessary to maintain the Owned Intellectual Property Rights have been paid, all necessary renewal applications have been timely filed and all other material steps necessary for their maintenance have been taken.
|
(f)
|
To the Seller’s Knowledge, the Scil Entities and the Business as currently conducted have, in the three (3) years before the date of this Agreement, respectively, neither infringed any third party’s intellectual property rights, nor has any third party, alleged the infringement of its intellectual property rights by any Scil Entity in writing, or sent an invitation to license to any Scil Entity, nor, to the Seller's Knowledge, are the Owned Intellectual Property Rights, the Licensed Intellectual Property Rights and the Scil Software materially infringed by third parties. None of the Scil Entities has sent a written notice alleging that a third party is infringing any Owned Intellectual Property Rights or any Scil Software.
|
(g)
|
After the Closing, the Seller and/or any member of the Seller’s Group will not own any intellectual property rights or other intangible rights pertaining to the Business and used or required by the Scil Entities to continue to conduct the Business substantially as currently conducted.
|
(h)
|
None of the Scil Entities has licensed any intellectual property rights to any third party (other than the Scil Entities), except as disclosed in Schedule 6.2.12(h).
|
(i)
|
To the Seller’s Knowledge, the Scil Software is free from any software defect or programming or documentation error which would (i) materially prevent the intended use or (ii) give rise to any product liability claims, and operates and runs in a reasonable and efficient business manner.
|
(j)
|
No intellectual property that contains or is derived from open source software has been incorporated by any Scil Entity into any products, or has otherwise been distributed or licensed by any Scil Entity to third parties, in a manner that renders any products subject to license terms that require such Scil Entity to (i) provide free access to the corresponding source code of any software contained in any product, or (ii) permit modification or free redistribution of any software contained in any product. No Scil Entity is in violation of any open source license. Open source software means software that is licensed pursuant to a license that upon distribution of such software (and modifications thereof), purports to require the distributing party to (y) provide free access to the corresponding source code, or (z) permit modification or free redistribution of such software.
|
(k)
|
The Scil Entities either own or hold valid leases and/or licenses to all computer hardware, software, networks and other information technology (collectively, Information Technology) which is necessary for the Scil Entities to conduct the Business substantially as currently conducted. The Information Technology owned or used by the Scil Entities has the capacity and performance necessary to meet the requirements of the Business. To the Seller’s Knowledge, the Information Technology has not, in the three (3) years before the date of this Agreement failed to any material extent and the data that are processed by the Information Technology has not been corrupted or compromised to any material extent.
|
(l)
|
In the three (3) years prior to the Signing Date (i) to the Seller’s Knowledge, each Scil Entity has, in all material respects, complied with all applicable Laws in connection with privacy and the processing, use and protection of personal data (including customer data), (ii) the Scil Entities have not received any third party notice in writing of any failure to comply with such Laws in connection with privacy and the processing, use and protection of personal data and have not been notified by a governmental authority in writing about any investigation with respect to any such failure and (iii) to the Seller’s Knowledge, there has been no unauthorized access, use or disclosure of any personal data under the control of any Scil Entity or any of their data processors.
|
(a)
|
The Scil Entities have (taking into account any permitted extension) timely filed all Tax Returns required to be filed under applicable Law with the appropriate Tax Authority.
|
(b)
|
The Scil Entities have (taking into account any permitted extension) timely paid all Taxes shown as payable on any valid and enforceable Tax assessment notice issued by any Tax Authority or any Tax Return filed by them other that Taxes for which a suspension of enforcement of Tax payment obligation (Aussetzung der Vollziehung) has been granted.
|
(c)
|
As of the Closing Date the Scil Entities have access to documents, records and information relating to the period ending on the Closing Date that are (i) necessary for the filing of Tax Returns of the Scil Entities or (ii) required to be retained or preserved under applicable law. The Scil Entities have complied in all material aspects with all applicable documentation, retention and reporting requirements (in particular with their obligations under sections 90 paragraph 3, 146 and 147 of the General Tax Code (Abgabenordnung) and any applicable Law regarding the documentation of transfer prices.
|
(d)
|
No Tax Returns and Tax assessments of the Scil Entities are subject of any formal proceedings outside the ordinary assessment of any Tax (e.g., no Tax assessments are subject to objections (Einspruch) or Tax court proceedings (Finanzgerichtsverfahren)).
|
(e)
|
None of the Scil Entities has received, or unsuccessfully applied for, any Tax ruling or entered into or is currently under negotiations to enter into any agreement with any Tax Authority.
|
(f)
|
As of the Signing Date, the Company is treated as a corporation for U.S. federal income tax purposes and has not filed an Internal Revenue Service Form 8832 election in the preceding 60 months. Each other Scil Entity is treated as an entity disregarded as separate from its owner for U.S. federal income tax purposes, except that (i) Vet Novations Canada Inc. is treated as a corporation for U.S. federal income tax purposes, and (ii) Lab Technologies Medizintechnik GmbH is treated as either a corporation or a partnership for U.S. federal income tax purposes. To Seller’s Knowledge, the Company’s minority interest in Lab Technologies Medizintechnik GmbH has a value not in excess of USD 100,000, as such value is determined for U.S. GAAP purposes.
|
(a)
|
been subject to any merger, spin-off or similar corporate reorganization, or any other material restructuring of the business organization (whether or not requiring any corporate action);
|
(b)
|
increased or decreased their respective share capital or redeemed any shares;
|
(c)
|
issued any share capital or similar ownership interests or rights thereto to any third party;
|
(d)
|
adopted, terminated or amended any affiliation agreements (Unternehmensverträge) within the meaning of sec. 291 et seq. AktG or any comparable agreement pursuant to foreign applicable Law;
|
(e)
|
acquired, encumbered, transferred or divested of a shareholding in any legal entity or a business;
|
(f)
|
made or declared any dividends or other distributions to the Seller or any member of the Seller’s Group;
|
(g)
|
made any capital expenditure, acquisition or disposal (including the creation of any Lien) of any assets with a value exceeding EUR 200,000 (in words: two hundred thousand euro) in each individual case or a series of related cases;
|
(h)
|
entered into any material contract, agreement or commitment (i.e. involving obligations in excess of EUR 200,000 (in words: two hundred thousand euro) per annum in each individual case or a series of related cases) outside the ordinary course of business;
|
(i)
|
terminated or materially amended any Material Agreement;
|
(j)
|
incurred any indebtedness for borrowed money;
|
(k)
|
extended any guarantees, indemnities, suretyships, letters of comfort, performance or warranty bonds or similar instruments securing any indebtedness or other obligations of any third party (other than Scil Entities) or incurred any other off-balance sheet liabilities;
|
(l)
|
made any advance or extended any loan (other than consumer credits and/or deferred payment arrangements granted in the ordinary course of business consistent with past practice) to any third party (other than Scil Entities) outside the ordinary course of business;
|
(m)
|
cancelled or waived any claims or rights of a value in excess of EUR 50,000 (in words: fifty thousand euro) in each individual case or a series of related cases except for discounts or boni granted to customers in the ordinary course of business;
|
(n)
|
changed the terms of employment (including compensation) of any of the Key Employees;
|
(o)
|
granted any increase in salaries, bonus or other remuneration of any Employee outside the ordinary course of business consistent with past practice or changed the current or introduced a new benefit plan;
|
(p)
|
laid off a significant part of its workforce or initiated any employee-related reorganization materially affecting the workforce or entered into any collective bargaining agreement or other collective agreement;
|
(q)
|
materially changed any method of accounting or accounting practice or policy, other than as required by a concurrent change of general accounting principles; and
|
(r)
|
agreed, whether in writing or otherwise, to do any of the foregoing.
|
(a)
|
Except as set out in Schedule 6.2.17(a) and except as specifically provided otherwise in this Agreement, none of the Scil Entities is, or has committed to become, a party to, or has any outstanding rights or obligations or liabilities under, any agreement with the Seller or any of its Affiliates other than the Scil Entities (collectively, the Seller's Group) or any of their directors or officers.
|
(b)
|
Except as listed in Schedule 6.2.17(b) and except as specifically provided otherwise in this Agreement, (i) no contractual relationships exist (A) between any Scil Entity, on the one hand, and any member of the Seller's Group or any of its directors or officers, on the other hand, (B) between any Scil Entity, any member of Sellers’ Group and third persons (including joint contractual relationships) and (C) to which a Scil Entity is a party and which are for the benefit of the Seller’s Group as third party beneficiary and (ii) neither any member of the Seller’s Group nor any of its directors or officers holds any assets or rights, which any of the Scil Entities currently uses for conducting its Business.
|
(c)
|
The (i) Seller and any other member of the Seller’s Group as well as (ii) [***], [***], and [***] including their respective Related Party, in each case, do not own, or have any other right to, any property or other tangible or intangible asset (including customer, end user and/or supplier data) pertaining to the Business and which is presently used by a Scil Entity and/or is required by such Scil Entity to continue the Business substantially in the same manner as presently conducted.
|
(a)
|
The Seller owns the Minority Shares thereby holding 25% in the share capital of the Participation. The Minority Shares have been validly issued, are fully paid up, either in cash or in kind, and have not been repaid, neither in whole nor in part, neither to the Company nor to any of its Affiliates. There is no shareholder obligation (actual or contingent) to make any additional payment or other contribution with respect to the Minority Shares. The Minority Shares are free and clear from any Liens and there are no pre-emptive rights, rights of first refusal, options, subscription rights or other rights (actual or contingent) of any third party to purchase or acquire, or otherwise in respect of, any or all of the Minority Shares other than as provided for in the articles of association of the Participation.
|
(b)
|
All agreements between the Company and other shareholders of the Participation and their Affiliates and related family members (including shareholders’ agreements and agreements on exclusivity, non-compete and non-solicitation of customers and suppliers) are listed on Schedule 6.2.18(b). No option of any third party exists to sell shares in the Participation to a Scil Entity.
|
(c)
|
No Scil Entity is liable for any (contingent or actual) liability or obligation owed by the Participation to any person under a guarantee, letter of comfort or otherwise.
