Document:

EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement (“Agreement”) is made effective as of October 19, 2007 (“Effective Date”), by and between XLNT Veterinary Care, Inc., a Delaware corporation (“Company”), and George A. Villasana (“Executive”).

	
             
 	
            R E C I T A L S
 

WHEREAS, the Company desires to employ the Executive and retain his services, experience and abilities; and

WHEREAS, the Executive desires to accept such employment upon the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the promises and the mutual covenants contained herein, it is agreed as follows:

1.         Duties/Position.  The Company hereby employs the Executive and the Executive hereby accepts such employment under all of the terms and conditions of this Agreement.  The Executive’s principal place of business shall be within the Nashville, Tennessee greater metropolitan area, subject to required business travel.  The Executive shall be an officer of the Company, and shall hold the offices of General Counsel and Corporate Secretary, reporting to the Company’s President and Chief Operating Officer until such time as the President and Chief Operating Officer ceases to serve as the Company’s “principal executive officer” for purposes of signing the certifications and related materials contemplated by Rule 13a-14 of the General
Rules and Regulations under the Securities Exchange Act of 1934, as amended, at which time Executive shall report to the Chief Executive Officer.  In addition following the merger of Pet DRx Acquisition Corp., a wholly-owned subsidiary of Echo Healthcare Acquisition Corp. (“Echo”), into the Company (the “Merger”), if the Executive continues to be employed under this Agreement at such date, Echo will, without the need for further actions by any party, assume this Agreement, XLNT Veterinary Care, Inc. (“XLNT”) will cease to be a party to this Agreement, all references in this Agreement to the “Company” shall be deemed to be references to Echo except for in Sections 4(c)(i) and 6, and the Executive shall not be deemed to have terminated employment hereunder as a result of the foregoing.  Accordingly, if the Executive continues to be employed under this Agreement at such date, the Executive will be an officer of Echo upon the Merger and shall hold
the offices of General Counsel and Corporate Secretary of Echo.  The Executive shall continue following the Merger to serve as an officer of XLNT, if so requested, and agrees to serve as such without additional compensation beyond what is specified in this Agreement.  The Executive’s removal or resignation as an officer of XLNT following the Merger shall not give rise to any compensation, severance or benefits under this Agreement.

2.         Employment Term.  The term of Executive’s employment under this Agreement shall commence as of the Effective Date and shall continue until the date of termination of employment in accordance with Section 5 (the “Employment Term”).

 

 

	
             
  	
            3.
 	
            Executive’s Duties, Responsibilities, and Authority.  
 

a.         The Executive shall have and perform diligently the duties of General Counsel and Corporate Secretary and such other such duties as may be directed by the Board of Directors of the Company (the “Board”) and commensurate with such position and in accordance with the Company’s By-laws.  

b.         During the Employment Term, Executive shall perform his duties consistent with his experience and abilities in furtherance of the Company’s interests and shall devote his entire business time, attention, skill and energy to his duties and the performance of the services, and the Company will be entitled to all of the benefits and profits arising from or incident to all such work and services.  

c.         The Executive will expend his best efforts on behalf of the Company, and will abide by all Company policies and procedures of which he has been given notice, as well as all applicable laws and regulations.

4.         Compensation.  In consideration of the services to be rendered by the Executive, the Company agrees to compensate and to provide benefits to the Executive as follows:

a.         Base Salary.  As compensation for Executive’s performance of all of his duties hereunder, Company shall pay to Executive an annual base salary of Two Hundred Forty Thousand Dollars ($240,000) (“Annual Base Salary”), payable in installments at such times as the Company shall pay its other senior level executive officers, less required deductions for state and federal withholding tax, social security and all other employment taxes and payroll deductions.  The Board shall review the Annual Base Salary at least annually for merit increases; provided, however, that any increase in Executive’s Annual Base Salary shall be at the Board’s sole discretion.  

	
             
  	
            b.
 	
            Bonus Opportunity.  
 

i.          For services performed by the Executive for the period commencing on June 12, 2007 and ending December 31, 2007, the Executive may receive a prorated Annual Bonus (as defined below) in such amount as is determined at the discretion of the Board to be paid in 2008.  

ii.        For the year commencing on January 1, 2008 and each year thereafter, the Executive shall have an annual opportunity to earn a cash bonus in an amount equal to fifty percent (50%) of the Annual Base Salary (the “Annual Target Bonus”), subject to the satisfaction by the Company and the Executive of certain objectives and targets established by the Board with respect to such year, with an opportunity to earn up to an additional fifty percent 50% of his then Annual Base Salary based on stellar performance related to such objectives and targets, determined in the sole discretion of the Board.  The objectives and targets established will be established by the Board (or an appropriate committee of the Board) within the first ninety (90) days of the fiscal year for which the bonus opportunity to be is earned (the
“Annual Bonus”).  The Annual Bonus, if any, 

 

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shall be paid in the year following the year with respect to which the objectives and targets relate as soon as reasonably practicable following the completion of year-end financial statements for that particular year that fairly represent the financial position of the Company, provided that the Executive remains employed on the payment date.

c.         Stock Options.  Executive shall be eligible to receive grants of stock options, restricted stock and other equity incentives pursuant to the XLNT Veterinary Care, Inc. 2004 Stock Option Plan (“Stock Plan”) in accordance with the terms of the Stock Plan.  Without limiting the generality of the foregoing:

i.          Within one (1) week following the Company’s receipt of a valuation report from an independent appraiser valuing the Company’s equity currently as of the date of the report, the Company shall grant Executive an option to purchase 130,000 shares of the Company’s common stock.  The exercise price per share shall be equal to the greater of $4.75 per share or an amount equal to the then current value per common share as reported in the valuation report, or in the event the report values the common stock per share in a range, the midpoint of the range; provided, however, if the valuation per common share is less than $4.75, then a portion of such option will have an exercise price per share at such lower valuation per share.  Such portion of the option will be for a number of shares equal to the
maximum number of shares at such lower valuation that the Company can issue without triggering anti-dilution rights in favor of the holders of Series B warrants of the Company (the “Maximum”) after taking into account any other issuances prior to the Effective Date of common stock or options to purchase common stock that count against the Maximum, multiplied by a fraction of 1/5.5.  Such option shall vest in three substantially equal annual increments on each of the first three anniversaries of June 12, 2007, provided the Executive remains employed through the applicable vesting date (except as provided in Section 5(c)(iii)).  In connection with the closing of the Merger, the option will be converted into an option to purchase common stock of Echo under a formula that the parties intend will not be treated as the grant of a new stock right or a change in the form of payment under Section 409A of the Internal Revenue Code (“Code Section 409A”).  The option will be
subject to any other terms and conditions approved by the Board or committee thereof, as set forth in the applicable stock option agreement.

ii.        Following the Merger, and within fifteen (15) days following the availability to Echo of final closing balance sheet information (including, without limitation, “Net Cash Amount” and “Excess Indebtedness” within the meaning of the Merger agreement) that will allow Echo to calculate the total number of issued and outstanding shares of Echo’s common stock resulting from the Merger, Echo hereby agrees to grant the Executive an option to purchase a number of shares of common stock of Echo equal to the difference between (i) the number of shares equal to 1% of the then issued and outstanding shares of Echo’s common stock (not calculated on a fully diluted basis) and (ii) the number of shares of Echo’s common stock that the Executive may acquire with options previously granted.  

 

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Such additional option shall be granted in accordance with the terms of Echo’s stock option plan and at an exercise price per share determined by Echo’s board of directors (or a committee thereof) which shall be equal to the last trade price per share for the Company’s common stock on the principal exchange, trading market or quotation system on which such securities are traded or quoted, or if the last trade price is not reported for such security, then the closing bid price, and if neither the last trade price nor closing bid price is reported, then the average of the bid and ask prices on such date, in each case on the date of grant.  The option will be subject to any other terms and conditions approved by the board of directors of Echo or committee thereof, as set forth in the applicable stock option agreement.

d.         Benefits.  Executive shall be eligible for participation in, and shall receive all benefits under, the benefit plans, practices, policies and programs provided by Company to the extent generally applicable to senior level executives of the Company, subject to the terms and conditions of the Company’s benefit plan documents, policies or programs, as adopted from time to time.  The Company reserves the right to change or eliminate the Company’s benefit plans, practices, policies or programs at any time.  

e.         Vacation.  From and after the Effective Date, Executive shall be entitled to three (3) weeks annual paid vacation per full calendar year worked in accordance with the plans, policies, and programs of the Company as in effect for senior level executives of the Company.  For 2007, vacation entitlement shall be prorated based on days worked in 2007 from June 12, 2007.  Any vacation for a calendar year that is not used by the last day of such calendar year shall not accrue for the following calendar year.  

f.         Expenses.  Executive shall be entitled to receive prompt reimbursement in accordance with the Company’s reimbursement policies for all reasonable, out-of-pocket business expenses incurred in the performance of his duties on behalf of Company (including mobile telephone usage).  To obtain reimbursement, expenses must be submitted promptly with appropriate supporting documentation in accordance with Company’s policies.

