Document:

JOINT VENTURE AGREEMENT

 

               between

THARAWAT HOLDINGS COMPANY

and

HCI VIOCARE CLINICS UK LIMITED

 

Privileged and Confidential

1

TABLE OF CONTENTS

 

	
1.

	
INTERPRETATION

	
3

	
2.

	
FORMATION

	
5

	
3.

	
SHARES IN THE COMPANY

	
6

	
4.

	
RESTRICTIONS ON TRANSFER OF SHARES

	
9

	
5.

	
MEETINGS OF MEMBERS

	
10

	
6.

	
MANAGEMENT, BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY

	
10

	
7.

	
REPRESENTATIONS, WARRANTIES AND COVENANTS

	
13

	
8.

	
FISCAL MATTERS

	
14

	
9.

	
CONFIDENTIALITY

	
15

	
10.

	
NON-COMPETITION

	
16

	
11.

	
TERM & TERMINATION

	
17

	
12.

	
INDEMNIFICATION AND LIMITATIONS OF LIABILITY

	
18

	
13.

	
INSURANCE

	
19

	
14.

	
TAX MATTERS

	
20

	
15.

	
CONSEQUENCES OF BREACH

	
20

	
16.

	
DISPUTE RESOLUTION

	
20

	
17.

	
GENERAL PROVISIONS

	
21

2

 

THIS JOINT VENTURE AGREEMENT (the "Agreement") is dated July 19, 2017 (the "Effective Date").

PARTIES

	
(1)

	
Tharawat Holding Company, a company incorporated under the laws of Saudi Arabia with commercial registration number 1010258018 whose registered office is at Kingdom Tower Level 56 P.O. Box 10999, Riyadh, 11443 ("Tharawat"); and

	
(2)

	
HCi Viocare Clinics UK Limited, a company incorporated pursuant to the laws of the State of Nevada, U.S.A., with company registration number E0214052007-4 whose registered office is at Kintyre House, 209 Govan Road, Glasgow, Scotland, UK G51 1HJ ("Viocare"),

each referred to individually as "Party" and collectively as "Parties".

PREAMBLE:

Whereas, the Parties have agreed to associate themselves as founders in a limited liability company (hereinafter referred to as the ("Company")) to be incorporated in accordance with the laws of the Kingdom of Saudi Arabia for the purposes of owning, managing and franchising a chain of full service prosthetic, orthotic and diabetic foot rehabilitation clinics ("Clinics" and each a "Clinic") throughout the Territory, as defined hereunder, or any other locations where the Parties mutually agree.

And Whereas, it is the intention of the Parties to set forth certain understandings to regulate this relationship as shareholders/owners of the Company and the respective rights and obligations of each towards the other including among other things, (i) the allocation of profits, losses, credits and distributions of cash flow and other proceeds of the Company (ii) the respective rights, obligations and interests of the members towards each other and to the Company; and (iii) certain other matters.

NOW, THEREFORE, in consideration of the mutual promises and undertakings of the Parties hereto, and other good and valuable consideration the receipt of which is hereby acknowledged, and intending to be legally bound hereby, the Parties hereto agree as follows.

	
1.

	
INTERPRETATION

	
1.1

	
Definitions:

Unless the context otherwise requires, the following terms shall have the meanings hereby ascribed to them:

"Affiliate" means:

	
(a)

	
With respect to a company or partnership, any company or partnership which controls, is controlled by or is under common control with such company or  partnership, or any individual and/or such individual's spouse, parents and/or children ("Relations") who control(s) such company or partnership, and

	
(b)

	
with respect to an individual, the Relations of such individual or a company or partnership controlled by such individual and/or his Relations.

3

 

For purposes of this definition, a person is deemed to control another person if the former person possesses directly or indirectly the power to direct or cause the direction of the management of the other person, whether through the ownership of more than 50% of the total voting interest of the other person or by contract or otherwise.

"Applicable Law" means any applicable law, regulation, decree, directive, order, ordinance,

judicial decision or rule of the Kingdom of Saudi Arabia.

"Board of Directors" or "Board" means the board of directors of the Company as provided for in Clause 6 below.

"Business" or "Company Business" means the business of the Company as set out in Clause 2.4 below.

"Business Plan" means the Company's business plan as datelined in Annex II to this Agreement.

"Companies Law" means the Saudi Arabia Companies Law enacted by Royal Decree No M3 dated 28/1/1437H (i.e. 10/11/2015G), as amended or replaced from time to time.

"Director" means any director on the Board of Directors, as appointed in accordance with

Clause 6.1.

"Initial Investment" means the Company's Initial Investment as detailed in Clause 3.1 below. For the avoidance of doubt, the Initial Investment shall comprise of (a) the Registered Capital and (b) the Initial Loan.

"Initial Loan" means the initial loan which will be provided by Tharawat to the Company after incorporation, and as further detailed in Clause 3.3 i 3.2iv below.

"Intellectual Property" means in relation to any Party, on a worldwide basis, all registered or unregistered trademarks, trade names, patents, copyrights, trade secrets, designs, rights of publicity, knowhow, mask work rights, utility models and other industrial or intangible property rights of a similar nature of that Party, all grants and registrations worldwide in connection with the foregoing and all other rights with respect thereto existing other than pursuant to grant or registration; all applications for any such grant or registration, all rights of priority under international conventions to make such applications and the right to control their prosecution, and all amendments, continuations, divisions and continuations-in-part of such applications; and all corrections, reissues, patents of addition, extensions and renewals of any such grant, registration or right.

"Member(s)" includes any of the Parties for so long as they hold any shares in the Company and any other person, natural or legal, that acquires and holds shares in the Company in accordance with the provisions of this Agreement.

"MOCI" means the Saudi Arabian Ministry of Commerce and Investments. "MOH" means the Saudi Arabian Ministry of Health.

4

"Registered Capital" means the Company's registered capital as detailed in Clause 3.2 below.

"SAGIA" Saudi Arabian General Investment Authority

"Territory" means the countries of the Gulf Cooperation Council, (which include the kingdom of Saudi Arabia, Qatar, Kuwait, United Arab Emirates, Sultanate of Oman and Kingdom of Bahrain), and Iran , Iraq , Jordan, Syria, Lebanon, Yemen and Palestine.