|
6.3
|
No other Seller's Guarantees
|
(a)
|
any projections, estimates or budgets delivered or made available to the Purchaser of future revenues, future results of operations (or any component thereof), future cash flows or future financial condition (or any component thereof) or the future business operations of the Scil Entities;
|
(b)
|
any other information or documents that were delivered or made available to the Purchaser or its counsel, accountants or advisors with respect to the Business or the Scil Entities except as expressly set forth in this Agreement or otherwise agreed.
|
6.4
|
Seller’s Knowledge
|
7.1
|
General/Recoverable Damages
|
(a)
|
internal administration or overhead costs;
|
(b)
|
damages based on the argument that the Purchase Price was calculated based upon incorrect assumptions (such as earnings or other multiples on the basis of which the Purchase Price or a component thereof has been calculated or agreed);
|
(c)
|
consequential damages (other than loss of profits); and
|
(d)
|
loss of profits (entgangener Gewinn), except if and to the extent that such loss of profits (entgangener Gewinn) has been incurred at the level of any Scil Entity.
|
7.2
|
Thresholds for claims regarding Breaches
|
7.3
|
Overall Scope of Seller's Liability pursuant to this Agreement
|
7.4
|
Exclusion of Claims due to Purchaser's Knowledge
|
(a)
|
are Disclosed in this Agreement (including the Exhibits and Schedules thereto which form an integral part of this Agreement), provided, however, that a disclosure with respect to a specific Guarantee shall only be Disclosed with respect to the Guarantee it explicitly relates to but not with respect to any other Guarantee (no cross-disclosure); or
|
(b)
|
are actually known, as of the Signing Date, by the individuay listed in Schedule 7.4.2(b) (the Purchaser’s Representatives); provided that the existence of such knowledge can be shown by any kind of document, e-mail, note or other documentation in writing, electronic form (sec. 126 a BGB) or text form (sec. 126 b BGB) that was Disclosed by the Seller to any of the Purchaser’s Representatives. The documents made available in a virtual data room shall not be deemed to be actually known by the Purchaser or the Purchaser’s Representatives.
|
7.5
|
Notification of Seller; Third Party Claims
|
(a)
|
promptly (and in any event within twenty (20) Business Days of becoming aware of it) give notice of the Third Party Claim to the Seller and, at the expense of the Seller, ensure that the Seller and its representatives are given all reasonably required and requested information available to the Purchaser or any of the Scil Entities to investigate it;
|
(b)
|
not (and ensure that any Scil Entity shall not) admit liability or make any agreement or compromise in relation to the Third Party Claim without the prior written approval of the Seller (not to be unreasonably withheld or delayed and such approval shall be deemed to be granted if not refused in Textform within five (5) Business Days following receipt of the respective approval request); and
|
(c)
|
(subject to Seller’s prior confirmation in writing of its liability under this Agreement on the merits (dem Grunde nach) and, subject to any limitations applicable hereunder, in the amount (der Höhe nach) finally determined as being payable in respect of the relevant Third Party Claim and to indemnify the Purchaser or the relevant Scil Entity against all reasonable out-of-pocket costs and expenses incurred in respect of that Third Party Claim) ensure that it and each relevant Scil Entity shall:
|
(i)
|
take such action as the Seller may reasonably request to avoid, resist, dispute, appeal, compromise or defend the Third Party Claim (excluding the making of counter-claims or other claims against third parties);
|
(ii)
|
allow the Seller (if it elects to do so) to take over the conduct of all proceedings and/or negotiations arising in connection with the Third Party Claim; and
|
(iii)
|
provide such information and assistance as the Seller may reasonably require in connection with the preparation for and conduct of any proceedings and/or negotiations relating to the Third Party Claim;
|
7.6
|
Mitigation
|
7.7
|
Limitation Periods
|
7.8
|
Exclusion of Further Remedies; no Double Counting
|
7.9
|
Treatment of Payments
|
8.1
|
Definitions
|
8.2
|
Tax Indemnification by Seller
|
(a)
|
does not exceed the Tax liabilities as shown in the Closing Accounts (to the extent such Tax liabilities have reduced the Purchase Price (other than the Enterprise Value) pursuant to Clause 3.1 and 3.2); for the avoidance of doubt, Tax provisions shall not reduce or exclude any Tax Indemnification Claim; or
|
(b)
|
is the result of (i) an amendment of a Tax Return for the Pre-Closing Date Period, (ii) an exercise of an election right with legal effect for the Pre-Closing Date Period, (iii) a deviation from past practice (where such past practice is in compliance with Mandatory Tax Law) of the Scil Entities in respect of accounting, valuation, transfer pricing or taxation principles introduced after the Closing Date for the Pre-Closing Date Period, (iv) a reorganization initiated by the Purchaser or – after the Closing Date – one or more of the Scil Entities with legal effect for the Pre-Closing Date Period, (v) an elapse of a deadline to contest a Tax assessment (Einspruch erheben) or to file a law suit in Tax court against the Tax Authorities (Klage vor den Finanzgerichten erheben) due to a non-compliance with a notification to be made by the Purchaser in accordance with Clause 8.4.1, (vi) a non-compliance with an instruction in compliance with Mandatory Tax Law given by the Seller in accordance with Clauses 8.3.2 and 8.4.2, (vii) a settlement of a Tax audit (Betriebsprüfung), contest of a Tax assessment (Einspruchsverfahren) or law suit in Tax Court (Klage vor dem Finanzgericht) without the prior consent in Textform of the Seller (not to be unreasonably withheld or delayed and such consent shall be deemed to be granted if not refused in Textform within fifteen (15) Business Days following receipt of the respective consent request) unless and to the extent such non-compliance under (v) to (vii) has not caused or increased the Tax Indemnification Claim. It is expressly understood that the exceptions from the Tax Indemnification Claim listed above under numbers (i) through (vii) do not apply if (A) the action or omission is required to comply with Mandatory Tax Law and (B) the Seller has been notified by the Purchaser at least fifteen (15) Business Days before such an action is taken (and if a circumstance occurs in which Mandatory Tax Law requires such action to be taken in less than fifteen (15) Business Days, the time for the notification of the Seller is reduced in a reasonable manner reflecting the specific situation); or
|
(c)
|
does correspond to or can be offset against any Tax Assets of the Scil Entities, the Purchaser or any of its affiliated companies arising or increasing out of reciprocal effects (Wechselwirkungen) triggered by a circumstance causing the specific Tax Indemnification Claim in question, e.g. resulting from the extension of depreciation periods or higher depreciation allowances (Phasenverschiebung) or from the transfer of an item relevant for Tax into another calendar year. It is understood that the value of such Tax Asset shall reduce a Tax Indemnification Claim (i) by its face value if and to the extent that the respective Tax Asset stems from a Tax other than Taxes on income (e.g. corporate income taxes, solidarity surcharge and trade taxes) or (ii) by the net present value of the respective Tax Asset if and to the extent the Tax Asset stems from Taxes on income (e.g. corporate income taxes, solidarity surcharge and trade taxes), whereby the net present value of such Tax Asset shall be calculated as of the day of the Tax Indemnification Claim becomes due and payable by discounting such respective Tax Asset by five (5) per cent per annum, applying a Tax rate applicable by Law in the relevant taxable period and the expected time period in which such respective Tax Asset can be realized (especially by way of refund, credit or set-off) but for a maximum of five (5) years after the Closing Date and under the assumption that the relevant entity is and will remain in a Tax paying position.
|
8.3
|
Tax Returns
|
8.4
|
Tax Proceedings
|
8.5
|
Tax Refunds
|
8.6
|
Tax Limitation Periods
|
8.7
|
Tax Threshold
|
8.8
|
United States Tax Covenants
|
9.1
|
Guarantees
|
9.2
|
Indemnification
|
11.1
|
Access to Financial Information
|
(a)
|
the annual books of accounts of the Scil Entities for the fiscal year 2019 as well as any other financial information required in connection with the Closing Accounts and the Purchase Price Determination Statement. Clause 5.1.3 remains unaffected;
|
(b)
|
the annual books of accounts of the Scil Entities for the fiscal year 2019 as well as any other financial information required in connection with the preparation of the Seller’s group accounts for the fiscal year 2019; and
|
(c)
|
any and all information the Seller requires to prepare the Tax filings according to Clause 8.
|
11.2
|
Obligations between Signing Date and Closing Date
|
(a)
|
become subject to any merger, spin-off or similar corporate reorganization, or any other material restructuring of the business organization (whether or not requiring any corporate action);
|
(b)
|
increase or decrease their respective share capital or redeem any shares;
|
(c)
|
issue any share capital or similar ownership interests or rights thereto to any third party;
|
(d)
|
adopt, terminate or amend any affiliation agreements (Unternehmensverträge) within the meaning of sec. 291 et seq. AktG or any comparable agreement pursuant to foreign applicable Law;
|
(e)
|
acquire, encumber, transfer or divest of a shareholding in any legal entity or a business);
|
(f)
|
make or declare any dividends or other distributions to the Seller or any member of the Seller’s Group;
|
(g)
|
make any capital expenditure, acquisition or disposal (including the creation of any Lien) of any assets with a value exceeding EUR 200,000 (in words: two hundred thousand euro) in each individual case or a series of related cases;
|
(h)
|
enter into any material contract, agreement or commitment (i.e. involving obligations in excess of EUR 200,000 (in words: two hundred thousand euro) per annum in each individual case or a series of related cases) outside the ordinary course of business;
|
(i)
|
terminate or materially amend any Material Agreement;
|
(j)
|
incur any indebtedness for borrowed money;
|
(k)
|
extend any guarantees, indemnities, suretyships, letters of comfort, performance or warranty bonds or similar instruments securing any indebtedness or other obligations of any third party (other than Scil Entities but including any member of the Seller’s Group) or incur any other off-balance sheet liabilities;
|
(l)
|
make any advance or extend any loan (other than consumer credits and/or deferred payment arrangements granted in the ordinary course of business consistent with past practice) to any third party (other than Scil Entities) outside the ordinary course of business;
|
(m)
|
cancel or waive any claims or rights of a value in excess of EUR 50,000 (in words: fifty thousand euro) in each individual case or a series of related cases except for discounts or boni granted to customers in the ordinary course of business;
|
(n)
|
change the terms of employment (including compensation) of any of the Key Employees;
|
(o)
|
grant any increase in salaries, bonus or other remuneration of any Employee outside the ordinary course of business consistent with past practice or change the current or introduce a new benefit plan;
|
(p)
|
lay off a significant part of its workforce or initiate any employee-related reorganization materially affecting the workforce or enter into any collective bargaining agreement or other collective agreement;
|
(q)
|
materially change any method of accounting or accounting practice or policy, other than as required by a concurrent change of general accounting principles;
|
(r)
|
grant any licenses to any third party (including Seller’s Group);
|
(s)
|
enter into any agreement with any member of the Seller’s Group or any of its directors, officers or shareholders; and
|
(t)
|
agree, whether in writing or otherwise, to do any of the foregoing.