5.         Termination.  Notwithstanding any other provision of this Agreement, the Agreement and the Executive’s employment hereunder shall be terminated as follows:

	
             
  	
            a.
 	
            Termination by the Company With Cause.
 

i.          The Company may terminate this Agreement and the Executive’s employment for Cause, as defined herein, upon written notice to the Executive setting forth in reasonable detail the facts and circumstances upon which the Board shall have determined, following reasonable inquiry, that Cause exists.

ii.        As used herein, “Cause” shall mean (i) any willful, material violation of any law or regulation applicable to the business of the Company or any affiliate of the Company; (ii) conviction for, or guilty plea to, a felony or a crime involving moral turpitude, or any willful perpetration of a common law fraud; (iii) commission of any act of personal dishonesty which involves personal 

 

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profit in connection with the Company or any affiliate of the Company; (iv) any material breach of any provisions of any agreement or understanding between the Company or any affiliate of the Company and Executive regarding the terms of Executive’s service as an employee, officer, director or consultant to the Company or any affiliate of the Company, including, without limitation, the willful and continued failure or refusal to perform the material duties required of Executive as an employee, officer, director or consultant of the Company or any affiliate of the Company (other than as a result of Disability) or a breach of any applicable creative works assignment and confidentiality agreement or similar agreement between the Company or any affiliate of the Company and Executive; (v) disregard of the policies of the Company or any affiliate of the Company, so as to cause material loss,
damage or injury to the property, reputation or employees of the Company or any affiliate of the Company; (vi) the Executive is in breach of the terms of Sections 6, 7 and/or 8 hereof; (vii) Executive fails to devote his entire business time to his duties pursuant to Section 3 of this Agreement; or (viii) any other misconduct by Executive which is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company or any affiliate of the Company; provided, however, for purposes of subclauses (iv), (v), (vi) and (vii), no such action for omission, separately or together, shall constitute an event of “Cause” unless the Board gives written notice to the Executive specifying the act(s) or omission(s) the Board believes to be Cause and gives the Executive an opportunity to cure or amend such contract to the reasonable satisfaction of the Board.

iii.       If the Company terminates the Executive’s employment for Cause, then the Executive shall be entitled only to the “Accrued Obligations.”  For purposes of this Agreement, the Accrued Obligations shall mean:  (i) all accrued but unpaid Annual Base Salary as of the date of termination; (ii) any unpaid or unreimbursed expenses incurred in accordance with Company policy, including amounts due under Section 4(d) and (f) hereof, to the extent incurred during the Employment Term; (iii) any benefits provided under the Company’s employee benefit plans upon a termination of employment, in accordance with the terms therein, including rights to equity in the Company to the extent provided pursuant to the applicable plan or agreement; and (iv) rights to indemnification by
virtue of the Executive’s position as an officer or director of the Company or its subsidiaries and coverage under any directors’ and officers’ liability insurance policy maintained by the Company, in accordance with its terms thereof.

b.         Termination by the Executive for Good Reason.  The Executive may terminate this Agreement and his employment for Good Reason, as defined herein; upon written notice to the Board setting forth in reasonable detail the facts and circumstances upon which the Executive shall have determined that Good Reason exists.  For purposes herein, “Good Reason” shall mean the occurrence of any of the following without the Executive’s express, written consent:

i.          the assignment to the Executive of any duties or the reduction of the Executive’s duties, either of which results in a significant diminution in the 

 

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Executive’s position or responsibilities with the Company in effect immediately prior to such assignment, or the removal of the Executive from such position and responsibilities; 

ii.        in the event that more than 50% of the value of the Company’s equity securities or sixty-five percent (65%) or more of the total gross fair market value of all of the assets of the Company is acquired by another company, the Executive is not appointed as the General Counsel and Corporate Secretary of the acquirer, unless the Executive rejects the offer of the position;

iii.       a reduction by the Company in the Annual Base Salary and/or potential Annual Bonus opportunity of the Executive; 

iv.        the Company requires the Executive to have a principal office other than within the Nashville, Tennessee greater metropolitan area; or

v.         a material breach by the Company of this Agreement, including, without limitation, the failure of the Company to pay any material item of compensation substantially when due; 

provided, however, that for a termination of employment by the Executive to be for Good Reason, the Executive must notify the Company in writing of the event giving rise to Good Reason within sixty (60) days following the occurrence of the event (or if later the Executive’s knowledge of occurrence of the event), the event must remain uncured after the expiration of thirty (30) days following the delivery of written notice of such event to the Company by the Executive, and the Executive must resign effective no later than thirty (30) days following the Company’s failure to cure the event.  In the event that the Executive’s employment is terminated by the Executive for Good Reason, the Executive shall be entitled to the same payments and benefits described in Section 5(c).

c.         Termination by the Company Without Cause.  The Company may terminate this Agreement and the Executive’s employment without Cause at any time.  In the event that the Executive’s employment is terminated by the Company without Cause (other than due to the Executive’s death or Disability), the Executive shall be entitled to:

i.          the Accrued Obligations, which shall be paid when such amounts would have been paid if the Executive has remained employed following such termination by the Company without Cause;

ii.        an amount equal to the sum of: (i) twelve (12) months of Annual Base Salary; and (ii) an amount equal to the Annual Target Bonus as if all criteria and metrics had been met, with such total amount payable in twelve (12) monthly installments in accordance with the Company’s standard payroll practices; provided, however that if such termination of employment occurs while the Executive is employed by Echo (or a successor pursuant to Section 12(b)) and within twelve (12) months following a Change in Control (as defined below), such total amount shall be paid in a single lump sum; 

 

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iii.       effective on the date of the termination of employment, the stock options described in Section 4(c)(i) and (ii), (the “Options”) that are unvested and would have vested at the next annual vesting date if the Executive had remained employed shall vest pro rata based on the number of months worked by the Executive since the last vesting date; provided however that if the Executive’s employment is terminated by the Company without Cause or by the Executive for Good Reason, in either case, within twelve (12) months following a “change in control” (as defined in the applicable Option agreement) then all Options to the extent then unvested shall become fully vested and exercisable as of the effective date of the Executive’s termination of employment; and

iv.        continuation of the health benefits (only under the Company’s medical and dental insurance plans, if any) in accordance with this paragraph for the lesser of two (2) years or the period that the Executive is entitled to continuation of health coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”); provided that the Executive must elect COBRA coverage to be entitled to this benefit, and provided further that:

(A)      if any such plan is fully insured, then the Executive shall be required to pay as each COBRA premium an amount equal to the allocable share of the cost of coverage for similarly situated active employees of the Company under such plan; or

(B)      if any such plan is not fully insured, the Executive shall be required to pay the full COBRA premium and the Company will reimburse the Executive for a portion of the COBRA premium charged to the Executive that represents the Company’s allocable share of the cost of coverage for similarly situated active employees of the Company under such plan; 

provided, however, that as a condition of receiving the payments and benefits in clauses (ii), (iii) and (iv), the Executive must execute within such period of time following termination of employment as is permitted by the Company (and not timely revoke during any revocation period provided therein) a comprehensive release, covenant not to sue, and non-disparagement agreement from the Executive in favor of the Company, its executives, officers, directors, affiliates, and all related parties, in such form as may be provided by the Company; provided, however, that the release will not apply to the payment and benefits described in clauses (i) through (iv).