	
1.2

	
The preamble hereto shall constitute an integral part of this Agreement.

	
1.3

	
References to 'Clause(s)' are to the clause(s) of this Agreement.

	
1.4

	
The Clause headings in this Agreement have been included for convenience of reference only and shall not be considered in the interpretation of this Agreement.

	
1.5

	
A reference to a clause is a reference to a clause or, or schedule to, this Agreement.

	
2.

	
FORMATION

	
2.1

	
Approvals

	
i.

	
The Parties hereby associate themselves to form the Company in accordance with the Applicable Law. The Parties shall commence with the registration of the Company as a limited liability company in accordance with the Applicable Law and shall apply for any required approvals for the proposed Company and for the Parties as shareholders therein, such approvals which include without limitation MOCI, SAGIA and MOH1.

	
ii.

	
Each Party undertakes to provide whatever information or documentation that may be reasonably required from its part in order to obtain such approvals.

	
2.2

	
Articles of Association

The formation of the Company shall be evidenced by:

	
i.

	
Articles of Association as per the form requested by MOCI and SAGIA and as annexed to this Agreement in the form of Annex 1;

	
ii.

	
The SAGIA investment license; and

	
iii.

	
The MOCI commercial registration certificate.

	
2.3

	
Name

The name of the Company shall be Viocare Clinics Middle East or any other name agreed by the Parties and approved in accordance with the Applicable Law.

1 Principally, the laws of Saudi Arabia permits the issuance of an investment license for foreign investors in the medical sectors within certain conditions. We are currently in touch with SAGIA to confirm these requirements for the company

5

	
2.4

	
Business of the Company

	
i.

	
The Business of the Company shall be owning, managing and franchising a chain of full service prosthetic, orthotic and diabetic foot rehabilitation clinics throughout the Territory.

	
ii.

	
The Company, as decided by the Board of Directors from time to time, shall be entitled to own and operate its own clinics, to franchise third party clinics and/or establish other joint ventures with other parties across the Territory.

	
2.5

	
Head Office and Branches

Subject to and conditional upon the approval of the Saudi authorities, including without limitations MOH, MOCI and SAGIA, the registered office of the Company shall be situated in Riyadh, Kingdom of Saudi Arabia. The Company, Subject to the approval of the Board of Directors and in accordance with the Business Plan, may open branches within the Territory.

	
2.6

	
Duration of the Company

The duration of the Company shall be 99 (ninety nine) years commencing as of the date of commercial registration Certificate. The term of the Company may be renewed in accordance with the Companies Law.

	
3.

	
SHARES IN THE COMPANY

	
3.1

	
Initial Investment

The Parties have determined that the Company needs an Initial Investment equivalent to an amount that will be determined by the Business Plan and which will be provided by Tharawat. The Initial Investment will be comprised of the Registered Capital and the Initial Loan.

	
3.2

	
Registered Capital

	
i.

	
The Company will be initially registered with an issued and outstanding share capital of One Million Saudi Riyals (SAR 1,000,000) which shall be paid up in full in cash at the time of registration of the Company.

	
ii.

	
The Company's Registered Capital may be increased from time to time by a unanimous resolution of the Members in accordance with the provisions of this Agreement, the Companies Law and the Articles of Association.

	
iii.

	
Each share in the Company shall have a par value of One Thousand Saudi Riyals (SAR 1,000) . The Registered Capital upon incorporation of the Company shall be distributed among the Parties as follows:

6

	 Party	 Number of shares 	 Capital Contribution 	 Percentage Interest
	
Tharawat

	
900

 

	
Nine Hundred Thousand Saudi Riyals (SAR 900,000)

	
90%

	
 

Viocare

	
 

100

	
One Hundred Thousand Saudi Riyals (SAR 100,000)

	
 

10%

	
 

Total

		 	
 

100%

	
iv.

	
The Initial Loan facility amount will be determined by the Business Plan as stipulated in Clause 3.3 i. below..

	
v.

	
Subject to Clause 3.2., vi and conditional upon the approval of the Saudi authorities, including without limitations MOH, MOCI and SAGIA, it is agreed upon the Parties that Viocare's share in the Registered Capital might be increased to reach the equivalent of 20% (twenty percent) of the Registered Capital upon the fulfillment of all the following conditions by Viocare with relation to any Clinic opened inside or outside KSA:

	
a.

	
Assisting in any documentation or procedural requirements that might be needed or required during obtaining the licenses for the Company and any of the Clinics;

	
b.

	
Providing and/or modifying the lay out of the Clinics as per international standards/Hci benchmarks;

	
c.

	
Assisting in any modification or redesigning of all Company buildings and Clinics as might be required by Saudi governmental regulatory agencies and authorities,

	
d.

	
Providing all approved and qualified list of suppliers for the Business;

	
e.

	
Assisting in finalizing any contractual agreement with suppliers;

	
f.

	
Assisting with furniture requirements specifications by providing the list as well as the name of the suppliers;

	
g.

	
Assisting in interviewing and training for the local hires;

	
h.

	
Interviewing and providing qualified staff (CPO and others) as per ISPO standards;

	
i.

	
Providing support and guidance in marketing activities and branding guidelines;

	
j.

	
Providing any other technical assistance might be required by the Company; and

7

  

	
k.

	
fulfillment of any other key performance Indicators as detailed in the Business Plan.

 

	
vi.

	
provided that all the conditions set forth in Clause 3.2 v are fulfilled; Viocare's entitlement to the additional share in the Registered Capital will only be realized once the following conditions are met:

	
a.

	
5% additional share in the Registered Capital to be realized once Tharawat fully recovers the Initial Loan amount provided that the Company remains cash positive after the repayment of such Initial Loan, Capital expenditure for the establishment of new clinics excluded;

	
b.

	
2% additional share in the Registered Capital to be realized once the Company and the Clinics reach 5,000 (Five Thousand) clients; and

	
c.

	
3% additional share in the Registered Capital to be realized once the Company reach 7,000 (Seven Thousand) clients.