|
1.
|
furnishing Purchaser with the Audited Financial Statements and such other financial and other financial and other pertinent information of the type that would typically be included in bank information memoranda and other syndication materials or similar documents customarily required in connection with the credit facilities obtained for the purpose of providing financing for the transactions contemplated by this Agreement, or otherwise as reasonably requested by Purchaser and that is customarily needed in connection with the arrangement of any Financing in connection with transactions similar to the transactions contemplated by this Agreement;
|
2.
|
upon reasonable prior notice and in reasonably convenient locations (or via teleconference), participating (including by making members of senior management with appropriate seniority and expertise available) in a reasonable number of meetings, presentations, due diligence sessions, meetings with prospective lenders and sessions with rating agencies at times to be mutually and reasonably agreed;
|
3.
|
providing reasonable and customary assistance in the preparation of materials for rating agency presentations, bank information memoranda (including, to the extent necessary, an additional bank information memorandum that does not contain material non-public information), and similar documents customarily required in connection with the Financing or the SEC Filings, including executing customary authorization letters in connection with the distribution of such materials authorizing the distribution of information containing a customary representation to the Financing sources that the public side versions of marketing materials, if any, do not include material non-public information about the business of the Company for purposes of U.S. federal and state securities laws;
|
4.
|
providing reasonable and customary assistance in the preparation, execution and delivery of definitive documentation with respect to the Financing or the SEC Filings, the delivery of collateral required to be provided thereunder and the perfection of security interests required to be granted thereunder;
|
5.
|
taking all corporate and other actions, reasonably necessary to permit the consummation of the Financing or the SEC Filings.
|
11.3
|
Domains
|
11.4
|
Specific Indemnities by the Seller
|
1.
|
any and all claims of the [***] if and to the extent these exceed the [***] Amount and have not been deducted from the Purchase Price as Financial Debt;
|
2.
|
any and all claims of the [***] if and to the extent these exceed the [***] Amount and have not been deducted from the Purchase Price as Financial Debt;
|
3.
|
any and all claims of the [***] if and to the extent these exceed the [***] Amount and have not been deducted from the Purchase Price as Financial Debt;
|
4.
|
(i) any and all former subsidiaries or other Affiliates of the Company (whether controlled or not), irrespective whether such subsidiary or other Affiliate has been sold, liquidated or otherwise disposed (including in the USA, the Netherlands, the United Kingdom and Singapore (including Harold PTE Ltd., Singapore, and Scil Animal Care Company, USA) and (ii) scil animal care company Ltd., United Kingdom, or other subsidiaries of the Company which are not operative any more as of the Closing Date (including costs for winding up/liquidation).
|
1.
|
If the [***] Amount deducted from the Purchase Price as Financial Debt exceeds the [***] Amount as finally determined, the Purchaser shall inform the Seller and shall pay to the Seller the amount by which the [***] Amount as deducted from the Purchase Price exceeds the [***] Amount.
|
2.
|
If the [***] Amount deducted from the Purchase Price as Financial Debt exceeds the [***] Amount as finally determined, the Purchaser shall inform the Seller and shall pay to the Seller the amount by which the [***] Amount as deducted from the Purchase Price exceeds the [***] Amount.
|
3.
|
If the [***] Amount deducted from the Purchase Price as Financial Debt exceeds the [***] Amount as finally determined, the Purchaser shall inform the Seller and shall pay to the Seller the amount by which the [***] Amount as deducted from the Purchase Price exceeds the [***] Amount.
|
11.5
|
Restrictive Covenants
|
12.1
|
Purchaser’s Guarantor
|
12.2
|
Seller’s Guarantor
|
13.1
|
Confidentiality; Press Releases; Public Disclosure
|
13.2
|
Seller's Confidentiality
|
13.3
|
Purchaser's Confidentiality
|
14.1
|
Assignment by Purchaser
|
14.2
|
Assignment by Seller
|
15.1
|
Transfer Taxes and Costs
|
15.2
|
Costs of Advisors
|
16.1
|
Form of Notices
|
16.2
|
Notices to the Seller and the Seller’s Guarantor
|
a)
|
Any Notices to be delivered to the Seller hereunder shall be addressed as follows:
|
b)
|
Any Notices to be delivered to the Seller’s Guarantor hereunder shall be addressed as follows:
|
16.3
|
Notices to the Purchaser and the Purchaser’s Guarantor
|
a)
|
Any Notices to be delivered to any of the Purchasers hereunder shall be addressed as follows:
|
b)
|
Any Notices to be delivered to the Purchaser’s Guarantor hereunder shall be addressed as follows:
|
16.4
|
Change of Address
|
16.5
|
Copies to Advisors
|
17.1
|
Governing Law
|
17.2
|
Place of Jurisdiction
|
17.3
|
Certain Definitions
|
17.4
|
Amendments; Supplements; Termination
|
17.5
|
Headings; References to German Legal Terms; Interpretation; References to Clauses
|
17.6
|
Schedules
|
17.7
|
Entire Agreement
|
17.8
|
Rights of Third Parties
|
17.9
|
Severability
|
•
|
10,250,000 shares of original common stock are designated as Traditional common stock;
|
•
|
10,250,000 shares of NOL restricted common stock are designated as Public common stock; and
|
•
|
2,500,000 shares are designated as preferred stock.
|
|
|
|
|
1.
|
Effective Date. This Agreement shall become effective on the eighth day after Employee signs this Agreement (the “Effective Date”), so long as Employee does not revoke this Agreement pursuant to Paragraph 10 below. Employee’s Termination Date will not change regardless of whether this Agreement becomes effective on the “Effective Date.”
|
2.
|
Consideration for Release and Payment Terms.
|
a.
|
Pursuant to this Agreement, the Company shall, as consideration for Employee’s release and promises set forth in this Agreement, pay Employee additional compensation that Employee would not be entitled to otherwise.
|
b.
|
After the Effective Date and on the express condition that Employee has not revoked this Agreement, the Company will pay Employee a severance payment in the total sum of five
|
c.
|
Medical and Dental Benefits. From the Termination Date through the earlier of (i) the six month anniversary of the Termination Date or (ii) the date on which Employee is provided or obtains medical or dental insurance coverage from another employer or entity, the Company shall reimburse Employee for the difference between the cost of any COBRA premiums paid by Employee for continued medical and dental coverage under the Company’s group health plans for himself and his dependents and the active employee rates for coverage under such plans. The foregoing is subject to Employee’s timely enrollment in COBRA and payment of applicable premiums.
|
d.
|
Reporting and Withholding. Reporting of and withholding on any payment under this Agreement for tax purposes shall be at the discretion of the Company in conformance with applicable tax laws. If a claim is made against the Company for any additional tax or withholding in connection with or arising out of any payment pursuant to this Agreement, Employee shall pay any such claim within thirty (30) days of being notified by the Company and agrees to indemnify the Company and hold it harmless against such claims, including, but not limited to, any taxes, attorneys’ fees, penalties, and/or interest, which are or become due from the Company.
|
3.
|
General Release.
|
a.
|
Employee, for Employee, and for Employee’s affiliates, successors, heirs, subrogees, assigns, principals, agents, partners, employees, associates, attorneys, and representatives, voluntarily, knowingly, unequivocally, unconditionally and intentionally releases and discharges (i) the Company and its predecessors, successors, parents, subsidiaries, affiliates, and assigns, and (ii) each of their respective officers, directors, principals, shareholders, agents, attorneys, board members, and employees (the “Released Parties”) from any and all claims, actions, liabilities, demands, rights, damages, costs, expenses, and attorneys’ fees (including, but not limited to, any claim of entitlement for attorneys’ fees under any contract, statute, or rule of law allowing a prevailing party or plaintiff to recover attorneys’ fees), of every kind and description from the beginning of time through the Effective Date (the “Released Claims”).
|
b.
|
The Released Claims include, but are not limited to, those which arise out of, relate to, or are based upon: (i) Employee’s employment with the Company or the termination thereof; (ii) statements, acts, or omissions by the Released Parties whether in their individual or representative capacities; (iii) express or implied agreements between the Parties and claims
|
c.
|
The General Release in this Agreement does not apply to claims under federal, state, or local law (statutory, regulatory, or otherwise) that may not be lawfully waived and released, including but not limited to vested retirement benefits (if any), COBRA rights, unemployment compensation, and workers’ compensation.
|
4.
|
Confidential Information.
|
a.
|
For the purposes of this Agreement, “Confidential Information” shall include, without limitation, any non-public information relating to or pertaining to the Company, such as the whole or any portion or phase of (i) any proprietary information or Trade Secrets (defined below); (ii) any scientific, technical, business, or financial information; (iii) any marketing information, business development information, prospect information, or marketing analysis or plans; (iv) any customer information, lists, contacts, or needs; (v) any contracts, agreements, or leases; (vi) any discoveries, inventions, products, designs, methods, know-how, techniques, systems, processes, software programs, works of authorship, projects, or
|
b.