As used in clause (ii) above, “Change in Control” means the occurrence of either of the following events after the Executive becomes employed by Echo under this Agreement:

 (A)      the acquisition by any one person, or more than one person acting as a group (other than any person or more than one person acting as a group who is considered to own more than fifty percent (50%) of the total fair market value or total voting power of the stock of Echo prior to such acquisition), of stock of Echo, that, together with stock held by such person or group, constitutes more 

 

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than fifty percent (50%) of the total fair market value or total voting power of the stock of Echo; or

 (B)      within any twelve-month period (beginning on or after the Effective Date) the acquisition by any one person, or more than one person acting as a group, of the assets of Echo, that have a total gross fair market value of sixty-five percent (65%) or more of the total gross fair market value of all of the assets of Echo, immediately before such acquisition or acquisitions; 

provided, however, that transfers to the following entities or person(s) shall not be deemed to result in a Change of Control:  

 (I)        an entity as to which the shareholders of Echo immediately before the transfer continue to own, directly or indirectly, immediately after the transfer, more than fifty percent (50%) of the total fair market value or total voting power of the stock, immediately after the transfer; 

 (II)      an entity, more than fifty percent (50%) of the total fair market value or total voting power of the stock of which is owned, directly or indirectly, by Echo; or

 (III)     any employee benefit plan maintained by or contributed to by Echo. 

For purposes of this definition of Change in Control, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with Echo.  Notwithstanding the foregoing, no Change in Control shall be deemed to have occurred for purposes of this Agreement by reason of any actions or events in which the Executive participates in a capacity other than in the Executive’s capacity as an employee.  It is intended that this definition of Change in Control be consistent with the definition of a “change in the ownership of a corporation” or a “change in a substantial portion of the assets of a corporation” within the meaning of Code Section 409A, and this definition shall be construed consistent with such intent.

	
             
  	
            d.
 	
            Termination By Reason of Death or Disability.  
 

i.          This Agreement will terminate automatically upon the Executive’s death.  The Company may terminate Executive’s employment at the expiration of the Disability Period (as defined below), such termination to be effective upon Executive’s receipt of written notice of such termination.  

ii.        In the event the Executive’s employment is terminated due to his death or at the expiration of the Disability Period (as defined below), the Company shall not be obligated to provide the Executive any compensation or benefits (other than the Accrued Obligations) after the effective date of such termination except as required by law or regulation. 

 

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iii.       For purposes of this Agreement, “Disability” shall mean any physical or mental disability or infirmity that prevents the performance of the Executive’s duties.  Any question as to the existence, extent or potentiality of the Executive’s Disability upon which the Executive and the Company cannot agree shall be determined by a qualified, independent physician selected by the Company and approved by the Executive (or the Executive’s duly appointed representative), which approval shall not be unreasonably withheld.  The determination of any such physician shall be final and conclusive for all purposes of this Agreement.

iv.        For purposes of this Agreement, “Disability Period” means a period, beginning on the date the Company determines that the Executive is subject to a Disability and ending on the earlier of the date the Executive begins receiving income replacement benefits under any long term disability plan or policy maintained by the Company or the date that is six (6) months after such determination, during which the Executive remains subject to a Disability

e.         Effect of Termination.  If the Company terminates this Agreement as provided herein, it shall not be obligated to provide the Executive any compensation or benefits after the effective date of such termination except as otherwise set forth in this Section 5 and as required by law or regulation.  The Executive’s entitlement to any amount of severance or other post-termination benefits under this Agreement shall be subject to the following conditions:  

i.          All payments of severance and other post-termination benefits under this Agreement shall accrue from the date of termination and shall be made or commence no later than the sixtieth (60th) day following the Executive’s termination of employment, with any accrued but unpaid severance or benefits being paid or provided on the date of the first payment; provided, however, that if the Executive is a “specified employee” within the meaning of Code Section 409A, at the date of his termination of employment, then such portion of the payments or benefits under Section 5(b) or 5(c) that would result in a tax under Code Section 409A if paid during the first six (6) months after termination of employment shall be withheld, starting with the payments latest in time during such six (6) month period, and paid
to the Executive during the seventh month following the date of his termination of employment; and

ii.        For purposes of Sections 5(b) and (c), the Executive will have experienced a termination of employment only if either (i) the Executive has ceased to perform any services for the Company and all affiliated companies that, together with the Company, constitute the “service recipient” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations thereunder (collectively, the “Service Recipient”) or (B) the Service Recipient and the Executive reasonably anticipate that the level of bona fide services the Executive will perform for the Service Recipient after a given date (whether as an employee or as an independent contractor) will permanently decrease (excluding a decrease as a result of military leave, sick leave, or other 

 

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bona fide leave of absence if the period of such leave does not exceed six months, or if longer, so long as the Executive retains a right to reemployment with the Service Recipient under an applicable statute or by contract) to no more than twenty percent (20%) of the average level of bona fide services performed for the Service Recipient (whether as an employee or an independent contractor) over the immediately preceding 36-month period (or the full period of service if the Executive has been providing services to the Service Recipient for less than 36 months).

f.         Employment Status.  Executive’s continued employment with the Company is subject to the ongoing review and approval of the Company and its Board in their sole and absolute discretion.  Except as otherwise provided for herein, all terms and conditions of employment (such as hours of work, job duties and benefits, etc.) are subject to change by the Company at any time and for any reason.  Similarly, the Company has the same right to terminate the employment relationship at any time and for any reason, or for no reason, with or without Cause.  Executive further understands that he is an “at-will” employee of the Company, and that this “at-will” relationship cannot be modified except by written agreement between the Executive and the Company.
Nothing in this Section shall be construed to take away any rights that the Executive has during the Employment Term pursuant to this Agreement, including his rights pursuant to Sections 5(b) and 5(c) hereof.

6.         Confidentiality.  Concurrently herewith, Executive shall execute the Company’s standard form Confidentiality and Assignment of Creative Works Agreement (the “Confidentiality Agreement”), a copy of which is attached hereto as Exhibit A.  The Confidentiality Agreement shall remain in full force and effect in accordance with the terms thereof and shall survive the termination of this Agreement.  Upon the Merger, the Executive and Echo shall be required to execute a similar confidentiality agreement that will be governed by Delaware law.

	
             
  	
            7.
 	
            Non-Competition; Non-Solicitation.  
 

a.         The Executive agrees that, during his employment with the Company and for one (1) year following his termination of employment for any reason (the “Applicable Period”), the Executive will not (except on behalf of or with the prior written consent of the Company, which consent may be withheld in Company’s sole discretion), within the Area (as defined below), either directly or indirectly, on his own behalf, or in the service of or on behalf of others, provide managerial services or management consulting services substantially similar to those Executive provides for the Company to any person, firm, corporation, joint venture, or other business that is engaged in the same or a substantially similar business as the business of the Company, other than the Company or an affiliate of the Company.  The
Executive acknowledges and agrees that the business of the Company is conducted in the Area.  For purposes of this Section 7(a), the “Area” means any area within a fifty (50) mile radius of the Company’s principal corporate offices in the State of Tennessee; any area within a twenty-five (25) mile radius of any location where the Company or an Affiliate conducting the business of the Company opens a 

 

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veterinary clinic on or after the Effective Date and prior to the termination of the Executive’s employment hereunder; and any area within a fifty (50) mile radius of any location where the Company or an Affiliate conducting the business of the Company opens a specialty veterinary hospital on or after the Effective Date and prior to the termination of the Executive’s employment hereunder.

b.         The Executive agrees that during the Applicable Period, he will not, either directly or indirectly, on his own behalf or in the service of or on behalf of others, solicit any individual or entity which is an actual or, to his knowledge, actively sought prospective client of the Company or any of its Affiliates (determined as of date of termination of employment) with whom he had material contact during the last two (2) years of the Executive’s employment with the Company, for the purpose of offering services substantially similar to those offered by the Company.

c.         Executive understands and agrees that the Company’s employees and any information regarding the Company’s employees is confidential and constitutes trade secrets.  Accordingly, Executive agrees that during the Applicable Period, Executive will not, either directly or indirectly, separately or in association with others, interfere with, impair, disrupt or damage the Company’s business by soliciting or attempting to hire or hiring any of Company’s employees or causing others to solicit or encourage any of the Company’s employees to discontinue their employment with the Company; provided, however, that Executive being named as a referral on the resume of a Company employee and Executive responding to inquiries resulting therefrom shall not violate this Agreement.  

d.         Executive agrees that these covenants are reasonable with respect to their duration, geographical area and scope.  Executive acknowledges that Executive’s breach of the covenants contained in this Section would cause irreparable injury to the Company and agrees that in the event of any such breach, the Company shall be entitled to seek temporary, preliminary and permanent injunctive relief without the necessity of proving actual damages or posting any bond or other security.  Executive also acknowledges that each of these covenants survives termination of this Agreement for any reason.

e.         In the event that this Section 7 is determined by a court which has jurisdiction to be unenforceable in part or in whole, the court shall be deemed to have the authority to strike any unenforceable provision, or any part thereof or to revise any provision to the minimum extent necessary to be enforceable to the maximum extent permitted by law.