	
3.3

	
Company Funding and Additional Capital Contribution

	
i.

	
The Initial Loan:

	
a.

	
As part of the Initial Investment, Tharawat will provide an interest free loan to the Company in an amount which will be determined by the Business Plan (the "Initial Loan").

	
b.

	
The Initial Loan shall be paid back from the revenues of the Company and the Business. Safe for statuary payments and reserves which will have a priority under the Applicable Law, the Initial Loan shall have a priority over any dividend distribution or any other payments which could be made out by the Company excluded the general operational expenses of the Company and the Management Fee as stipulated in Clause 6.3v considered it as a general and operational expense. The Members will not be entitled to receive any dividend until such time when the Initial Loan is fully repaid to Tharawat.

	
c.

	
The Parties hereby agree, confirm and acknowledge that all assets of the Company shall be pledged to the benefit of Tharawat and shall remain under pledge to the benefit of Tharawat until the Initial Loan is fully paid back. Accordingly, the Board of Directors shall not, and the Members shall not direct or cause any Director to, under any circumstances dispose of any assets owned by the Company without the prior written approval of Tharawat. Moreover, the Initial Loan shall be due and payable in full, to the extent then unpaid, on the date of termination of this Agreement and dissolution of the Company in accordance with this Agreement.

	
ii.

	
Additional capital contributions:

8

	
a.

	
Additional capital contributions shall be made in the amounts and at the times determined by the unanimous vote of the Members.

	
b.

	
In the event that a Member does not make a timely additional capital contribution as required by this Clause 3.3ii ("Defaulting Member"), the other Member, at its option, may elect to advance to the Company, as a loan to the Defaulting Member, an amount up to or equal to the amount that the Defaulting Member failed to contribute. Such loan shall be referred to herein as a "Default Loan". Each Default Loan shall be evidenced by such documents and shall be on such terms and conditions as are customary in transactions of this type and are reasonably acceptable to the lending Member; provided that each Default Loan shall be repaid from any cash distributed to the Defaulting Member with the approval of the Board of Directors and, to the extent then unpaid, shall be due and payable in full on the date of termination of this Agreement and dissolution of the Company in accordance with this Agreement.

	
c.

	
Liability of Members

Except as otherwise provided in Clause 12, all debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company (including under a judgment, decree or order of a court), and no Member (and no Affiliate of any Member) shall be obligated or liable for any such debt, obligation or liability of the Company solely by reason of being a Member (or an Affiliate of a Member).

 

	
4.

	
RESTRICTIONS ON TRANSFER OF SHARES

	
4.1

	
Restriction on Sale

The Members shall not transfer or pledge any or all of their membership interest in the Company within the first 5 (five) years after the commercial registration of the Company without the prior consent of the other Members, which consent shall not be unreasonably withheld.

	
4.2

	
Priority to Purchase a Member's Interest

Upon the lapse of the term specified in Clause 4.1, should any Member (hereinafter called the "Selling Member") desire to sell all or any part of its interest in the Company (the "Offered Interest"), then the Selling Member shall grant the other Member(s) the priority right to purchase the Offered Interest in proportion to their membership interest in the Company and at the then current market value specified by an independent auditor mutually selected by the Members. In the event that the other Member(s) does (do) not exercise such right of priority within 30 (thirty) days of the date on which the value was set and advised to the other Member(s), then the Selling Member shall have the right to sell the Offered Interest to any third party at the same price and on the same terms offered to the other Members, provided that such third party abides by Clause 4.3 below. The procedures set by the Companies Law in relation to the sale of a Member's interest shall govern any sale of a Member's interest in the Company.

9

 

	
4.3

	
Obligation of Transferee To Become Party Hereto

No sale or pledge of a Member's interest in the Company may be made to any third party unless such third party enters into an agreement with the remaining Members, in form and substance satisfactory to the remaining Members, pursuant to which the third party shall become a party hereto and agrees to be bound by the terms and conditions hereof. The remaining Members shall not unreasonably withhold their acceptance of such agreement.

	
5.

	
MEETINGS OF MEMBERS

Meetings of the Members of the Company shall be held in  the manner and at the times prescribed by the Companies Law.

	
6.

	
MANAGEMENT, BOARD OF DIRECTORS AND OFFICERS OF THE COMPANY

	
6.1

	
The Business of the Company will be undertaken at the direction of the Board of Directors.

	
6.2

	
Election

	
i.

	
The powers of the Company shall be exercised by or under the authority of, and the Business and affairs of the Company shall be managed under the directions of, a Board of Directors as described herein. The Board of Directors shall have complete and exclusive control of the business and affairs of the Company in compliance with the Applicable Law. The Board of Directors shall possess all power, on behalf of the Company, to do or authorize the Company or to direct the officers, employees and agents of the Company, to do all things necessary or convenient to carry out the business and affairs of the Company.

	
ii.

	
The Board of Directors shall consist of 5 (five) Directors, of whom 4 (four) Directors shall be designated by Tharawat and 1 (one) Director shall be designated by Viocare.

	
iii.

	
Each Party shall appoint its representatives on the Board of Directors by written instrument to the Company and it may from time to time replace or change its representatives in the same manner. The Directors shall not receive any compensation for their participation on the Board of Directors  or for attendance at any meeting thereof and shall be compensated solely by the Member appointing such Director.

	
iv.

	
The Board of Directors may appoint, reappoint and remove officers of the Company who, to the extent provided by the Board of Directors, may have and may exercise all the powers and authority of the Board of Directors in the conduct of the business and affairs of the Company, subject in all cases to such limitations as the Board of Directors may reasonably impose or as are otherwise set forth in this Agreement. The officers of the Company shall consist of a general manager and  may consist of a treasurer, a secretary, or other officers or agents as may be elected or appointed by the majority of the Board of Directors.

10

 

	
6.3

	
Actions Requiring Unanimous Vote Board (Reserved Matters):

	
i.

	
The Quorum for a meeting of the Board of Directors of the Company shall comprise of a minimum of three Directors.

	
ii.