|
Employee acknowledges the success of the Company depends in large part on the protection of the Company’s Confidential Information. Employee further acknowledges that, in the course of Employee’s employment with the Company, Employee became familiar with the Company’s Confidential Information. Employee recognizes and acknowledges that the Company’s Confidential Information is a valuable, special, and unique asset of the Company’s business, access to and knowledge of which were essential to the performance of Employee’s duties. Employee acknowledges use or disclosure of the Confidential Information outside the performance of Employee’s job duties for the Company would cause harm and/or damage to the Company.
|
c.
|
Employee agrees that Employee will not, directly or indirectly, disclose any Confidential Information to any person, firm, business, company, corporation, association, or any other entity for any reason or purpose whatsoever. Employee also agrees that Employee has not and will not use, directly or indirectly, any Confidential Information for Employee’s own purposes or for the benefit of any person, firm, business, company, corporation, or any other entity (except the Company) under any circumstances. Employee has considered and treated and shall consider and treat as confidential all Confidential Information in any way relating to the Company’s business and affairs, whether created by Employee or otherwise coming into Employee’s possession before, during, or after the Termination Date. Employee shall not use or attempt to use any Confidential Information in any manner which has the possibility of injuring or causing loss, whether directly or indirectly, to the Company, its affiliates, subsidiaries, parents, or customers. Employee agrees all such Confidential Information shall be and remain the sole and exclusive property of the Company.
|
5.
|
Remedies.
|
a.
|
Injunctive Relief. Employee acknowledges that any breach of Paragraph 4 or the surviving provisions of the Employment Agreement referenced in Paragraphs 6, 8, 12 and 13 below will cause the Company to suffer immediate and irreparable harm and damage for which money alone cannot fully compensate the Company. Employee agrees that upon breach or threat of imminent breach of any obligation under Paragraphs 4, 6, 8, 12, and/or 13 of this Agreement, the Company shall be entitled to a temporary restraining order, preliminary injunction, permanent injunction, or other injunctive relief without posting any bond or other security, and that Employee shall not oppose entry of any of these measures. This Paragraph shall not be construed as an election of any remedy, or as a waiver of any right available to
|
b.
|
Attorneys’ Fees. In the event of any controversy, claim, or dispute between the parties affecting or relating to Paragraphs 4, 6, 8, 12, and/or 13 of this Agreement, if the Company is required to defend its actions or seek enforcement of the Agreement, the Company shall be entitled to recover all of its attorneys’ fees and costs if the Company is successful in its defense or enforcement action.
|
c.
|
Separate Provisions. Employee agrees the provisions of Paragraphs 4, 6, 8, 12, and 13 of this Agreement are separate from and independent of the remainder of this Agreement and that these provisions are specifically enforceable by the Company notwithstanding any claim by Employee that the Company has violated or breached this Agreement.
|
6.
|
Return of Company Property. Employee represents and warrants that Employee returned all Company property to the designated Company representative on or before Employee’s Termination Date, unless otherwise agreed upon. This property includes, but is not limited to, Company documents and files (in any recorded media, such as papers, computer disks, copies, transparencies, and microfiche), materials, keys, credit cards, laptops, cellular phone(s), computer disks, and badges. Employee agrees that, to the extent that Employee possesses any files, data, or information relating in any way to the Company or the Company’s business on any personal computer, Employee will delete the data, files, or information (and will retain no copies in any form).
|
7.
|
Unknown Facts. The releases in this Agreement include, but are not limited to, claims of every nature and kind, known or unknown, suspected or unsuspected. Employee hereby acknowledges that Employee may hereafter discover facts different from, or in addition to, those which Employee now knows to be or believes to be true with respect to this Agreement, and Employee agrees that this Agreement and the releases contained herein shall be and remain effective in all respects, notwithstanding such different or additional facts or the discovery thereof.
|
8.
|
Confidentiality of Agreement. Employee agrees to keep this Agreement confidential and will not disclose the existence or the terms of this Agreement to anyone except to Employee’s immediate family, accountants, legal or financial advisors, as part of an investigation or proceeding conducted by any Government Agency, or as otherwise appropriate or necessary as required by law or court order. To the extent that Employee discloses the existence or terms of this Agreement to Employee’s immediate family, accountants, or legal or financial advisors, Employee must advise them that they must not disclose the existence or terms of this Agreement to any person or entity. However, nothing contained herein precludes any individual from communicating with any Government Agency. If compulsory disclosure is required by a Government Agency, Employee shall provide the Company immediate notice of the compulsory process and affording the Company the opportunity to obtain any necessary or appropriate protective orders. Otherwise, in response to inquiries about Employee’s employment and this matter, Employee shall state, “My employment with the Company has ended” and nothing more.
|
9.
|
No Admission of Liability. The Parties agree that nothing contained herein, and no action taken by any Party hereto with regard to this Agreement, shall be construed as an admission by any Party of liability or of any fact that might give rise to liability for any purpose whatsoever.
|
10.
|
ADEA and Older Workers Benefit Protection Act Release
|
11.
|
Representations and Warranties. Employee represents and warrants as follows:
|
a.
|
Employee has read this Agreement and agrees to the conditions and obligations set forth in it;
|
b.
|
Employee voluntarily executes this Agreement (i) after having been advised to consult with legal counsel, (ii) after having had opportunity to consult with legal counsel, and (iii) without being pressured or influenced by any statement or representation or omission of any person acting on behalf of the Company including, without limitation, the officers, directors, board members, committee members, employees, agents, and attorneys for the Company;
|
c.
|
Employee has no knowledge of the existence of any lawsuit, charge, or proceeding against the Company or any of its officers, directors, board members, committee members, employees, or agents arising out of or otherwise connected with any of the matters herein released. In the event that any such lawsuit, charge, or proceeding has been filed, Employee immediately will take all actions necessary to withdraw or terminate that lawsuit, charge, or proceeding;
|
d.
|
Employee has not previously disclosed any information which would be a violation of the confidentiality provisions set forth herein if such disclosure were to be made after the execution of this Agreement;
|
e.
|
Employee has full and complete legal capacity to enter into this Agreement;
|
f.
|
Employee admits, acknowledges, and agrees that Employee is not otherwise entitled to the amounts and other consideration set forth in Paragraph 2, which are good and valuable consideration for this Agreement; and
|
g.
|
Employee further admits, acknowledges, and agrees that Employee has been fully and finally paid all wages, compensation, vacation, bonuses, stock, stock options, or other benefits from the Company which are or could be due to Employee under the terms of Employee’s employment with the Company or otherwise.
|
12.
|
Non-Disparagement. Employee agrees not to make to any person any statement that disparages the Company or reflects negatively upon the Company, including, without limitation, statements regarding the Company’s financial condition, business practices, employment practices, or its predecessors, successors, parents, subsidiaries, officers, directors, employees, affiliates, agents, or representatives. Company agrees not to make to any person any statement that disparages Employee or reflects negatively upon the Employee.
|
13.
|
Cooperation. Employee agrees to cooperate with and assist the Company with any investigation, lawsuit, arbitration, or other proceeding to which the Company is subjected. Employee will be
|
14.
|
Section 409A. This Agreement is intended to comply with Section 409A of the Internal Revenue Code and shall be construed accordingly. It is the intention of the Parties that payments or benefits payable under this Agreement not be subject to the additional tax or interest imposed pursuant to Section 409A. To the extent such potential payments or benefits are or could become subject to Section 409A, the Parties shall cooperate to amend this Agreement with the goal of giving Employee the economic benefits described herein in a manner that does not result in such tax or interest being imposed. Employee shall, at the request of the Company, take any reasonable action (or refrain from taking any action), required to comply with any correction procedure promulgated pursuant to Section 409A.
|
15.
|
Severability. If any provision of this Agreement is held illegal, invalid, or unenforceable, such holding shall not affect any other provisions hereof. In the event any provision is held illegal, invalid or unenforceable, such provision shall be limited so as to effect the intent of the parties to the fullest extent permitted by applicable law. Any claim by Employee against the Company shall not constitute a defense to enforcement by the Company of this Agreement.
|
16.
|
Enforcement. The Release contained herein does not release any claims for enforcement of the terms, conditions, or warranties contained in this Agreement. The Parties shall be free to pursue any remedies available to them to enforce this Agreement.
|
17.
|
Entire Agreement. This Agreement constitutes the entire agreement between the Parties and supersedes and modifies any and all prior agreements. This Agreement cannot be modified except in a writing signed by all Parties.
|
18.
|
Venue, Applicable Law, and Submission to Jurisdiction. This Agreement shall be interpreted and construed in accordance with the laws of the State of Colorado, without regard to its conflicts of law provisions. Venue and jurisdiction will be in the Colorado state or federal courts.
|
19.
|
Interpretation. The determination of the terms, and the drafting, of this Agreement has been by mutual agreement after negotiation, with consideration by and participation of all Parties. Accordingly, the Parties agree that rules relating to the interpretation of contracts against the drafter of any particular clause shall not apply in the case of this Agreement. The term “Paragraph” shall refer to the enumerated paragraphs of this Agreement. The headings contained in this Agreement are for convenience of reference only and are not intended to limit the scope or affect the interpretation of any provision of this Agreement.
|
20.
|
Assignment. The Company may assign its rights under this Agreement. Employee cannot assign Employee’s rights under this Agreement without the written consent of the Company. No other assignment is permitted except by written permission of the Parties.
|
EMPLOYEE
|
|
|
HESKA CORPORATION
|
|
|
|
|
|
|
|
|
/s/ Jason Napolitano
|
|
|
/s/ Christopher Sveen
|
Jason Napolitano
|
|
|
Christopher Sveen
|
|
|
|
Vice President, General Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
1/23/2020
|
|
|
1/23/2020
|
Date
|
|
|
Date
|
1.
|
Effective Date. This Agreement shall become effective on the eighth day after Employee signs this Agreement (the “Effective Date”), so long as Employee does not revoke this Agreement pursuant to Paragraph 10 below. Employee’s Termination Date will not change regardless of whether this Agreement becomes effective on the “Effective Date.”
|
2.
|
Consideration for Release and Payment Terms.
|
a.
|
Pursuant to this Agreement, the Company shall, as consideration for Employee’s release and promises set forth in this Agreement, pay Employee additional compensation that Employee would not be entitled to otherwise.
|
b.