	
             
  	
            8.
 	
            Executive Representations.  The Executive represents that:
 

a.         Executive is entering into this Agreement voluntarily and that his employment hereunder and compliance with the terms and conditions hereof will not conflict with or result in the breach by him of any agreement to which he is a party or by which he may be bound;

 

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b.         he has not, and in connection with his employment with the Company will not, violate any non-solicitation or other similar covenant or agreement by which he is or may be bound; and

c.         in connection with his employment with the Company he will not use any confidential or proprietary information he may have obtained in connection with employment with any prior employer.

9.         Indemnification of the Executive.  The Company shall indemnify the Executive to the extent provided under the Company’s Articles of Incorporation or By-laws, and any separate indemnification agreement between the Company and the Executive, if any.

10.       Taxes.  Notwithstanding anything contained herein to the contrary, all payments made under this Agreement shall be subject to withholding for all applicable taxes, including, but not limited to, income, employment and social insurance taxes, as shall be required by law.  The Company and the Executive desire that the benefits and payments described in this Agreement be exempt from, or comply with, the requirements of Code Section 409A.  To that end, if the Executive suggests any amendments to this Agreement that the Executive believes will make certain benefits or  payments under this Agreement exempt from or compliant with Code Section 409A, the Company will use reasonable efforts to cooperate with the Executive in negotiating and implementing any such amendments,
provided that such amendments do not, in the sole discretion of the Company, have a cost to the Company (apart from legal fees associated with negotiating, drafting and submitting any required regulatory filings), or adversely affect the Company in any manner.  Notwithstanding the foregoing, the Company makes no guarantee as to any tax consequences relating to this Agreement, and the Company does not represent or warrant that any payments or benefits under this Agreement are exempt from or compliant with Code Section 409A. Further, the Executive shall be responsible for his own taxes under this Agreement, including, if and to the extent applicable, taxes under Section 409A and 4999 of the Internal Revenue Code.

	
             
  	
            11.
 	
            Governing Law; Arbitration; Expenses.
 

a.         This Agreement shall be governed and construed in accordance with the laws of the State of Delaware without regard to its principles regarding choice of law.  Subject to Section 11(b), the parties hereto consent to venue in the courts of the State of Delaware or in the Federal courts sitting in the State of Delaware with respect to any dispute regarding the subject matter hereof.

b.         In the event of any dispute under the provisions of this Agreement other than a dispute pursuant to Section 6 or 7, the parties shall be required to have the dispute, controversy or claim settled by binding arbitration in the city in which the headquarters of the Company is located in accordance with the commercial arbitration rules then in effect of the American Arbitration Association, before a panel of three arbitrators, one of whom shall each be selected by the Company and Executive, respectively, and the third of whom shall be selected by the other two arbitrators.  Any award entered by the arbitrators shall be final, binding and nonappealable and judgment may be entered thereon by either party in accordance with applicable law in any court of competent jurisdiction. This 

 

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arbitration provision shall be specifically enforceable.  The fees of the American Arbitration Association and the arbitrators shared equally by the parties, subject to Section 11(c) hereof.

c.         The party that materially prevails in any dispute litigated or arbitrated pursuant to Section 11(a) or 11(b) hereof shall be entitled to reimbursement for all of such party’s fees and costs (including, without limitation, the fees of the American Arbitration Association and the arbitrators and reasonable attorneys’ fees and expenses) that are incurred during the Employment Term or thereafter during the Executive’s lifetime, and which shall be reimbursed promptly following submission of proof of the expenses but not later than March 15 of the year following the year in which the judgment on arbitration award becomes final.

Executive must initial here:           Company representative must initial here:           

	
             
  	
            12.
 	
            Miscellaneous.
 

a.         Notices.  All notices, requests, demands and other communications which are required or permitted hereunder shall be in writing and shall be deemed to have been duly  given (i) when delivered personally, (ii) one (1) business day after being deposited with a reputable, nationally known overnight delivery service for service the next business day, or (iii) upon receipt after having been mailed by registered or certified mail, postage prepaid and return receipt requested; in each case addressed to the relevant address below or to such address as either party may hereafter designate by written notice to the other party in accordance herewith.

 

	
            If to the Executive:
 	
            George A. Villasana

709 S.E. 9 Street

Fort Lauderdale, Florida 33316 

 
 
	
            If to the Company:
 	
            ATTN:  President and Chief Operating Officer

XLNT Veterinary Care, Inc.

560 South Winchester Boulevard, Suite 500

San Jose, California 95128

Tel.# (408) 236-7413

Fax # (408) 904-5871

 
 

b.         Entire Agreement; Assignment.  This Agreement supersedes all prior agreements and negotiations and sets forth the entire understanding between the parties hereto with respect to the subject matter hereof, including without limitation, that certain agreement between the Company and the Executive dated July 6, 2007 (but not the stock option agreement for 100,000 shares dated July 6, 2007), and cannot be changed, modified, extended or terminated except upon written amendment approved by the Company and executed on its behalf by a duly authorized officer.  The rights and obligations of the Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of the Company, as
applicable, including 

 

13

 

without limitation, a purchaser of all or substantially all the assets of the Company.  If the Agreement is assigned pursuant to the foregoing sentence, the assignment shall be by novation and the entity defined as the “Company” herein prior to such assignment shall have no further liability hereunder, and the successor or assign, as applicable, shall become the “Company” hereunder.  Further, the Executive shall not be deemed to have incurred a termination of employment hereunder as a result of such assignment.  The Agreement is a personal contract and the rights and interests of the Executive may not be assigned by the Executive.  This Agreement shall inure to the benefit of and be enforceable by the Executive and the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

c.         Severability.  The invalidity, illegality or unenforceability of any provision of this Agreement shall not in any way affect, impair or render unenforceable any other provision of this Agreement, all of which shall remain in full force and effect.

d.         Survival.  Section 6 through 12 hereof shall survive the termination of this Agreement and shall not be extinguished thereby.

e.         Modification.  This Agreement may not be amended or modified except by a document signed by the Executive and an authorized representative of the Board which specifically states that it is amending this Agreement.

f.         Authority.  The signatories below on behalf of the Company have the full legal authority to bind the Company to all of the terms of this Agreement.

g.         Executed Counterparts. This Agreement may be executed in one or more counterparts, all of which when fully-executed and delivered by all parties hereto and taken together shall constitute a single agreement, binding against each of the parties.  To the maximum extent permitted by law or by any applicable governmental authority, any document may be signed and transmitted by facsimile with the same validity as if it were an ink-signed document.  Each signatory below represents and warrants by his signature that he is duly authorized (on behalf of the respective entity for which such signatory has acted) to execute and deliver this instrument and any other document related to this transaction, thereby fully binding each such respective entity. 

THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS AGREEMENT ON THE DATES SHOWN BELOW.

 

[Signatures begin on the following page]

 

14

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

	
            Company:
 	
            XLNT VETERINARY CARE, INC.
 
	
             
 	
             
 
	
             
 	
             
 
	
             
 	
            By:                                                                              

Steven T. Johnson, 

President and Chief Operating Officer
 
	
             
 	
             
 
	
            Executive:
 	
             

 

                                                                                    

George A. Villasana
 
	
             
 	
             
 
	
             
 	
            Solely as to Sections 1 and 4(c)(ii):

ECHO HEALTHCARE ACQUISITION CORP.
 