	
Without prejudice to the Members' authorities as set forth in the Companies Law, the Articles of Association and in this Agreement, the Board of Directors shall not take the following actions ("Reserved Matters" and each a "Reserved Matter") without a unanimous vote in respect of the Company:

	
a.

	
alter its name;

	
b.

	
alter this Joint Venture Agreement;

	
c.

	
pass any resolution for winding it up;

	
d.

	
apply for the appointment of a receiver or an administrator over its assets;

	
e.

	
reorganize or change the nature or scope of its business;

	
f.

	
dispose of the whole or any substantial part of its undertaking or assets or merge with any other company;

	
g.

	
dispose of any of its assets outside the ordinary course of business;

	
h.

	
Approve or effectuate any non-recourse facilities, or any refinancing relating thereto, or any other financing with a total amount equivalent to or exceeding

$1,000,000 (One Million US Dollars) in total, whether provided at once or on several installments the total amount of which accumulate to 1,000,000 (One Million US Dollars) or more (excluding trade debt, accounts payable or equipment leases incurred in the ordinary course of the Company's business), execution of any promissory/order note, evidence of indebtedness, guaranty or the like not authorized and duly approved in an operating budget, or approval or effectuation of the prepayment, modification or refinancing of any such financing;

	
i.

	
Prosecution, waiver, settlement or compromise of any claims or causes of action of the Company against any third party (or parties), or agreement on behalf of the Company to pay any disputed claims or causes of action against the Company to the extent each claim exceeds[$100,000 (One Hundred Thousand US Dollars);

	
j.

	
Merging the Company with any entity;

	
k.

	
Approval of any actions which may result in or effectuate a liquidity event for the Company, including the sale of the Company, the properties or substantially all of the Company's assets;

11

	
l.

	
Listing the Company for a private or public sale;

	
iii.

	
Safe for the Reserved Matters, the decisions of the Board of Directors shall be resolved by a simple majority of the Directors present in any Board of Directors' meeting, provided that at quorum for the Board of Directors' meetings is met at all times.

	
iv.

	
The Parties confirm and acknowledge that the incorporation of the Company and the execution of this Agreement depends entirely on the knowhow and technical expertise of Viocare. Accordingly, Viocare shall provide certain management and technical services to the benefit of the Company as further detailed in the Management Services Agreement which is annexed to this Agreement as Annex III (the "Management Services Agreement").

	
v.

	
in consideration for the services provided by Viocare to the Company under the Management Services Agreement, Viocare shall be entitled to 5% (five percent) of each country Clinic's Net Profit, subject to Clause 6.3vi below, as a Management Fee (the "Management Fee"). The Management Fee shall only become payable to Viocare at the end of any profitable fiscal year of the Company per country. For the avoidance of doubt, if the Company in a country is not in profit during any fiscal year then Viocare will not be entitled to the Management Fee for the Clinics of this country.

	
vi.

	
Moreover, the Parties confirm and acknowledge that the Management Fee is only payable to Viocare upon the fulfillment of the key performance Indicators as detailed in the Business Plan and other terms and conditions agreed upon in the Management Services Agreement.

	
vii.

	
Viocare shall, as part of the management services to be provided to the Company under the Management Services Agreement, supply, at cost basis, the Company with all equipment, products and supplies which are necessary for the Business of the Company. The Company shall reimburse Viocare with the costs of equipment, products, supplies and actual expenses.

	
viii.

	
Viocare shall, as part of the management services to be provided to the Company under the Management Services Agreement, grant the Company a royalty free exclusivity and non-transferable right to use all Viocare's Intellectual Property in the Territory during the term of the Agreement.

	
6.4

	
Removal or Vacancy

Each Party shall have the right to remove each or any of its respective designated Directors at any time, with or without cause. In the event of the death, disability, resignation or removal of any Director, the Party that had designated such Director shall have the right to designate his successor.

12

	
6.5

	
Chairman

The Board of Directors shall elect a chairman from the Directors, provided however that the charming must be at all times a Director who is designated by Tharawat.

	
6.6

	
Meetings

The meetings of the Board of Directors shall be held in the manner and at the times agreed by the Directors provided, however, that the Board of Directors shall meet at least 4 (four times) during each fiscal year. At every Board meeting, the presence of three (3) Directors shall constitute a quorum. Except for the Reserved Matters and as otherwise expressly provided in this Agreement, the resolutions and all Company Business shall be made by the simple majority of the Board of Directors. In the event the votes for a resolution are tied, the chairman shall have a casting vote.

	
7.

	
REPRESENTATIONS, WARRANTIES AND COVENANTS

Each Party ("Representing Party") hereby represents, warrants and covenants to the other Party

the following:

	
i.

	
Organization and Existence. Representing Party is duly organized, validly existing and in good standing under the laws pursuant to which it is registered. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby, will violate any provision of Representing Party's constitutive documents or any agreement to which Representing Party is a party or by which it is bound.

	
ii.

	
Power and Authority. Representing Party has the full legal right, power and authority required to enter into this Agreement and to perform fully its obligations hereunder, and that the execution, delivery and performance of this Agreement have been duly authorized by all necessary corporate action of Representing Party. This Agreement constitutes the legal, valid and binding obligation of Representing Party, enforceable against Representing Party in accordance with its terms.

	
iii.

	
Litigation. There is no suit, action, arbitration or governmental proceeding pending or threatened against the Representing Party, and there is not outstanding against the Representing Party any judgment, decree, injunction, rule or order of any court, governmental body or arbitrator, which, in any such case, could have a material adverse effect on the business, finances or operations of the Representing Party or on the ability of the Representing Party to perform its obligations under this Agreement.

	
iv.

	
Full Disclosure. All documents and information furnished by or on behalf of the Representing Party to the other Parties in connection with the Representing Party, this Agreement and the transactions contemplated hereby do not contain any untrue statement of a material fact and do not omit to state any material fact.

	
v.

	
Legal Compliance. The Representing Party shall (i) not cause the other Party or the Company to violate the Applicable Law; and (ii) reasonably cooperate with the other Party and the Company in ensuring compliance with all Applicable Laws.

13

 

	
vi.