|
After the Effective Date and on the express condition that Employee has not revoked this Agreement, the Company will pay Employee a severance payment in the total sum of three hundred fifty thousand dollars ($350,000.00), less applicable deductions and withholdings, to be paid within three business days of the Effective Date, so long as Employee does not revoke this Agreement pursuant to Paragraph 10 below. This payment is inclusive of the severance pay
|
c.
|
Medical and Dental Benefits. From the Termination Date through the earlier of (i) the six month anniversary of the Termination Date or (ii) the date on which Employee is provided or obtains medical or dental insurance coverage from another employer or entity, the Company shall reimburse Employee for the difference between the cost of any COBRA premiums paid by Employee for continued medical and dental coverage under the Company’s group health plans for himself and his dependents and the active employee rates for coverage under such plans. The foregoing is subject to Employee’s timely enrollment in COBRA and payment of applicable premiums.
|
d.
|
Reporting and Withholding. Reporting of and withholding on any payment under this Agreement for tax purposes shall be at the discretion of the Company in conformance with applicable tax laws. If a claim is made against the Company for any additional tax or withholding in connection with or arising out of any payment pursuant to this Agreement, Employee shall pay any such claim within thirty (30) days of being notified by the Company and agrees to indemnify the Company and hold it harmless against such claims, including, but not limited to, any taxes, attorneys’ fees, penalties, and/or interest, which are or become due from the Company.
|
3.
|
General Release.
|
a.
|
Employee, for Employee, and for Employee’s affiliates, successors, heirs, subrogees, assigns, principals, agents, partners, employees, associates, attorneys, and representatives, voluntarily, knowingly, unequivocally, unconditionally and intentionally releases and discharges (i) the Company and its predecessors, successors, parents, subsidiaries, affiliates, and assigns, and (ii) each of their respective officers, directors, principals, shareholders, agents, attorneys, board members, and employees (the “Released Parties”) from any and all claims, actions, liabilities, demands, rights, damages, costs, expenses, and attorneys’ fees (including, but not limited to, any claim of entitlement for attorneys’ fees under any contract, statute, or rule of law allowing a prevailing party or plaintiff to recover attorneys’ fees), of every kind and description from the beginning of time through the Effective Date (the “Released Claims”).
|
b.
|
The Released Claims include, but are not limited to, those which arise out of, relate to, or are based upon: (i) Employee’s employment with the Company or the termination thereof; (ii) statements, acts, or omissions by the Released Parties whether in their individual or representative capacities; (iii) express or implied agreements between the Parties and claims under any severance plan (except as provided herein); (iv) any stock or stock option grant, agreement, or plan; (v) all federal, state, and municipal statutes, ordinances, and regulations, including, but not limited to, claims of discrimination based on race, color, national origin,
|
c.
|
The General Release in this Agreement does not apply to claims under federal, state, or local law (statutory, regulatory, or otherwise) that may not be lawfully waived and released, including but not limited to vested retirement benefits (if any), COBRA rights, unemployment compensation, and workers’ compensation.
|
4.
|
Confidential Information.
|
a.
|
For the purposes of this Agreement, “Confidential Information” shall include, without limitation, any non-public information relating to or pertaining to the Company, such as the whole or any portion or phase of (i) any proprietary information or Trade Secrets (defined below); (ii) any scientific, technical, business, or financial information; (iii) any marketing information, business development information, prospect information, or marketing analysis or plans; (iv) any customer information, lists, contacts, or needs; (v) any contracts, agreements, or leases; (vi) any discoveries, inventions, products, designs, methods, know-how, techniques, systems, processes, software programs, works of authorship, projects, or plans; (vii) any proposals, strategies, concepts, analyses, surveys, ideas, research, data, databases, reports, manuals, manuscripts, articles, or records; and (viii) any other business or corporate documents related to Company Business. The Company’s “Trade Secrets”
|
b.
|
Employee acknowledges the success of the Company depends in large part on the protection of the Company’s Confidential Information. Employee further acknowledges that, in the course of Employee’s employment with the Company, Employee became familiar with the Company’s Confidential Information. Employee recognizes and acknowledges that the Company’s Confidential Information is a valuable, special, and unique asset of the Company’s business, access to and knowledge of which were essential to the performance of Employee’s duties. Employee acknowledges use or disclosure of the Confidential Information outside the performance of Employee’s job duties for the Company would cause harm and/or damage to the Company.
|
c.
|
Employee agrees that Employee will not, directly or indirectly, disclose any Confidential Information to any person, firm, business, company, corporation, association, or any other entity for any reason or purpose whatsoever. Employee also agrees that Employee has not and will not use, directly or indirectly, any Confidential Information for Employee’s own purposes or for the benefit of any person, firm, business, company, corporation, or any other entity (except the Company) under any circumstances. Employee has considered and treated and shall consider and treat as confidential all Confidential Information in any way relating to the Company’s business and affairs, whether created by Employee or otherwise coming into Employee’s possession before, during, or after the Termination Date. Employee shall not use or attempt to use any Confidential Information in any manner which has the possibility of injuring or causing loss, whether directly or indirectly, to the Company, its affiliates, subsidiaries, parents, or customers. Employee agrees all such Confidential Information shall be and remain the sole and exclusive property of the Company.
|
5.
|
Remedies.
|
a.
|
Injunctive Relief. Employee acknowledges that any breach of Paragraph 4 or the surviving provisions of the Employment Agreement referenced in Paragraphs 6, 8, 12 and 13 below will cause the Company to suffer immediate and irreparable harm and damage for which money alone cannot fully compensate the Company. Employee agrees that upon breach or threat of imminent breach of any obligation under Paragraphs 4, 6, 8, 12, and/or 13 of this Agreement, the Company shall be entitled to a temporary restraining order, preliminary injunction, permanent injunction, or other injunctive relief without posting any bond or other security, and that Employee shall not oppose entry of any of these measures. This Paragraph shall not be construed as an election of any remedy, or as a waiver of any right available to the Company under this Agreement or the Colorado law governing this Agreement, including the right to seek damages from Employee.
|
b.
|
Attorneys’ Fees. In the event of any controversy, claim, or dispute between the parties affecting or relating to Paragraphs 4, 6, 8, 12, and/or 13 of this Agreement, if the Company is required to defend its actions or seek enforcement of the Agreement, the Company shall be entitled to recover all of its attorneys’ fees and costs if the Company is successful in its defense or enforcement action.
|
c.
|
Separate Provisions. Employee agrees the provisions of Paragraphs 4, 6, 8, 12, and 13 of this Agreement are separate from and independent of the remainder of this Agreement and that these provisions are specifically enforceable by the Company notwithstanding any claim by Employee that the Company has violated or breached this Agreement.
|
6.
|
Return of Company Property. Employee represents and warrants that Employee returned all Company property to the designated Company representative on or before Employee’s Termination Date, unless otherwise agreed upon. This property includes, but is not limited to, Company documents and files (in any recorded media, such as papers, computer disks, copies, transparencies, and microfiche), materials, keys, credit cards, laptops, cellular phone(s), computer disks, and badges. Employee agrees that, to the extent that Employee possesses any files, data, or information relating in any way to the Company or the Company’s business on any personal computer, Employee will delete the data, files, or information (and will retain no copies in any form).
|
7.
|
Unknown Facts. The releases in this Agreement include, but are not limited to, claims of every nature and kind, known or unknown, suspected or unsuspected. Employee hereby acknowledges that Employee may hereafter discover facts different from, or in addition to, those which Employee now knows to be or believes to be true with respect to this Agreement, and Employee agrees that this Agreement and the releases contained herein shall be and remain effective in all respects, notwithstanding such different or additional facts or the discovery thereof.
|
8.
|
Confidentiality of Agreement. Employee agrees to keep this Agreement confidential and will not disclose the existence or the terms of this Agreement to anyone except to Employee’s immediate family, accountants, legal or financial advisors, as part of an investigation or proceeding conducted by any Government Agency, or as otherwise appropriate or necessary as required by law or court order. To the extent that Employee discloses the existence or terms of this Agreement to Employee’s immediate family, accountants, or legal or financial advisors, Employee must advise them that they must not disclose the existence or terms of this Agreement to any person or entity. However, nothing contained herein precludes any individual from communicating with any Government Agency. If compulsory disclosure is required by a Government Agency, Employee shall provide the Company immediate notice of the compulsory process and affording the Company the opportunity to obtain any necessary or appropriate protective orders. Otherwise, in response to inquiries about Employee’s employment and this matter, Employee shall state, “My employment with the Company has ended” and nothing more.
|
9.
|
No Admission of Liability. The Parties agree that nothing contained herein, and no action taken by any Party hereto with regard to this Agreement, shall be construed as an admission by any Party of liability or of any fact that might give rise to liability for any purpose whatsoever.
|
10.
|
ADEA and Older Workers Benefit Protection Act Release
|
11.
|
Representations and Warranties. Employee represents and warrants as follows:
|
a.
|
Employee has read this Agreement and agrees to the conditions and obligations set forth in it;
|
b.
|
Employee voluntarily executes this Agreement (i) after having been advised to consult with legal counsel, (ii) after having had opportunity to consult with legal counsel, and (iii) without being pressured or influenced by any statement or representation or omission of any person acting on behalf of the Company including, without limitation, the officers, directors, board members, committee members, employees, agents, and attorneys for the Company;
|
c.
|
Employee has no knowledge of the existence of any lawsuit, charge, or proceeding against the Company or any of its officers, directors, board members, committee members, employees, or agents arising out of or otherwise connected with any of the matters herein released. In the event that any such lawsuit, charge, or proceeding has been filed, Employee immediately will take all actions necessary to withdraw or terminate that lawsuit, charge, or proceeding;
|
d.
|
Employee has not previously disclosed any information which would be a violation of the confidentiality provisions set forth herein if such disclosure were to be made after the execution of this Agreement;
|
e.
|
Employee has full and complete legal capacity to enter into this Agreement;
|
f.
|
Employee admits, acknowledges, and agrees that Employee is not otherwise entitled to the amounts and other consideration set forth in Paragraph 2, which are good and valuable consideration for this Agreement; and
|
g.