	
             
 	
             
 
	
             
 	
             
 
	
             

 

 

 

 
 	
            By:                                                                                

 

Name:                                                                         

 

Title:                                                                           
 

 

15

 

EXHIBIT A

CONFIDENTIALITY AGREEMENTLicense Agreement between the Registrant and The Department of Veterans Affairs

 Exhibit 10.7 
 Confidential Materials omitted and filed separately with the 
 Securities and Exchange Commission. Asterisks
denote omissions. 
 LICENSE AGREEMENT 
 THIS LICENSE AGREEMENT, is entered into and effective as of August 27, 2002 (“Execution Date”) by and between The Department of Veterans Affairs, 810 Vermont Avenue, N.W., Washington, DC 20420
(hereinafter referred to as LICENSOR) and TransMedics, Inc., a corporation organized and existing under the laws of Delaware having a principal place of business at 600 West Cummings Park, Suite 3050, Woburn, MA 10801 and all AFFILIATES (as defined
below) thereof (“LICENSEE”). 
 ARTICLE I. DEFINITIONS 
 1.00 Terms in this License (other than names of parties and article headings) which are set forth in capital and bold letters have the meanings
established in the succeeding paragraphs of Article I. 
 1.01 AFFILIATE means any corporation, company, partnership, joint venture and/or
firm which controls, is controlled by, or is under common control with the LICENSEE. For purposes of this Paragraph 1.01, “control” shall mean (a) in the case of corporate entities, direct or indirect ownership of at least fifty
percent (50%) of the stock or shares having the right to vote for the election of directors, and (b) in the case of non-corporate entities, direct or indirect ownership of at least fifty percent (50%) of the equity interest with the
power to direct the management and policies of such non-corporate entities. As used herein, “LICENSEE” includes all AFFILIATES thereof. 
 1.02 CALENDAR YEAR means the fiscal year that begins on October 1st and ends the following September 30th. 
 1.03 FIELD OF USE means perfusion apparatuses, which as an example only is shown in Exhibit 1, for LICENSEE’S portable organ preservation system,
and modifications thereto and related hardware components (including electrical and mechanical components) that are used for maintaining an isolated (harvested) solid organ in a functioning state. 
 1.04 FDA means the United States Food and Drug Administration or any successor agency thereto. 
 1.05 FDA APPROVAL means an approval from the FDA or regulatory approval in a country in the TERRITORY after completion of appropriate trials to obtain
marketing approval for a LICENSED PRODUCT. 
 1.06 FIRST COMMERCIAL SALE means for each LICENSED PRODUCT, the first commercial sale in any
country after FDA APPROVAL by LICENSEE or its AFFILIATES, sublicensees or distributors. Sales for test marketing, clinical trial purposes or similar use shall not be considered to constitute a First Commercial Sale. 
 1.07 LICENSED PATENTS means U.S. Patent Nos. 6,100,082 and 6,046,046, owned and assigned to Licensor, per the Assignment Agreement dated August 27,
2002, and any and all divisions, continuations, continuations-in-part, reissues, reexaminations, renewals or extensions thereof and all corresponding foreign patents and pending patent applications throughout the world. LICENSED PATENTS existing as
of the Execution Date are set forth in Appendix A to this Agreement, which may be updated from time to time. 

 1.08 LICENSED PRODUCTS means any and all machines, articles of manufacture and solutions (as limited by
this paragraph and paragraph 2.01), the manufacture, use, or sale of which, would, absent the License granted to LICENSEE hereunder, infringe one or more claims in the LICENSED PATENTS. LICENSED PRODUCTS consists of three product lines: 

(a) Complete perfusion apparatuses, which as an example only is shown in Exhibit 1, for LICENSEE’S portable organ preservation
system, and modifications thereto (“APPARATUSES”); 
 (b) Consumables, which include preservation chambers and
perfusion circuits sold individually or together as a set, selected for use in the Apparatuses, such typical sets of Consumables, as an example only, are shown in Exhibit 2 hereto (“CONSUMABLES”); 
 and 
 (c) Solutions for use
in the Licensed Products in the FIELD OF USE (“SOLUTIONS”). 
 1.09 LICENSOR’S Representative means the Director (122),
Technology Transfer Program, Department of Veterans Affairs, Central Office, 810 Vermont Avenue, NW, Washington, DC, 20420. 
 1.10 NET SALES
means the gross amount invoiced on sales of any LICENSED PRODUCTS, less the following deductions: 
 1.10.01 Customary trade,
cash and quantity discounts actually allowed and taken directly with respect to such sales, as reflected in the amount invoiced; 
 1.10.02 Tariffs, duties, excises, sales taxes or other taxes imposed upon and paid directly with respect to the production, sale, delivery or use of the LICENSED PRODUCT (excluding national, state or local taxes based on income), as
reflected in the amount invoiced; 
 1.10.03 Amounts repaid or credited by reason of rejections, defects, recalls or returns
or because of chargebacks, refunds, rebates or retroactive price reductions; and 
 1.10.04 Freight, insurance and other
transportation charges incurred in shipping a LICENSED PRODUCT to third parties, as reflected in the amount invoiced. 
 No royalties shall
be paid on: demonstration units used for trade shows or internal testing; units used for replacement of damaged or broken goods which were under warranty; or samples used in the process of making sales. Transfer of LICENSED PRODUCTS between LICENSEE
and sublicensees, where such sublicensees are in the business of selling the LICENSED PRODUCTS, shall not be deemed sales and shall not be included in computing NET SALES. 
  

 2 

 1.11 PARTY means LICENSOR or LICENSEE; “PARTIES” means LICENSOR and LICENSEE. As used in this
Agreement, references to “third parties” do not include a PARTY or its AFFILIATES. 
 1.12 TERRITORY means all of the countries of
the world. 
 ARTICLE II. LICENSE GRANT 
 2.00 LICENSOR grants to LICENSEE and its AFFILIATES an exclusive, royalty- bearing license, and the right to grant sublicenses, under the LICENSED PATENTS to make, have made, use, import, offer for sale, sell or have sold in the FIELD OF
USE the APPARATUSES and CONSUMABLES throughout the life of the LICENSED PATENTS in the TERRITORY. 
 2.01 LICENSOR grants to LICENSEE and its
AFFILIATES a non-exclusive, royalty- bearing license, and the right to grant sublicenses, under the LICENSED PATENTS for SOLUTIONS to make, have made, use, import, offer for sale, sell or have sold in the FIELD OF USE for use in the LICENSED
PRODUCTS throughout the life of the LICENSED PATENTS in the TERRITORY. 
 2.02 The license granted herein and pursuant to Article V below
shall be subject to the Government of the United States of America (hereinafter referred to as the “GOVERNMENT”) having the irrevocable, royalty-free, paid-up right to practice and have practiced the LICENSED PATENTS throughout the
TERRITORY by or on behalf of the GOVERNMENT or international organization pursuant to any existing or future treaty or agreement to which the GOVERNMENT is a signatory. 
 2.03 LICENSOR reserves the right to require LICENSEE to grant sublicenses to responsible applicants on reasonable terms to the extent that the LICENSED PRODUCTS are required for public use by Government regulations or
when necessary to fulfill public health, welfare, or safety needs. Any decision by LICENSOR to require such a sublicense may be appealed by LICENSEE under the procedures set forth in 35 U.S.C. § 203 (b). 
 ARTICLE III. ROYALTIES AND PAYMENTS 
 3.00
LICENSEE shall pay directly to LICENSOR a one-time milestone payment of sixty-five thousand US dollars ($65,000.00) upon the first FDA APPROVAL of a LICENSED PRODUCT. This fee shall be payable sixty (60) days after the date of FDA APPROVAL of a
LICENSED PRODUCT. 
 3.01 LICENSEE shall pay LICENSOR royalties according to the following schedule: 
 3.01.01 For a LICENSED PRODUCT which is an APPARATUS: 
  

	 	(a)	[**] % of NET SALES of $[**] to $[**] per year; 

  

	 	(b)	[**]% on NET SALES greater than $[**] to $[**] per year; and 

  

 3 

	 	(c)	[**]% on NET SALES greater than $[**] per year. 