	
Indemnification. The Company will be indemnified by the Parties and their respective associated persons for any damages caused by their failure to comply with the representations and warranties in this Clause. The Parties shall indemnify and hold the Company harmless against any losses, claims, judgments and investigation costs incurred by the Company as a result of a Party's breach of the provisions contained in this Agreement.

	
8.

	
FISCAL MATTERS

	
8.1

	
Economic Effect, Revenues and Expenses Prior to Commercial Registration:

Safe for expense and costs incurred by the Parties for the purposes of negotiating and executing this Agreement, expenses incurred by the Parties for and on behalf of the Company for the purposes of registering the Company duly, after the date of signature of this Agreement and prior to the commercial registration of the Company, shall be billed to and be an expense of the Company up to actual expenses

	
8.2

	
Expenses After Commercial Registration:

After commercial registration, expenses reasonably incurred by the Parties for and on behalf of the Company shall be billed to and be an expense of the Company up to approved financial budget

	
8.3

	
Bank Accounts

	
i.

	
The Company shall open and maintain one or more bank accounts with such banks inside or outside the Kingdom of Saudi Arabia as shall be acceptable to the Board of Directors.

	
ii.

	
All withdrawals or payments from the Company's bank accounts or instructions relating to the operation thereof shall be as determined by the majority of the Board of Directors.

	
iii.

	
Any funds that are temporarily not required to be disbursed may be invested in financial institutions or securities approved by the majority of the Board of Directors but not in any security issued by a Party or any of its Affiliates.

	
8.4

	
Books of Account

	
i.

	
The administrative member shall be Tharawat (the "Administrative Member") and shall establish in the name and on behalf of the Company bank accounts in accordance with Clause 8.3i to receive/disburse Company funds. The Company bank accounts shall be operated and maintained in accordance with the instructions of the Board of Directors.

	
ii.

	
The Company's books of account shall be kept and maintained by the Company in the English language. Books of account shall be maintained in accordance with the standards of the Saudi Organization for Certified Public Accountants. Such books of account shall be audited annually by independent auditors appointed by the members on the recommendation of the Board of Directors. The books of account shall be kept at the Company's head office or such other place as the majority of the Board of Directors may determine to be appropriate. Each Member and/or its duly authorized representative(s) shall have access to the complete books of accounts of the Company and supporting documentation at all reasonable times during normal business hours of the Company.

14

 

	
9.

	
CONFIDENTIALITY

	
9.1

	
Company Confidential Information

The Parties hereto hereby acknowledge that all trade, business and technical information regarding the Company as may exist from time to time (and which came into the possession of a Party hereto prior to the date hereof or which may come into the possession of a Party hereto after the date hereof), including, inter alia, prices, marketing, sales and other data, technology, trade secrets, the identity and requirements of customers and prospective customers of the Company, the Company's methods of doing business and all information relating to the Business, operations and marketing operations of the Company ("Company Confidential Information"), constitute valuable confidential information of the Company. The Parties hereto, or any of their Affiliates, employees or agents, shall not use or discuss any Company Confidential Information for any purpose, except on behalf of the Company and then only to such extent as may be authorized by the Company, or disclose any Company Confidential Information to any other person, firm or corporation, except to the extent required in carrying out, on behalf of the Company, their functions as Members or Directors of the Company.

	
9.2

	
Member Confidential Information

Each Party agrees that with respect to any confidential:

	
i.

	
operating, economic or business information or data received (prior to or after the date hereof) by that Party or its Affiliates, directly or indirectly, from the other Party or its Affiliates, and

	
ii.

	
technical, scientific or engineering information or data disclosed (prior to or after the date hereof) by that Party or any of its Affiliates to the other Party or any of its Affiliates in written or machine readable form and identified as confidential

(collectively, "Member Confidential Information"), it shall take such reasonable steps, and shall cause all of its Affiliates to take such steps, as may be required, to prevent the duplication, disclosure or unauthorized use thereof anywhere in the world, except with the prior written approval of the furnishing Party.

All information and data provided by Viocare or any of its Affiliates to Tharawat up until the date of signing this Agreement mutually agreed and considered as confidential and governed by the provisions of sub-clauses 9.1 and 9.2 herein and the non-disclosure agreement dated May 31st, 2016 signed between Tharawat and HcI Viocare Technologies Ltd of Scotland.

 

 

15

	
9.3

	
Exceptions

The obligations of confidentiality set forth in Clause 9.1 above with respect to Company Confidential Information and Clause 9.2 above with respect to Member Confidential Information shall not apply if the Party that wishes to disclose such information without violating such Clauses 9.1 or 9.2, as the case may be, can document that such information or data:

	
i.

	
is public information or otherwise generally available to the public through no act or fault of the disclosing Party;

	
ii.

	
was, prior to disclosure to such Party by the furnishing Party, already in the possession of the disclosing Party and was not obtained by such Party under a prior obligation of confidentiality from any Party to this Agreement;

	
iii.

	
was or hereafter is rightfully received by the disclosing Party from a third party who did not receive the same directly or indirectly from a Party to this Agreement or otherwise in violation of any confidentiality agreement;

	
iv.

	
is hereafter independently developed by the disclosing Party's employees who have not

had access to such information and data from the other Party; or

	
v.

	
is required to be divulged by a government or court order (in which case, the disclosing Party shall notify the other Party in advance if feasible and limit such disclosure to only that information or data specifically requested by the government or the court order).

	
9.4

	
Survival

This Clause 9 (Confidentiality) shall remain in full force and effect between the Parties and shall survive the termination of this Agreement.

	
10.

	
NON-COMPETITION

	
i.

	
Without prejudice to Clauses 10.iii and 10.iv, as of the Effective Date no Member shall independently or with a third party pursue a business opportunity in the Territory in competition with the Company or which might be similar to the Business so long as the Company is operating and as long as that Member owns an interest in the Company and for a period of three (3) years following the termination of the Agreement as set forth in Clause 10.ii below.

	
ii.

	
In the event this Agreement is terminated for any reason other than the breach of Viocare or Tharawat, the provisions of Clause 10.i shall apply to the Parties as of the date of termination the Agreement, and the Parties undertake not to be active, independently or with/through a third party or an affiliated company, in the field of prosthetic and orthotic rehabilitation and limb fitting market for a period of three (3) years following the termination of the Agreement as set forth herein.

	
iii.