|
Employee further admits, acknowledges, and agrees that Employee has been fully and finally paid all wages, compensation, vacation, bonuses, stock, stock options, or other benefits from the Company which are or could be due to Employee under the terms of Employee’s employment with the Company or otherwise. This Agreement explicitly excludes vested, exercised stock and stock options currently owned by the Employee and does not prevent Employee from exercising vested stock options in accordance with Employee’s Stock Option Agreement. This Agreement further acknowledges that expenses submitted and approved before the Effective Date may be reimbursed after the Effective Date, in accordance with internal Company policies and procedures.
|
12.
|
Non-Disparagement. Employee agrees not to make to any person any statement that disparages the Company or reflects negatively upon the Company, including, without limitation, statements regarding the Company’s financial condition, business practices, employment practices, or its predecessors, successors, parents, subsidiaries, officers, directors, employees, affiliates, agents, or representatives. Company agrees not to make to any person any statement that disparages Employee or reflects negatively upon the Employee.
|
13.
|
Cooperation. Employee agrees to cooperate with and assist the Company with any investigation, lawsuit, arbitration, or other proceeding to which the Company is subjected. Employee will be
|
14.
|
Section 409A. This Agreement is intended to comply with Section 409A of the Internal Revenue Code and shall be construed accordingly. It is the intention of the Parties that payments or benefits payable under this Agreement not be subject to the additional tax or interest imposed pursuant to Section 409A. To the extent such potential payments or benefits are or could become subject to Section 409A, the Parties shall cooperate to amend this Agreement with the goal of giving Employee the economic benefits described herein in a manner that does not result in such tax or interest being imposed. Employee shall, at the request of the Company, take any reasonable action (or refrain from taking any action), required to comply with any correction procedure promulgated pursuant to Section 409A.
|
15.
|
Severability. If any provision of this Agreement is held illegal, invalid, or unenforceable, such holding shall not affect any other provisions hereof. In the event any provision is held illegal, invalid or unenforceable, such provision shall be limited so as to effect the intent of the parties to the fullest extent permitted by applicable law. Any claim by Employee against the Company shall not constitute a defense to enforcement by the Company of this Agreement.
|
16.
|
Enforcement. The Release contained herein does not release any claims for enforcement of the terms, conditions, or warranties contained in this Agreement. The Parties shall be free to pursue any remedies available to them to enforce this Agreement.
|
17.
|
Entire Agreement. This Agreement constitutes the entire agreement between the Parties and supersedes and modifies any and all prior agreements. This Agreement cannot be modified except in a writing signed by all Parties.
|
18.
|
Venue, Applicable Law, and Submission to Jurisdiction. This Agreement shall be interpreted and construed in accordance with the laws of the State of Colorado, without regard to its conflicts of law provisions. Venue and jurisdiction will be in the Colorado state or federal courts.
|
19.
|
Interpretation. The determination of the terms, and the drafting, of this Agreement has been by mutual agreement after negotiation, with consideration by and participation of all Parties. Accordingly, the Parties agree that rules relating to the interpretation of contracts against the drafter of any particular clause shall not apply in the case of this Agreement. The term “Paragraph” shall refer to the enumerated paragraphs of this Agreement. The headings contained in this Agreement are for convenience of reference only and are not intended to limit the scope or affect the interpretation of any provision of this Agreement.
|
20.
|
Assignment. The Company may assign its rights under this Agreement. Employee cannot assign Employee’s rights under this Agreement without the written consent of the Company. No other assignment is permitted except by written permission of the Parties.
|
EMPLOYEE
|
|
|
HESKA CORPORATION
|
|
|
|
|
|
|
|
|
/s/ Steve Asakowicz
|
|
|
/s/ Christopher Sveen
|
Steve Asakowicz
|
|
|
Christopher Sveen
|
|
|
|
Vice President, General Counsel
|
|
|
|
|
|
|
|
|
|
|
|
|
1/28/2020
|
|
|
1/28/2020
|
Date
|
|
|
Date
|
1.
|
Effective Date. This Agreement shall become effective on the eighth day after Employee signs this Agreement (the “Effective Date”), so long as Employee does not revoke this Agreement pursuant to Paragraph 10 below. Employee’s Termination Date will not change regardless of whether this Agreement becomes effective on the “Effective Date.”
|
2.
|
Consideration for Release and Payment Terms.
|
a.
|
Pursuant to this Agreement, the Company shall, as consideration for Employee’s release and promises set forth in this Agreement, pay Employee additional compensation that Employee would not be entitled to otherwise.
|
b.
|
After the Effective Date and on the express condition that Employee has not revoked this Agreement, the Company will pay Employee a severance payment in the total sum of three hundred fifty thousand dollars ($350,000.00), less applicable deductions and withholdings, to be paid within three business days of the Effective Date, so long as Employee does not revoke this Agreement pursuant to Paragraph 10 below. This payment is inclusive of the severance pay
|
c.
|
Medical and Dental Benefits. From the Termination Date through the earlier of (i) the six month anniversary of the Termination Date or (ii) the date on which Employee is provided or obtains medical or dental insurance coverage from another employer or entity, the Company shall reimburse Employee for the difference between the cost of any COBRA premiums paid by Employee for continued medical and dental coverage under the Company’s group health plans for himself and his dependents and the active employee rates for coverage under such plans. The foregoing is subject to Employee’s timely enrollment in COBRA and payment of applicable premiums.
|
d.
|
Reporting and Withholding. Reporting of and withholding on any payment under this Agreement for tax purposes shall be at the discretion of the Company in conformance with applicable tax laws. If a claim is made against the Company for any additional tax or withholding in connection with or arising out of any payment pursuant to this Agreement, Employee shall pay any such claim within thirty (30) days of being notified by the Company and agrees to indemnify the Company and hold it harmless against such claims, including, but not limited to, any taxes, attorneys’ fees, penalties, and/or interest, which are or become due from the Company.
|
3.
|
General Release.
|
a.
|
Employee, for Employee, and for Employee’s affiliates, successors, heirs, subrogees, assigns, principals, agents, partners, employees, associates, attorneys, and representatives, voluntarily, knowingly, unequivocally, unconditionally and intentionally releases and discharges (i) the Company and its predecessors, successors, parents, subsidiaries, affiliates, and assigns, and (ii) each of their respective officers, directors, principals, shareholders, agents, attorneys, board members, and employees (the “Released Parties”) from any and all claims, actions, liabilities, demands, rights, damages, costs, expenses, and attorneys’ fees (including, but not limited to, any claim of entitlement for attorneys’ fees under any contract, statute, or rule of law allowing a prevailing party or plaintiff to recover attorneys’ fees), of every kind and description from the beginning of time through the Effective Date (the “Released Claims”).
|
b.
|
The Released Claims include, but are not limited to, those which arise out of, relate to, or are based upon: (i) Employee’s employment with the Company or the termination thereof; (ii) statements, acts, or omissions by the Released Parties whether in their individual or representative capacities; (iii) express or implied agreements between the Parties and claims under any severance plan (except as provided herein); (iv) any stock or stock option grant, agreement, or plan; (v) all federal, state, and municipal statutes, ordinances, and regulations, including, but not limited to, claims of discrimination based on race, color, national origin,
|
c.
|
The General Release in this Agreement does not apply to claims under federal, state, or local law (statutory, regulatory, or otherwise) that may not be lawfully waived and released, including but not limited to vested retirement benefits (if any), COBRA rights, unemployment compensation, and workers’ compensation.
|
4.
|
Confidential Information.
|
a.
|
For the purposes of this Agreement, “Confidential Information” shall include, without limitation, any non-public information relating to or pertaining to the Company, such as the whole or any portion or phase of (i) any proprietary information or Trade Secrets (defined below); (ii) any scientific, technical, business, or financial information; (iii) any marketing information, business development information, prospect information, or marketing analysis or plans; (iv) any customer information, lists, contacts, or needs; (v) any contracts, agreements, or leases; (vi) any discoveries, inventions, products, designs, methods, know-how, techniques, systems, processes, software programs, works of authorship, projects, or plans; (vii) any proposals, strategies, concepts, analyses, surveys, ideas, research, data, databases, reports, manuals, manuscripts, articles, or records; and (viii) any other business or corporate documents related to Company Business. The Company’s “Trade Secrets”
|
b.
|
Employee acknowledges the success of the Company depends in large part on the protection of the Company’s Confidential Information. Employee further acknowledges that, in the course of Employee’s employment with the Company, Employee became familiar with the Company’s Confidential Information. Employee recognizes and acknowledges that the Company’s Confidential Information is a valuable, special, and unique asset of the Company’s business, access to and knowledge of which were essential to the performance of Employee’s duties. Employee acknowledges use or disclosure of the Confidential Information outside the performance of Employee’s job duties for the Company would cause harm and/or damage to the Company.
|
c.
|
Employee agrees that Employee will not, directly or indirectly, disclose any Confidential Information to any person, firm, business, company, corporation, association, or any other entity for any reason or purpose whatsoever. Employee also agrees that Employee has not and will not use, directly or indirectly, any Confidential Information for Employee’s own purposes or for the benefit of any person, firm, business, company, corporation, or any other entity (except the Company) under any circumstances. Employee has considered and treated and shall consider and treat as confidential all Confidential Information in any way relating to the Company’s business and affairs, whether created by Employee or otherwise coming into Employee’s possession before, during, or after the Termination Date. Employee shall not use or attempt to use any Confidential Information in any manner which has the possibility of injuring or causing loss, whether directly or indirectly, to the Company, its affiliates, subsidiaries, parents, or customers. Employee agrees all such Confidential Information shall be and remain the sole and exclusive property of the Company.
|
5.
|
Remedies.
|
a.