 3.01.02 For a LICENSED PRODUCT which is a CONSUMABLE, [**]% of NET SALES. 
 3.01.03 For a LICENSED PRODUCT which is
a SOLUTION for the FIELD OF USE, [**]% of NET SALES. 
 3.02 In the case where the royalties paid under Section 3.01 do not aggregate a
minimum sum of [**] US dollars ($[**]) (“MINIMUM SUM”) in a CALENDAR YEAR, LICENSEE will, within sixty (60) days from the end of the CALENDAR YEAR, pay the difference between the MINIMUM SUM and the royalties actually paid. Licensee
shall be obligated to pay the MINIMUM SUM for a period of five (5) CALENDAR YEARs after the FIRST COMMERCIAL SALE. The Minimum Sum owed for the first and last CALENDAR YEAR in which sales subject to such royalties are made will be prorated
based on the month in which the FIRST COMMERCIAL SALE is made. 
 3.03 The royalties payable under Paragraphs 3.01, above, shall be paid on a
country-by-country basis on each LICENSED PRODUCT until the expiration of all LICENSED PATENTS which cover such LICENSED PRODUCT in such country. 
 3.04 No royalty shall be payable under this License for direct sales of LICENSED PRODUCT by LICENSEE or its sublicensees to the GOVERNMENT or any of its agencies for governmental purposes. The sales price of LICENSED PRODUCTS for direct
sales to the GOVERNMENT shall be adjusted lower to reflect the foregoing royalty-free basis of such sales. 
 3.05 The sales price paid by
the GOVERNMENT for any LICENSED PRODUCTS shall be equivalent to or lower than the lowest price paid by any third party customer of LICENSEE. 
 ARTICLE IV. REPORTS AND RECORDS 
 4.00 Within sixty (60) days after the end of each calendar quarter after the FIRST
COMMERCIAL SALE, LICENSEE shall deliver to LICENSOR a quarterly report, setting forth a reasonably detailed accounting of the NET SALES of LICENSED PRODUCTS that are subject to royalty payments due to LICENSOR for such calendar quarter. Such
quarterly reports shall include, on a country-by-country basis, during the preceding calendar quarter (i) the number and description of the LICENSED PRODUCTS manufactured by LICENSEE and its sublicensees; (ii) the aggregate NET SALES
received by LICENSEE and its sublicenses; and (iii) the royalties payable on such NET SALES. LICENSEE shall deliver all income payments due to LICENSOR through the prior June 30 in one lump sum payment dated and postmarked no earlier than
October 1 and no later than October 10 of each CALENDAR YEAR. 
 4.01 LICENSEE shall keep, and shall require its sublicensees to
keep, complete and accurate records of the latest five (5) years of sales to which royalties and income attach. For the sole purpose of verifying income payable to LICENSOR, LICENSOR shall have the right on an annual basis and at
LICENSOR’S expense to retain an independent certified public accountant selected by LICENSOR, to review such records in the location(s) where such records are 

  

 4 

 
maintained by LICENSEE or its sublicensees upon reasonable notice and during regular business hours and under obligations of confidence. In the event
LICENSOR contends after a review that there has been an underpayment by LICENSEE to LICENSOR, LICENSOR shall provide a copy of the review to LICENSEE. In the event that there has been an underpayment of income to LICENSOR, such underpayment shall be
promptly remitted to LICENSOR, together with interest calculated in the manner provided in Paragraph 4.02 below. If the underpayment is equal to or greater than five percent (5%) of the income amount that was otherwise due, LICENSOR shall be
entitled to have LICENSEE pay all of the costs of such review. In the event of an overpayment of income to LICENSOR, such overpayment shall be refunded to LICENSEE or applied to future royalty payments due. 
 4.02 All payments under this Agreement shall be made in United States dollars by check or bank draft drawn on a United States bank and shall be payable
to the “Department of Veterans Affairs (royalty)” All payments shall be sent to LICENSOR within ten (10) days when such payments are due in accordance with the provisions of this Agreement. Any income payments due hereunder with
respect to sales outside of the United States shall be payable in their U.S. Dollar equivalents, calculated using the applicable conversion rates for buying United States dollars as published by The Wall Street Journal for the last business day of
the calendar quarter for which the royalties are payable. LICENSEE shall pay interest to LICENSOR on the aggregate amount of any payments that are not paid on or before the date such payments are due under this Agreement at a rate per annum equal to
the lesser of the United States prime interest rate plus one percent (1%), as reported by The Wall Street Journal for the applicable period, or the highest rate permitted by applicable law, calculated on the number of days such payment is
delinquent. All payments shall be sent to the following address: Department of Veterans Affairs; Technology Transfer Financial Management Office (12TT); 810 Vermont Ave, NW; Washington, D.C. 20420 
 ARTICLE V. SUBLICENSING RIGHTS 
 5.00
LICENSEE shall have the right under the LICENSED PATENTS to grant sublicenses to third parties at royalty rates not less than those required to be paid as specified in Paragraph 3.02, Article III, subject to the provisions of this Agreement and to
the submission to and approval by LICENSOR’S Representative, which approval shall not be unreasonably withheld. Any sublicense shall make reference to this License including those rights retained by LICENSOR. Such sublicenses shall be
non-assignable by LICENSEE without the written approval of the LICENSOR, which approval shall not be unreasonably withheld, except to the successor of that part of the LICENSEE’S business to which this Agreement pertains. A copy of any
sublicense shall be furnished to LICENSOR’S Representative promptly after its execution. In the event of a material default by any sublicensee under a sublicense agreement, LICENSEE will inform LICENSOR and has the right to take such action,
after consultation with LICENSOR, which in LICENSEE’S reasonable business judgment will address such default. 
 5.01 LICENSEE and
LICENSOR shall share royalties and fees paid by sublicensees, based on cash actually received by LICENSEE as royalties, sublicense issue fees, milestone payments, or fees other than royalties, excluding funds provided by sublicensees for research
and development, with the total of such moneys going to LICENSOR equal to the royalties due to Licensor from Licensee in accordance with Article III above, and the remainder to LICENSEE. 
  

 5 

 5.02 Termination of this Agreement shall terminate all sublicenses which may have been granted by
LICENSEE, provided that any sublicensee may elect to continue its sublicense by advising LICENSOR in writing, within 60 days of the sublicensee’s receipt of written notice of such termination, of its election, and of its agreement to assume in
respect to LICENSOR all the obligations (including obligations for payment) contained in its sublicensing agreement with LICENSEE. 
 ARTICLE
VI. PATENT MAINTENANCE 
 6.00 LICENSEE, and not LICENSOR, shall amend, prosecute and maintain LICENSED PATENTS at its own expense subject to
provisions of Paragraph 6.01, below. Licensee agrees to send copies of all correspondence (past and future) to and from any patent office to LICENSOR and to keep LICENSOR informed of the status of all patents and patent applications. 
 6.01 LICENSEE, may, in its discretion, elect to abandon any patent application or issued patent. LICENSEE shall give LICENSOR at least thirty days
(30) notice of any such planned abandonment. LICENSOR shall then have the right to continue the prosecution of any such applications and to maintain any such patents under its own control and at its expense. LICENSEE agrees to cooperate in such
activities. 
 ARTICLE VII. PATENT ENFORCEMENT 
 7.00 LICENSOR and LICENSEE shall notify each other promptly in writing of any infringement of LICENSED PATENTS which becomes known to either of them (“Infringement Notice”). LICENSEE shall notify LICENSOR
promptly of any action taken in accordance with Article VII, Paragraph 7.01, to eliminate such infringement. 
 7.01 While and as long as its
license under this Agreement remains exclusive, LICENSEE is authorized pursuant to the provision of 35 U.S.C. Chapter 29, or other statutes and only if the Infringement Notice has been provided to Licensor: 
 7.01.01 To bring suit in its own name or, if required by law, jointly with LICENSOR, at LICENSEE’S own expense and on its own behalf,
for infringement of the LICENSED PATENTS in the FIELD OF USE, however LICENSOR’s involvement is subject to the Department of Justice’s prior written approval which LICENSOR shall use its best efforts to secure; 
 7.01.02 In any such suit, to enjoin infringement and to collect for its use, damages, profits, and awards of whatever nature recoverable
for such infringement; and 
 7.01.03 To settle any claim or suit for infringement of LICENSED PATENTS by granting the
infringing party a sublicense under the provisions of Article V of this Agreement. LICENSEE agrees to keep Licensor apprised of the status of all potential or actual litigations and will seek Licensor’s written authorization to settle any
dispute, which authorization will not be unreasonably withheld, but subject to the Department of Justice approval which LICENSOR shall use its best efforts to secure. Any royalties received by LICENSEE pursuant to such a sublicense shall be shared
with LICENSOR in accordance with Article V, Paragraph 5.01. 
  