	
Notwithstanding anything to the contrary in their Agreement, if this Agreement is terminated as a result of the breach of Viocare, the non-compete provisions set forth in Clause 10.i and 10.ii shall not apply on Tharawat and shall only be applicable on Viocare.

16

 

	
iv.

	
Notwithstanding anything to the contrary in their Agreement, if this Agreement is terminated as a result of the breach of Tharawat, the non-compete provisions set forth in Clause 10.i and 10.ii shall not apply on Viocare and shall only be applicable on Tharawat.

	
11.

	
TERM & TERMINATION

	
11.1

	
Effective Date

	
i.

	
This Agreement shall come into effect on the later of (a) Effective Date or (b) the date on which all of the conditions set forth in Clause 11.1ii below are satisfied. This Agreement shall remain in full force and effect unless earlier terminated as set out in this Clause 11 (Term & Termination).

	
ii.

	
Notwithstanding anything to the contrary in this Agreement, this Agreement will not come into effect and become binding upon its Parties unless all of the following conditions, which shall constitute conditions precedent to the execution of this Agreement, are fulfilled:

	
a.

	
The written agreement of the Parties on the Business Plan,

	
b.

	
The agreement of the Parties on the Management Services Agreement, and the execution of the same by the Parties, and

	
c.

	
The written agreement of the Parties on the Articles of Association.

	
iii.

	
In the case any the above conditions precedent is not fulfilled within a period of (90 days) as of the Effective Date, this Agreement shall be considered null, void and harmless without any liability or responsibility on any of the Parties.

	
11.2

	
Automatic Termination

This Agreement shall terminate forthwith and the Company wound up (if incorporated duly at the time, without notice, upon the occurrence of any of the following events:

	
i.

	
Mutual written agreement of all of the Parties;

	
ii.

	
The dissolution, liquidation or bankruptcy of the Company, or the marshaling or assignment of its assets for the benefit of creditors or other similar events; or

	
iii.

	
The violation of any Applicable Law by the Company or  a Member with regard to Company Business which violation cannot be cured (or a plan put in place to cure) to the satisfaction of all other Members within 10 (ten) days of the Company receiving notification of such violation.

	
11.3

	
Termination by Either Party

Subject to Clause 11.4 below, a Party may terminate this Agreement by simple written notice to the other Party upon the bankruptcy of the other Member, the marshalling or assignment of its assets for the benefit of creditors or other similar events.

17

 

	
11.4

	
Consequences of Termination as a Result of a Member's Bankruptcy

In the event that any Party exercises its right to terminate this Agreement as a result of the bankruptcy of any Member, the marshaling or assignment of its assets for the benefit of creditors or other similar events (the "Bankrupt Member"), the remaining Members in the Company shall have the right to purchase, pro rata their interest in the Company, the interest of the Bankrupt Member in the Company at such interest's current market value as determined by a "big four" audit firm acceptable to the remaining Members.

	
11.5

	
Consequences of Termination

Upon the termination of this Agreement for any reason:

	
i.

	
any provision of this Agreement which is expressed to continue in force after termination shall continue in full force and effect; and

	
ii.

	
subject to the terms of this Clause 11 (Term & Termination), and except in respect of any accrued rights, the Parties shall not be under any further obligation to each other.

	
12.

	
INDEMNIFICATION AND LIMITATIONS OF LIABILITY

	
12.1

	
Company Indemnity

To the maximum extent permitted by Applicable Law, the Company shall indemnify, defend and hold harmless all Members and their respective Affiliates, directors, officers, the employees and agents of the Company, the Administrative Member and the Tax Matters Partner (each, an "Indemnified Party") from and against any and all losses, claims, demands, costs, damages, liabilities, joint and several, expenses of any nature (including attorneys' fees and disbursements), judgments, fines, settlements, penalties, and other expenses actually and reasonably incurred by the Indemnified Party in connection with any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative, or investigative, in which the Indemnified Party may be involved, or threatened to be involved, as a party or otherwise, by reason of the fact that the Indemnified Party is or was a Member or Director or is or was an employee or  agent of the Company, including  Affiliates of the foregoing, arising  out of or incidental to the activities of the Company, provided, (a) the Indemnified Party's conduct did not constitute willful misconduct or recklessness, (b) the action  is  not based  on breach of this Agreement, (c) the Indemnified Party acted in good faith and in a manner the Indemnified Party reasonably believed to be in, or not opposed to, the best interests of the Company and within the scope of such Indemnified Party's authority, and (d) with respect to a criminal action or proceeding, the Indemnified Party had no reasonable cause to believe the Indemnified Party's conduct was unlawful. The termination of any action, suit, or proceeding by judgment, order, settlement, or upon a plea of no contest or its equivalent, shall not, in and of itself, create a presumption or otherwise constitute evidence that the Indemnified Party acted in a manner contrary to that specified above.

18

	
12.2

	
Indemnification by Members

Subject to the limitation of damages and liabilities (Clause 12.3), each Member shall indemnify the Company and the other Members individually in respect of and hold the Company and the other Members individually harmless against all losses, claims, demands, liabilities and cost of any nature (including reasonable attorney fees) incurred or suffered by the Company or the other Members individually resulting from or related to any facts attributable to a Member, which if true, would constitute a breach of, inaccuracy in, or failure to perform by such Member of any covenants or representations of that Member contained in this Agreement.

	
12.3

	
Limitation of Liabilities

In no event shall any Party be liable to the other Party under the terms and conditions of this Agreement for any claims or demands exceeding actual damages, including loss of profits, or any incidental, special, exemplary, punitive, or consequential damages.

	
13.

	
INSURANCE

	
13.1

	
Insurance for the Company

Subject to  Clause 13.4 below, the Company shall be responsible for obtaining  quotes and placing, as approved by the Board of Directors, insurance for the Company.