|
Injunctive Relief. Employee acknowledges that any breach of Paragraph 4 or the surviving provisions of the Employment Agreement referenced in Paragraphs 6, 8, 12 and 13 below will cause the Company to suffer immediate and irreparable harm and damage for which money alone cannot fully compensate the Company. Employee agrees that upon breach or threat of imminent breach of any obligation under Paragraphs 4, 6, 8, 12, and/or 13 of this Agreement, the Company shall be entitled to a temporary restraining order, preliminary injunction, permanent injunction, or other injunctive relief without posting any bond or other security, and that Employee shall not oppose entry of any of these measures. This Paragraph shall not be construed as an election of any remedy, or as a waiver of any right available to the Company under this Agreement or the Colorado law governing this Agreement, including the right to seek damages from Employee.
|
b.
|
Attorneys’ Fees. In the event of any controversy, claim, or dispute between the parties affecting or relating to Paragraphs 4, 6, 8, 12, and/or 13 of this Agreement, if the Company is required to defend its actions or seek enforcement of the Agreement, the Company shall be entitled to recover all of its attorneys’ fees and costs if the Company is successful in its defense or enforcement action.
|
c.
|
Separate Provisions. Employee agrees the provisions of Paragraphs 4, 6, 8, 12, and 13 of this Agreement are separate from and independent of the remainder of this Agreement and that these provisions are specifically enforceable by the Company notwithstanding any claim by Employee that the Company has violated or breached this Agreement.
|
6.
|
Return of Company Property. Employee represents and warrants that Employee returned all Company property to the designated Company representative on or before Employee’s Termination Date, unless otherwise agreed upon. This property includes, but is not limited to, Company documents and files (in any recorded media, such as papers, computer disks, copies, transparencies, and microfiche), materials, keys, credit cards, laptops, cellular phone(s), computer disks, and badges. Employee agrees that, to the extent that Employee possesses any files, data, or information relating in any way to the Company or the Company’s business on any personal computer, Employee will delete the data, files, or information (and will retain no copies in any form).
|
7.
|
Unknown Facts. The releases in this Agreement include, but are not limited to, claims of every nature and kind, known or unknown, suspected or unsuspected. Employee hereby acknowledges that Employee may hereafter discover facts different from, or in addition to, those which Employee now knows to be or believes to be true with respect to this Agreement, and Employee agrees that this Agreement and the releases contained herein shall be and remain effective in all respects, notwithstanding such different or additional facts or the discovery thereof.
|
8.
|
Confidentiality of Agreement. Employee agrees to keep this Agreement confidential and will not disclose the existence or the terms of this Agreement to anyone except to Employee’s immediate family, accountants, legal or financial advisors, as part of an investigation or proceeding conducted by any Government Agency, or as otherwise appropriate or necessary as required by law or court order. To the extent that Employee discloses the existence or terms of this Agreement to Employee’s immediate family, accountants, or legal or financial advisors, Employee must advise them that they must not disclose the existence or terms of this Agreement to any person or entity. However, nothing contained herein precludes any individual from communicating with any Government Agency. If compulsory disclosure is required by a Government Agency, Employee shall provide the Company immediate notice of the compulsory process and affording the Company the opportunity to obtain any necessary or appropriate protective orders. Otherwise, in response to inquiries about Employee’s employment and this matter, Employee shall state, “My employment with the Company has ended” and nothing more.
|
9.
|
No Admission of Liability. The Parties agree that nothing contained herein, and no action taken by any Party hereto with regard to this Agreement, shall be construed as an admission by any Party of liability or of any fact that might give rise to liability for any purpose whatsoever.
|
10.
|
ADEA and Older Workers Benefit Protection Act Release
|
11.
|
Representations and Warranties. Employee represents and warrants as follows:
|
a.
|
Employee has read this Agreement and agrees to the conditions and obligations set forth in it;
|
b.
|
Employee voluntarily executes this Agreement (i) after having been advised to consult with legal counsel, (ii) after having had opportunity to consult with legal counsel, and (iii) without being pressured or influenced by any statement or representation or omission of any person acting on behalf of the Company including, without limitation, the officers, directors, board members, committee members, employees, agents, and attorneys for the Company;
|
c.
|
Employee has no knowledge of the existence of any lawsuit, charge, or proceeding against the Company or any of its officers, directors, board members, committee members, employees, or agents arising out of or otherwise connected with any of the matters herein released. In the event that any such lawsuit, charge, or proceeding has been filed, Employee immediately will take all actions necessary to withdraw or terminate that lawsuit, charge, or proceeding;
|
d.
|
Employee has not previously disclosed any information which would be a violation of the confidentiality provisions set forth herein if such disclosure were to be made after the execution of this Agreement;
|
e.
|
Employee has full and complete legal capacity to enter into this Agreement;
|
f.
|
Employee admits, acknowledges, and agrees that Employee is not otherwise entitled to the amounts and other consideration set forth in Paragraph 2, which are good and valuable consideration for this Agreement; and
|
g.
|
Employee further admits, acknowledges, and agrees that Employee has been fully and finally paid all wages, compensation, vacation, bonuses, stock, stock options, or other benefits from the Company which are or could be due to Employee under the terms of Employee’s employment with the Company or otherwise. This Agreement explicitly excludes vested, exercised stock and stock options currently owned by the Employee and does not prevent Employee from exercising vested stock options in accordance with Employee’s Stock Option Agreement. This Agreement further acknowledges that expenses submitted and approved before the Effective Date may be reimbursed after the Effective Date, in accordance with internal Company policies and procedures.
|
12.
|
Non-Disparagement. Employee agrees not to make to any person any statement that disparages the Company or reflects negatively upon the Company, including, without limitation, statements regarding the Company’s financial condition, business practices, employment practices, or its predecessors, successors, parents, subsidiaries, officers, directors, employees, affiliates, agents, or representatives. Company agrees not to make to any person any statement that disparages Employee or reflects negatively upon the Employee.
|
13.
|
Cooperation. Employee agrees to cooperate with and assist the Company with any investigation, lawsuit, arbitration, or other proceeding to which the Company is subjected. Employee will be
|
14.
|
Section 409A. This Agreement is intended to comply with Section 409A of the Internal Revenue Code and shall be construed accordingly. It is the intention of the Parties that payments or benefits payable under this Agreement not be subject to the additional tax or interest imposed pursuant to Section 409A. To the extent such potential payments or benefits are or could become subject to Section 409A, the Parties shall cooperate to amend this Agreement with the goal of giving Employee the economic benefits described herein in a manner that does not result in such tax or interest being imposed. Employee shall, at the request of the Company, take any reasonable action (or refrain from taking any action), required to comply with any correction procedure promulgated pursuant to Section 409A.
|
15.
|
Severability. If any provision of this Agreement is held illegal, invalid, or unenforceable, such holding shall not affect any other provisions hereof. In the event any provision is held illegal, invalid or unenforceable, such provision shall be limited so as to effect the intent of the parties to the fullest extent permitted by applicable law. Any claim by Employee against the Company shall not constitute a defense to enforcement by the Company of this Agreement.
|
16.
|
Enforcement. The Release contained herein does not release any claims for enforcement of the terms, conditions, or warranties contained in this Agreement. The Parties shall be free to pursue any remedies available to them to enforce this Agreement.
|
17.
|
Entire Agreement. This Agreement constitutes the entire agreement between the Parties and supersedes and modifies any and all prior agreements. This Agreement cannot be modified except in a writing signed by all Parties.
|
18.
|
Venue, Applicable Law, and Submission to Jurisdiction. This Agreement shall be interpreted and construed in accordance with the laws of the State of Colorado, without regard to its conflicts of law provisions. Venue and jurisdiction will be in the Colorado state or federal courts.
|
19.
|
Interpretation. The determination of the terms, and the drafting, of this Agreement has been by mutual agreement after negotiation, with consideration by and participation of all Parties. Accordingly, the Parties agree that rules relating to the interpretation of contracts against the drafter of any particular clause shall not apply in the case of this Agreement. The term “Paragraph” shall refer to the enumerated paragraphs of this Agreement. The headings contained in this Agreement are for convenience of reference only and are not intended to limit the scope or affect the interpretation of any provision of this Agreement.
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20.
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Assignment. The Company may assign its rights under this Agreement. Employee cannot assign Employee’s rights under this Agreement without the written consent of the Company. No other assignment is permitted except by written permission of the Parties.
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EMPLOYEE
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HESKA CORPORATION
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/s/ Rod Lippincott
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/s/ Christopher Sveen
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Rod Lippincott
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Christopher Sveen
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Vice President, General Counsel
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1/27/2020
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1/27/2020
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Date
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Date
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1.
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Element DC5X Analyzer. A new Section 1.27 consisting of the following shall be added to the Original Agreement:
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1.27
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“Element DC5X Analyzer” shall mean a Dri-Chem NX 700 (HESKA CAT No. 6611 / Fuji’s Material No : 16575966) which is an OEM product supplied by Fuji to Heska.
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2.
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Target Purchase Quantity. A new Section 1.28 consisting of the following shall be added to the Original Agreement:
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3.
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Actual Purchase Quantity. A new Section 1.29 consisting of the following shall be added to the Original Agreement:
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4.
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Target Award. A new Section 1.30 consisting of the following shall be added to the Original Agreement:
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5.
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Affected Products. A new Section 1.31 consisting of the following shall be added to the Original Agreement:
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6.
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Reimbursement Balance. A new Section 1.32 consisting of the following shall be added to the Original Agreement:
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7.
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Actual Shipment Quantity. A new Section 1.33 consisting of the following shall be added to the Original Agreement:
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8.
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Transportation Cost Balance. A new Section 1.34 consisting of the following shall be added to the Original Agreement:
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9.
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Payment of Target Award. A new Section 3.7 consisting of the following shall be added to the Original Agreement:
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3.7
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Payment of Target Award. In the event that Heska achieves the Target Purchase Quantity, Fuji shall pay to Heska the Target Award, which shall be equivalent to the amount calculated by multiplying the Actual Purchase Quantity by [***]. The Target Award shall be paid in accordance with the following procedures:
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(a)
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Within thirty (30) days after the end of each Fiscal Year, Fuji shall notify, in writing, Heska of (i) the Actual Purchase Quantity in the Fiscal Year and (ii) the amount of the Target Award calculated on the basis of such Actual Purchase Quantity in accordance with the calculation method above (the “Preliminary Target Award”, and collectively with (i) the Actual Purchase Quantity in the Fiscal Year, the “Actual Purchase Quantity, Etc”).