 6 

 7.02 In the event that the LICENSEE decides not to abate any infringement pursuant to Section 7.01
above, it shall so inform LICENSOR of this decision within sixty days (60) of the Infringement Notice. If LICENSEE decides not to abate the infringement, then LICENSOR shall have the right to do so and may, at LICENSOR’s, sole discretion,
bring suit to abate the infringement. 
 7.03 LICENSOR and LICENSEE mutually agree to furnish technical and other necessary assistance to
each other in conducting any litigation necessary to enforce the LICENSED PATENTS against others in the FIELD OF USE. Expenses for such assistance will be paid by the PARTY requesting such assistance. LICENSOR’s involvement is subject to the
Department of Justice’s approval which LICENSOR shall use its best efforts to secure. 
 7.04 Any PARTY that initiates suit or
proceeding against an infringer (“Plaintiff Party”) shall assume and pay all of its own out-of-pocket costs incurred in connection with any litigation described in Paragraph 7.01 or 7.02, including, without limitation, the fees and
expenses of its own counsel. 
 7.05 Any recovery obtained by any PARTY as a result of any proceeding described in Paragraph 7.01 or 7.02, by
settlement or otherwise, shall be applied in the following order of priority: 
 (i) first, to reimburse each PARTY for all litigation costs
in connection with such proceeding paid by that PARTY and not otherwise recovered (on a pro rata basis based on each PARTY’S respective litigation costs, to the extent the recovery was less than all such litigation costs); and 
 (ii) second, the remainder of the recovery shall be paid seventy-five percent (75%) to the Plaintiff Party responsible for abating the infringement
and twenty-five percent (25%) to the other PARTY. 
 ARTICLE VIII. CONFIDENTIALITY 
 8.00 All confidential information disclosed by a PARTY to the other PARTY during the term of this Agreement shall not be used by the receiving PARTY
except in connection with the activities contemplated by this Agreement, shall be maintained in confidence by the receiving PARTY (except to the extent reasonably necessary for regulatory approval of products developed by LICENSEE or any of its
respective AFFILIATES or sublicensees or for the filing, prosecution and maintenance of LICENSED PATENTS), and shall not otherwise be disclosed by the receiving PARTY to any other person, firm, or agency, governmental or private, without the prior
written consent of the disclosing PARTY, except to the extent that the confidential information (as determined by competent documentation): 
 (a) was known or used by the receiving PARTY prior to its date of disclosure to the receiving PARTY; or 
  

 7 

 (b) either before or after the date of the disclosure to the receiving PARTY is lawfully
disclosed to the receiving PARTY by sources other than the disclosing PARTY rightfully in possession of the confidential information; or 
 (c) either before or after the date of the disclosure to the receiving PARTY becomes published or generally known to the public (including information known to the public through the sale of products in the ordinary
course of business) through no fault or omission on the part of the receiving PARTY or its sublicensees; or 
 (d) is
independently developed by or for the receiving PARTY and provable by written contemporaneous documentation without reference to or reliance upon the confidential information; or 
 (e) is required to be disclosed by the receiving PARTY to comply with applicable laws, e.g., to defend or prosecute litigation or to
comply with governmental regulations; provided that the receiving PARTY provides prior written notice of such disclosure to the disclosing PARTY and takes reasonable and lawful actions to avoid and/or minimize the degree of such
disclosure. 
 8.01 All obligations of confidentiality imposed under this Article VIII shall expire five (5) years following termination
or expiration of this Agreement. 
 ARTICLE IX. REPRESENTATIONS AND WARRANTIES 
 9.01 LICENSEE and LICENSOR each represents and warrants to the other that as of the Execution Date it has full right, power and authority to enter into
this Agreement and to perform its respective obligations under this Agreement. LICENSOR represents and warrants to LICENSEE that it has the right to grant to LICENSEE the licenses and sublicenses granted pursuant to this Agreement. 
 9.02 LICENSEE and LICENSOR each represents and warrants that all necessary consents, approvals and authorizations of all government authorities and other
persons required to be obtained by such PARTY in connection with execution, delivery and performance of this Agreement have been obtained. 
 9.03 LICENSEE and LICENSOR each represents and warrants that notwithstanding anything to the contrary in this Agreement, the execution and delivery of this Agreement and, the performance of such PARTY’S obligations hereunder
(a) do not conflict with or violate any requirement of applicable laws or regulations and (b) do not and will not conflict with, violate or breach or constitute a default or require any consent under, any contractual obligations of such
PARTY, except such consents as shall have been obtained prior to the Execution Date. 
 9.04 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN,
THE PARTIES MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, AND PARTICULARLY THAT PRODUCTS WILL BE SUCCESSFULLY DEVELOPED HEREUNDER, AND IF DEVELOPED, WILL HAVE COMMERCIAL UTILITY OR MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE. 
  

 8 

 ARTICLE X. INDEMNIFICATION 
 10.00 LICENSEE agrees to defend LICENSOR at its costs and expense, and will indemnify and hold LICENSOR and its respective directors, officers, employees and agents (the “LICENSOR Indemnified Parties”)
harmless from and against any losses, costs, damages, fees or expenses arising out of any claim relating to personal injury from the development, manufacture, use, sale or other disposition of any product made by or for LICENSEE and/or its
AFFILIATES. In the event of any such claim against the LICENSOR Indemnified Parties by any third party, LICENSOR shall promptly notify LICENSEE in writing of the claim and LICENSEE shall manage and control, at its sole expense, the defense of the
claim and its settlement. The LICENSOR Indemnified Parties shall cooperate with LICENSEE and may, at their option and expense, be represented in any such action or proceeding. LICENSEE shall not be liable for any litigation costs or expenses
incurred by the LICENSOR Indemnified Parties without LICENSEE’S prior written authorization. In addition, LICENSEE shall not be responsible for the Indemnification of any LICENSOR Indemnified Party arising from any negligent or intentional acts
by Licensor or any of Licensor’s Indemnified Parties, or as the result of any settlement or compromise by the LICENSOR Indemnified Parties without LICENSEE’s prior written consent. LICENSOR’S involvement is subject to Department of
Justice approval, which LICENSOR shall use its best efforts to secure. 
 ARTICLE XI. TERM AND TERMINATION 
 11.00 The term of this Agreement begins with its Execution Date as set forth in the heading paragraph located in front of Article I and, unless sooner
terminated or otherwise modified as provided for in this Article XI, shall continue until the expiration of the last to expire as to each of the LICENSED PATENTS. 
 11.01 Upon any material breach of this Agreement by either PARTY (in such capacity, the “Breaching Party”), the other PARTY (in such capacity, the “Non-Breaching Party”) may terminate this
Agreement by providing sixty (60) days’ written notice to the Breaching Party, specifying the material breach. The termination shall become effective at the end of the sixty (60) day period unless (a) the Breaching Party cures
such breach during such sixty (60) day period, or (b) if such breach is not susceptible to cure within sixty (60) days of the receipt of written notice of the breach, the Breaching Party is diligently pursuing a cure (unless such
breach, by its nature, is incurable, in which case the Agreement may be terminated immediately) and effects such cure within an additional sixty (60) days after the end of such initial sixty (60) day period. 
 11.02 Upon expiration or termination of this Agreement for any reason, nothing in this Agreement shall be construed to release either PARTY from any
obligations that matured prior to the date of expiration or termination; and the following provisions shall expressly survive any such expiration or termination: Article I, Article IV, Paragraph 6.01, Article VIII, Article IX, Article X, and
Paragraphs 12.01, 12.04, 12.09, 12.10 and 12.11. 
  

 9 

 ARTICLE XII. GENERAL 
 12.00 In carrying out the obligations and duties under this Agreement, it is understood and agreed that LICENSEE is acting as an independent contractor and not as an agent, partner, joint venturer or employee of
LICENSOR, neither PARTY shall have the right to bind or obligate the other in any manner whatsoever and neither PARTY shall be liable for the representation, act or omission of the other party which is contrary to the provisions hereof. 