	
13.2

	
Insurance if Member is a Subcontractor to the Company

When performing services as a subcontractor to the Company, each Member shall maintain insurance coverage sufficient to meet the requirements of the prime contract under which the subcontract services by the Member to the Company are being performed. The subcontractor Member shall be responsible for all insurance and deductible costs associated with its insurance and shall be solely responsible for any uninsured losses arising out of its subcontract services. The subcontractor Member shall add the Company and other Member as additional insured's to the applicable insurance policies with respect to the services being performed for the Company.

	
13.3

	
Contract Insurance

Any losses, expenses (including deductible costs) or damages for insurance claims not covered by the insurance required herein shall be allocated, if reasonably possible, directly to the contract under which the losses, expenses or damages occurred.

	
13.4

	
Insurance by the Company

The Company shall obtain and maintain in effect such policies of insurance with terms and limits of coverage as the Board of Directors deems appropriate, including, (i) any insurance required by contracts entered into by the Company; (ii) any insurance required by Applicable Law; and

(iii) such additional Company insurance as the Board of Directors may determine is appropriate and is customary and ordinary for an organization of this size. Company placed insurance policy(ies) shall provide that each Member shall be an additional insured on these policies. The cost of insurance purchased by the Company is to be borne by the Company.

19

	
14.

	
TAX MATTERS

The Board of Directors shall cause the Company to prepare, submit to the Members for approval and thereafter file all required tax and Zakat returns in compliance with the Applicable Law for each tax year of the Company.

	
15.

	
CONSEQUENCES OF BREACH

	
15.1

	
Consequences of Breach

Subject to Clause 15.2, if a Member (the "Breaching Member") commits a material breach of any of the provisions of this Agreement and, if the breach is capable of remedy, fails to remedy it within 30 (thirty) days ("Remedy Period") after being given a written notice containing full particulars of the breach and requiring it to be remedied then, the other Member(s) (the "Non- Breaching Member(s)") shall be entitled, at any time within 30 (thirty) days after the expiration of the Remedy Period to give final written notice to the Breaching Member either:

	
i.

	
requiring it to sell its interest in the Company at such interest's current market value as determined by a "big four" audit firm acceptable to the Non-Breaching Member(s) [LESS 10%]; or

	
ii.

	
requiring it to purchase the Non-breaching Member(s) interests in the Company at such interests' current market value as determined by an independent auditor acceptable to the Non-Breaching Member(s) [PLUS 10%]; or

	
iii.

	
terminating this Agreement and requiring the Company to be wound up, in which event the Parties shall forthwith take all steps necessary to do so.

	
15.2

	
Capability of Remedy

For the purposes of Clause 15.1, a breach shall be considered capable of remedy if the Party in breach can comply with the provision in question in all respects other than as to the time of performance (provided that time of performance is not of the essence).

	
15.3

	
Remedies Non-exclusive

The rights given by this Clause 15 (Consequences of Breach) shall not prejudice any other right or remedy of the Non-Breaching Member(s) under this Agreement or otherwise.

	
16.

	
DISPUTE RESOLUTION

	
16.1

	
Subject to Clause 16.2 below, any dispute, controversy or claim arising out of or in connection with the present Agreement or the breach, termination or invalidity thereof shall be finally settled and resolved by arbitration under the LCIA Rules, which Rules are deemed to be incorporated by reference into this clause. The number of arbitrators shall be one, and the seat, or legal place, of arbitration shall be London, United Kingdom.

	
16.2

	
If a disagreement or dispute shall arise between the Members related to or arising out of this Agreement (including any disagreement or dispute regarding operations of the Company), the  Board of Directors shall immediately refer the issue to those chief executive officers of the Members for decision. If such  executives reach  unanimous consent  on  a resolution  to  the dispute, their decision shall bind the Members and the Company. In the event the chief executive officers of the Members are unable unanimously to resolve the dispute within 5 (five) working days or such longer period as such executives may establish, then the matter may be submitted to arbitration pursuant to Clause 16.1 above. However, pending the outcome of the arbitration, the Chairman of the Board of Directors may render a decision in his sole discretion if and as necessary in order to prevent interruption or delay in the Company Business.

20

	
17.

	
GENERAL PROVISIONS

	
17.1

	
Force Majeure

In the event of any failure or delay in the performance of this Agreement by any Party due to war, civil commotion, labor  dispute, fire, natural  disaster,  government embargoes or trade restrictions, or any other cause whatsoever beyond the reasonable control of such Party (each hereinafter called a "Force Majeure Event"), the Party so affected shall not be liable for such failure or delay or for the results thereof. Upon the occurrence of any Force Majeure Event, the Party being affected shall, without delay, notify in writing the other Party of the nature and effects of such Force Majeure Event, and the Parties shall meet and discuss appropriate or necessary actions to be taken to deal with the situation.

	
17.2

	
Notices

	
i.

	
Any notice, request and other correspondence pursuant to or in connection with this Agreement shall be in the English language and shall be sent to any Party by facsimile, registered mail or personal/courier delivery at its address as specified at the beginning of this Agreement or at such other address as shall be notified pursuant to Clause 17.2iii below.

	
ii.

	
Any notice, request or other correspondence pursuant to or in connection with this Agreement shall be deemed validly received by the addressee upon the expiration of [48 (forty-eight) hours] after transmission in case of facsimile, on the [3rd (third) day] after mailing in the case of registered mail, or immediately upon delivery in case of personal/courier delivery.

	
iii.

	
Any Party shall, upon a change of its address, notify the other Party of such change in accordance with the procedures provided for in this Clause 17.2.

	
17.3

	
Governing Law

This Agreement shall be governed by and construed in accordance with the law of England and Wales.

	
17.4

	
Assignment

This Agreement shall inure to the benefit of and be binding upon the respective Parties and their successors and permitted assigns and transferees hereunder. Except as expressly provided herein, none of the Parties shall assign or transfer all or any part of this Agreement or any of its rights and/or obligations hereunder to any third party without the prior written consent of the other Party.

21

 

	
17.5

	
No Implied Waivers

The failure of any Party at any time to require performance by the other Party of any provision hereof shall in no way affect the right of such Party to require such performance at any time thereafter nor shall the waiver by any Party of a breach of any provision hereof constitute a waiver of any succeeding breach of the same or any other provision or constitute a waiver of the provision itself.