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(b)
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Within thirty (30) days after receipt by Heska of the notice set forth in the paragraph (a) above (the “Award Opposition Period”), Heska shall notify, in writing, Fuji of (i) whether or not Heska approves the Actual Purchase Quantity, Etc described in such notice and (ii) grounds for Heska’s disapproval to the Actual Purchase Quantity, Etc if Heska does not approve. If Heska fails to notify, in writing, Fuji thereof for the Award Opposition Period, Heska shall be deemed to approve the Actual Purchase Quantity, Etc upon expiration of the Award Opposition Period. The notice of Heska’s disapproval to the Actual Purchase Quantity, Etc shall be sent to Fuji along with documents supporting such disapproval.
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(c)
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In the event of (i) receipt by Fuji of the notice of Heska’s approval to the Actual Purchase Quantity, Etc or (ii) Heska being deemed to approve the Actual Purchase Quantity, Etc in accordance with the paragraph (b) above, the Target Award shall be fixed as the amount of the Preliminary Target Award upon such receipt or being deemed, as the case may be, and Fuji shall pay such amount to Heska within thirty (30) days after such fixation as long as such amount is greater than zero (0).
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(d)
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In the event of receipt by Fuji of the notice of Heska’s disapproval to the Actual Purchase Quantity, Etc and documents supporting such disapproval, Fuji and Heska shall discuss in good faith in order to eliminate the gap in perception concerning the Actual Purchase Quantity, Etc between Fuji and Heska.
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(e)
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Fuji will issue Heska a credit to Fuji’s Heska account (the “Discount Credit”), the Discount Credit shall be used by Heska and accepted by Fuji as payment against any Heska purchase amount of Products due Fuji, or if no amount is then due, shall cause Fuji to issue to Heska a cash refund payable to Heska by wire transfer from Fuji.
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10.
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Delivery of Product. Section 4.9 of the Original Agreement is hereby deleted in its entirety and replaced with the following:
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4.9
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Delivery of Product; Determination of Method of Transportation. Products shall be delivered FCA (Incoterms 2010) Fuji’s warehouse at Yokohama, Japan or Ho Chi Minh City, Vietnam, except for any Product made in China, which shall be DDP (Incoterms 2010) Heska's USA warehouse specified on each Purchase Order. For Products delivered FCA Fuji’s warehouse at Yokohama, Japan or Ho Chi Minh City, Vietnam, (i) the method of transportation of the Products, shipping destination, the carrier selected and other matters concerning transportation as may be required by Fuji shall be as specified by Heska in its purchase orders, and (ii) packaging specifications of the Products shall be those specified in Exhibit 4.9. Notwithstanding the foregoing, regarding the consumable Products, Heska agrees and acknowledges that Fuji has an allowance of [***] of the quantity of delivered Products than ordered quantity in the firm purchase order. In addition to the requirements set forth in Section 4.1, all consumable Products which has the term of validity (i.e., expiration date) shall be delivered by Fuji within [***] from the date of manufacturing such consumable Products.
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11.
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Payment of Reimbursement Balance. A new Section 4.15 consisting of the following shall be added to the Original Agreement:
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4.15
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Payment of Reimbursement Balance. With respect to the Affected Products, Fuji shall pay to Heska the Reimbursement Balance, which shall be equivalent to the amount calculated by multiplying the Actual Shipment Quantity by the Transportation Cost Balance; provided, however, that, in the event of any change to the total cost set forth in the paragraph (e) below, the Reimbursement Balance shall be equivalent to the amount calculated by multiplying the Actual Shipment Quantity after such change by the Transportation Cost Balance from the date of such change. The Reimbursement Balance shall be paid in accordance with the following procedures:
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(a)
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Within thirty (30) days after April 1 and October 1 of each Fiscal Year, Fuji shall notify, in writing, Heska of (i) the Actual Shipment Quantity in the preceding six month period, (ii) the Transportation Cost Balance in the preceding six month period and (iii) the amount of the Reimbursement Balance calculated on the basis of such Actual Shipment Quantity and such Transportation Cost Balance for the preceding six month period, in accordance with the calculation method above (the “Preliminary Reimbursement Balance”, and collectively with (i) the Actual Shipment Quantity in the six month period and (ii) the Transportation Cost Balance, the “Actual Shipment Quantity, Etc”).
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(b)
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Within thirty (30) days after receipt by Heska of the notice set forth in the paragraph (a) above (the “Reimbursement Opposition Period”), Heska shall notify, in writing, Fuji of (i) whether or not Heska approves the Actual Shipment Quantity, Etc described in such notice and (ii) grounds for Heska’s disapproval to the Actual Shipment Quantity, Etc if Heska does not approve. If Heska fails to notify, in writing, Fuji thereof for the Reimbursement Opposition Period, Heska shall be deemed to approve the Actual Shipment Quantity, Etc upon expiration of the Reimbursement Opposition Period. The notice of Heska’s disapproval to the Actual Shipment Quantity, Etc shall be sent to Fuji along with documents supporting such disapproval.
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(c)
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In the event of (i) receipt by Fuji of the notice of Heska’s approval to the Actual Shipment Quantity, Etc or (ii) Heska being deemed to approve the Actual Shipment Quantity, Etc in accordance with the paragraph (b) above, the Reimbursement Balance shall be fixed as the amount of the Preliminary Reimbursement Balance upon such receipt or being deemed, as the case may be, and Fuji shall pay such amount to Heska within thirty (30) days after such fixation as long as such amount is greater than zero (0).
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(d)
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In the event of receipt by Fuji of the notice of Heska’s disapproval to the Actual Shipment Quantity, Etc and documents supporting such disapproval, Fuji and Heska shall discuss in good faith in order to eliminate the gap in perception concerning the Actual Shipment Quantity, Etc between Fuji and Heska.
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(e)
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In the event of any change, of the carrier designated by Heska, or to the carrier’s total cost showing a transportation fee in U.S. dollars determined by a measured rate system, Heska shall notify Fuji thereof as soon as practically possible.
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12.
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LIST OF EXHIBITS. LIST OF EXHIBITS of the Original Agreement is hereby deleted in its entirety and replaced with LIST OF EXHIBITS attached hereto.
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13.
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Exhibit 1.13. Exhibit 1.13 of the Original Agreement is hereby deleted in its entirety and replaced with Exhibit 1.13 attached hereto.
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14.
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Exhibit 4.9. Exhibit 4.9 attached hereto shall be added to the Original Agreement.
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15.
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No Other Changes. Except as expressly modified by this Amendment, all other provisions of the Original Agreement shall remain in full force and effect, as amended hereby.
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Heska Corporation
By: /s/Nancy Wisnewski
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FUJIFILM Corporation
By: [***]
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Name: Nancy Wisnewski
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Name: [***]
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Title: Chief Operating Officer
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Title: [***]
[***]
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Date: 09/04/2019
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Date: 10/23/2019
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If to the Company:
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Heska Corporation
3760 Rocky Mountain Ave |
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If to a Purchaser:
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To the address set forth under such Purchaser’s name on the signature pages hereto
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If to any other Person who is then the registered Holder:
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To the address of such Holder as it appears in the stock transfer books of the Company
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•
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ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
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•
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block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
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•
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through brokers, dealers or underwriters that may act solely as agents;
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•
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purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
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•
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an exchange distribution in accordance with the rules of the applicable exchange;
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•
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privately negotiated transactions;
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•
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through the writing or settlement of options or other hedging transactions entered into after the effective date of the registration statement of which this prospectus is a part, whether through an options exchange or otherwise;
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•
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settlement of short sales entered into after the effective date of the registration statement of which this prospectus is a part;
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•
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broker-dealers may agree with the selling stockholders to sell a specified number of such shares at a stipulated price per share;
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•
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a combination of any such methods of disposition; and
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•
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any other method permitted pursuant to applicable law.
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Date to Effect Conversion:
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Number of shares of Series X Preferred Stock owned prior to Conversion:
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Number of shares of Series X Preferred Stock to be Converted:
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Number of shares of Common Stock to be Issued:
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Address for delivery of physical certificates:
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or
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for DWAC Delivery:
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DWAC Instructions:
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Broker no:
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Account no:
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HOLDER
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By:
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Name:_______________________________
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Title:________________________________
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Date:________________________________
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__ (1)
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A bank as defined in Section 3(a)(2) of the Securities Act, or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary capacity;
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__ (2)
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A broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934;
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__ (3)
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An insurance company as defined in Section 2(13) of the Securities Act;
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__ (4)
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An investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of such act;
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__ (5)
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A Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958;
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__ (6)
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A plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of $5,000,000;
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__ (7)
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An employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of $5,000,000 or, if a self-directed plan, with investment decisions made solely by persons that are accredited investors;
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__ (8)
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A private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940;
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__ (9)
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An organization described in Section 501(c)(3) of the Internal Revenue Code, a corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the Securities, with total assets in excess of $5,000,000;
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C.
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ADDITIONAL SIGNATURES (if required by partnership, corporation or trust document):
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1.
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I have reviewed this annual report on Form 10-K of Heska Corporation;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a.
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b.
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Dated: February 28, 2020
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/s/ Kevin S. Wilson
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KEVIN S. WILSON
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Chief Executive Officer and President
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(Principal Executive Officer)
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1.
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I have reviewed this annual report on Form 10-K of Heska Corporation;
|
2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
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The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and
|
c.
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d.
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Dated: February 28, 2020
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/s/ Catherine Grassman
|
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CATHERINE GRASSMAN
|
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Executive Vice President, Chief Financial Officer
|
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(Principal Financial and Accounting Officer)
|
Dated: February 28, 2020
|
By:
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/s/ Kevin S. Wilson
|
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Name:
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KEVIN S. WILSON
|
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Title:
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Chief Executive Officer and President
|
Dated: February 28, 2020
|
By:
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/s/ Catherine Grassman
|
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Name:
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CATHERINE GRASSMAN
|
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Title:
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Executive Vice President, Chief Financial Officer
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