12.01 This Agreement shall not be transferred or assigned by LICENSEE to any party other than to a successor or assignee of all or substantially all
of the business interest of LICENSEE relating to LICENSED PRODUCTS without the written approval of LICENSOR’s Representative. Notwithstanding the foregoing, LICENSEE may assign its rights (but not its obligations) pursuant to this Agreement in
whole or in part to an AFFILIATE only upon the written consent of LICENSOR, which consent shall not be unreasonably withheld. 
 12.02 Any
amendment or modification to this Agreement shall be made in writing signed by both PARTIES. 
 12.03 This License does not confer any
immunity from or defenses under the antitrust laws, and laws and regulations pertaining to or administered by the Food and Drug Administration, or the export laws, nor does it confer immunity from a charge of patent misuse. Furthermore,
LICENSEE’S or sublicensee’s acquisition and exercise of rights hereunder are not immunized from the operation of any State or Federal law by reason of the source of the grant. The License does not constitute an endorsement by LICENSOR of
any LICENSED PRODUCTS and LICENSEE shall not state or imply in any medium that such endorsement exists as the result of this License. 
 12.04 Neither PARTY makes any warranty, express or implied, to the other PARTY regarding the patentability or validity of the LICENSED PATENTS and no representations whatsoever with regard to the scope of the LICENSED PATENTS or that the
LICENSED PATENTS may be exploited without infringing other patents. 
 12.05 LICENSOR assumes no liability resulting from LICENSEE’S
exercise of its rights under this License or from LICENSOR’S exercise of its rights under this License, including modification or termination thereof. 
 12.06 LICENSEE agrees that LICENSED PRODUCTS or any and all components or products which comprise the LICENSED PRODUCTS used, sold, or otherwise disposed of in the TERRITORY by LICENSEE and its sublicensees will be
manufactured when practicable in the United States. 
 12.07 The decision of LICENSOR’s Representative on any requirement, dispute,
interpretation, modification, or termination of this License shall be reduced to writing and a copy mailed or otherwise furnished to LICENSEE. Such decision shall be final, provided that LICENSEE may, within 30 days of receiving notice of such
decision, submit a written appeal through LICENSOR’S Representative to the Office of General Counsel, which VA appeal shall set forth in detail the decision being appealed and the basis of the appeal and may include appropriate supporting
materials. Implementation of such decision shall be stayed pending a final resolution of such appeals. Pending such final resolution, LICENSEE shall proceed diligently with the performance of its obligations under this Agreement. 
  

 10 

 12.08 The parties shall notify each other of any changes in name, address, or business status, and any
notice, payment or report required to be given under the provisions of this License shall be considered dully given 
 (i) if delivered by
hand or by overnight courier on the date of delivery or sending; 
 (ii) if sent by cable, telegram, telex, fax, on the day following the day
of sending; and 
 (iii) if sent by certified or registered mail, on the fifth business day after the day of sending. Notice shall not be
sent by ordinary pre-paid or first-class mail. 
  

			
	12.08.01	  	If to LICENSOR:
		
		  	Mindy L. Aisen (122)
		  	Director of Technology Transfer
		  	Veterans Affairs
		  	VA Rehab R&D Service
		  	810 Vermont Avenue, N.W.
		  	Washington, D.C. 20420
		
	12.08.02	  	If to LICENSEE:
		
		  	Waleed H. Hassanein
		  	President & CEO
		  	TransMedics, Inc.
		  	600 West Cummings Park, Suite 3050
		  	Woburn, MA 10801

 12.09 This Agreement shall be construed in accordance with United States Federal law and the laws
of the Commonwealth of Massachusetts when not in conflict with United States Federal law. Federal law and regulations will preempt conflicting or inconsistent provisions in the agreement. LICENSEE shall have all defenses available to it under law.

 12.10 No failure or omission by the PARTIES hereto in the performance of any obligation of this Agreement shall be deemed a breach of this
Agreement or create any liability if the same shall arise from any cause or causes beyond the control of the PARTIES, including, but not limited to, the following: acts of God; acts or omissions of any governmental entity, other than LICENSOR; acts
of terrorism, any rules, regulations or orders issued by any governmental authority other than LICENSOR or by any officer, department, agency or instrumentality thereof; fire; storm; flood; earthquake; accident; war; rebellion; insurrection; riot;
and invasion and provided that such failure or omission resulting from one of the above causes is cured as soon as is practicable after the occurrence of one or more of the above-mentioned causes. 
  

 11 

 12.11 This Agreement has been prepared jointly and shall not be strictly construed against any PARTY.

 12.12 No failure on the part of LICENSOR or LICENSEE to exercise, and no delay in exercising, any right, power, remedy or privilege under
this Agreement, or provided by statute or at law or in equity or otherwise, shall impair, prejudice or constitute a waiver of any such right, power, remedy or privilege or be construed as a waiver of any breach of this Agreement or as an
acquiescence therein, nor shall any single or partial exercise of any such right, power, remedy or privilege preclude any other or further exercise thereof or the exercise of any other right, power, remedy or privilege. 
 12.13 If any provision hereof should be held invalid, illegal or unenforceable in any respect in any jurisdiction, then, to the fullest extent permitted
by law, (a) all other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in order to carry out the intentions of the PARTIES as nearly as may be possible and (b) such invalidity,
illegality or unenforceability shall not affect the validity, legality or enforceability of such provision in any other jurisdiction. 
 12.14 This Agreement may be executed in counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original, and all of which counterparts, taken together, shall constitute one and the same
instrument. 
 12.15 LICENSEE shall expend reasonable efforts and resources to carry out the LICENSEE’s plan for development and
marketing of the licensed invention and to bring the LICENSED PRODUCTS to the point of practical application in accordance with 37 C.F.R. § 404.5(5). 
 12.16 After bringing the LICENSED PRODUCTS to the point of practical application in the TERRITORY, LICENSEE agrees to make the LICENSED PRODUCTS available to the public on reasonable terms during the term of this
License. LICENSEE shall promptly report discontinuance of its making the benefits of the LICENSED PRODUCTS reasonably accessible to the public. 
 IN WITNESS THEREOF, each of the parties hereto has caused this License to be executed in duplicate originals by its duly authorized officers or representatives. 
  

							
	FOR LICENSOR:	 		 		 	
				
	 /s/ Thompson for
	 		 	August 28, 2002	 	
	Tim S. McClain	 		 		 	
	General Counsel	 		 		 	
	Department of Veterans Affairs	 		 		 	

  

 12 

							
	and	 		 		 	
				
	 /s/ James F. Burris, M.D.
	 		 	August 28, 2002	 	
	James Burris, M.D.	 		 		 	
	Acting Chief Research and Development Officer	 		 		 	
	Department of Veterans Affairs	 		 		 	
				
	FOR LICENSEE:	 		 		 	
				
	 /s/ Waleed H. Hassanein
	 		 	August 26, 2002	 	
	Waleed H. Hassanein	 		 		 	
	President & CEO	 		 		 	

  

 13 

											
	 Country
	  	 Application Filing
Date
	  	 Application No.
	  	 Title
	  	 Status
	  	 Comments

	US	  	23 SEPT 1997	  	08/936,062	  	Perfusion Apparatus and Methods Including Chemical Compositions for Maintaining an Organ	  	Issued	  	Patent No.: 6,100,082 August 8, 2000
						
	US	  	03 APRIL 1998	  	09/054,698	  	Compositions, Methods and Devices for Maintaining an Organ	  	Issued	  	Patent No.: 6,046,046 April 4, 2000
						
	US	  	23 MARCH 2000	  	09/534,092	  	Compositions, Methods and Devices for Maintaining an Organ	  	Filed	  	National Phase of PCT/US98/19912
						
	PCT	  	23 SEPT 1998	  	 PCT/US98/19912: Publication Date:
 01 APRIL 1999

  
 Publication No: WO99/15011
	  	Compositions, Methods and Devices for Maintaining an Organ	  	Filed	  	CIP of US 09/054,698
						
	EPO	  	23 SEPT 1998	  	98 94 84 78.7	  	Compositions, Methods and Devices for Maintaining an Organ	  	Filed	  	National Phase of PCT/US98/19912
						
	AU	  	23 SEPT 1998	  	9504298	  	Compositions, Methods and Devices for Maintaining an Organ	  	Granted	  	 Patent No.: 728233
 April 19, 2001

						
	CA	  	23 SEPT 1998	  	2304598	  	Compositions, Methods and Devices for Maintaining an Organ	  	Filed	  	National Phase of PCT/US98/19912
						
	JP	  	23 SEPT 1998	  	2000512407	  	Compositions, Methods and Devices for Maintaining an Organ	  	Filed	  	National Phase of PCT/US98/19912

  

 14 

 EXHIBIT 1 
 (License Agreement, Paragraph 1.08(a)) 
 [To be attached is Figure 4 of U.S. 6,100,082, which is the same as
Figure 4 of U.S. 6,046,046] 
 

 
 FIG. 4 

 EXHIBIT 2 
 (License Agreement, Paragraph 1.08(b)) 
  

	 	•	 	 Container for keeping an organ in communication with a fluid media 

  

	 	•	 	 Fluid media delivery means for delivering the fluid media to a major vessel of the organ 

  

	 	•	 	 Means for carrying the fluid media away from the organ 

  

	 	•	 	 Container cover assemblies with one or more integral cannulas

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