	
17.6

	
Liability Limitation

Notwithstanding any other provision of this Agreement, no Party shall in any circumstances be liable to the other Party for special, incidental, consequential, exemplary or punitive damages, or for goodwill, loss of profits, loss of data or loss of use damages.

	
17.7

	
Counterparts

This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same agreement.

	
17.8

	
Severability

If any provision of this Agreement is held to be invalid under the governing law set out in Clause 17.3, the same shall not affect the remaining provisions of this Agreement, which shall continue in full force and effect. [If a provision of this Agreement is held invalid, the Parties shall negotiate and mutually agree on a legal provision that, to the greatest extent possible, achieves the Parties' original commercial intention of the invalid provision.

	
17.9

	
Independent Parties

Each Party is and shall be considered for all purposes to be an independent entity in relation to the other Party or Parties under this Agreement and shall not hold itself out as a partner, employee or agent of any other Party. As an independent entity, each Party is solely responsible for its employees and agents. Unless explicitly stated in writing by the Parties, (i) nothing herein shall be construed to grant any Party authority to bind any other Party, or to create or assume, directly or indirectly, any express or implied obligation on behalf of any other Party; (ii) no Party shall incur any liability whatsoever on behalf of any other Party, nor in any way pledge the credit of any other Party; and (iii) no Party has any authority whatsoever under this Agreement to commence any legal proceeding in the name of or on behalf of any other Party.

	
17.10

	
Entire Agreement; Amendments

 

This Agreement, including all of its Annexes, sets forth the entire agreement and understanding of the Parties relating to the subject matter contained herein and supersedes all prior discussions among the Parties, and none of the Parties shall be bound by any previous agreements, negotiations, commitments or writing relating to the subject matter contained herein except as expressly provided in this Agreement. This Agreement may not be amended or supplemented in any manner except by an instrument in writing signed by a duly authorized representative of each of the Parties.

(SIGNATURES ON FOLLOWING PAGE(S))

22

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their duly authorized representatives on the date specified above.

	 	
Tharawat

	 	
Viocare

	 	 	 	 
	
By

	 /s/Ammer Abdulwahab Alselham	
By

	 /s/Sotirios Leontaritis
	
Name

	
Ammer Abdulwahab Alselham

	
Name

	
Sotirios Leontaritis

	
Title

	
President & Chief Executive Officer

	
Title

	
Director

23

ANNEX I ARTICLES OF ASSOCIATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24

ANNEX II BUSINESS PLAN

	
1.

	
With reference to the Territory in 1.1 and the Non-competition clause in 10, the Business Plan should forecast the development of Clinics with the following capacity p.a. (as per ISPO standards) to capture the market potential

	
i.

	
1st year: a Clinic with a capacity of at least 300 amputees in the KSA.

2nd- 10th year: Clinics with capacity totaling of at least 10,000 amputees in the Territory.

	
2.

	
Key performance indicators for the shareholders

The following key performance indicators shall be considered as part of the Business Plan

	
i.

	
Pre operationalization of first Clinic

Tharawat is expected to get all the regulatory approval within a period of approximately 6 -9 months. During this period, Viocare needs to support Tharawat by honoring the below responsibilities

	
·

	
Assist in any documentation/ procedural requirements that might be needed or required during obtaining the licensing for the Clinics

	
·

	
Providing/ modifying the lay out as per international standards/ Viocare benchmarks

	
·

	
Assist in any modification or redesigning of all company buildings/ Clinics which might be requirement by governmental regulatory agencies

	
ii.

	
Post the regulatory approval, both the parties are obliged to fulfill the below responsibilities within the specified duration

	
·

	
Tharawat

	
Activity

	
Duration

	
Procuring Inventory, furniture, machinery and equipment

	
3 months

	
Visa processing for CPOs

	
Approximate 1.5 months

	
Hiring the technicians locally*

	
2 months

	
Certifications for the facilities*

	
3 months

	
·

	
Viocare

25

	
Activity

	
Duration

	
Providing all approved/ qualified list of suppliers for the business

	
45 days

	
Assist in finalizing any contractual agreement with suppliers

	
45 days

	
Assist with furniture requirements specifications by providing the list as well as the name of the suppliers

	
45 days

	
Assist in interviewing and training for the local hires*

	
6 months including training

	
Interviewing and providing qualified staff (CPO and others) as per ISPO standards

	
6 months

	
Certifications for the facilities*

	
3 months

	
Providing any other technical assistance might be required by the Company

	
as long  Viocare is a partner

	
Support/ guidance in marketing activities and branding guidelines

	
as long  Viocare is a partner

* Tasks that are done in parallel with co-ordination between the two Parties

Note: Refer to appendix for details on the interdependencies among the identified activities.

	
iii.

	
Post operationalization of first Clinic

	
2.1

	
Tharawat

	
i.

	
Committed to all aspect of the Business Plan

	
2.2

	
Viocare

	
a)

	
Provide all the support as mentioned in section 1.2 whenever a new clinic is opened .

	
b)

	
Viocare needs to supply qualified CPOs as per the distribution mentioned below

26

	
Year

	
2018

	
2019

	
2020

	
2021

	
2022

	
2023

	
2024

	
2025

	
2026

	
2027

	
Number of CPOs

	
1

	
3

	
4

	
4

	
4

	
4

	
4

	
4

	
3

	
3

Earn out clause

Viocare is entitled to the additional 10% equity stake subject to the fulfillment of KPIs as mentioned in section 1 and section 2. The stake realization will be in a manner defined below

	
1.

	
5% stake to be realized once Tharawat recovers the loan amount completely and the JV remains cash positive post the repayment

	
2.

	
Next 2% will be realized once the JV reaches 5000 Client

	
3.

	
Next 3% will be realized once the JV reaches 7000 Clients

27

 

 

 

 

ANNEX III MANAGEMENT SERVICES AGREEMENT

 

 

 

 

 

 

 

28Exhibit

EMPLOYMENT AGREEMENT

This Employment Agreement, dated as of July 28, 2017 (the “Agreement”), is made between Kindred Biosciences, Inc. (the “Company” or “Kindred”), and Wendy Wee (“Executive”).
WHEREAS, the Company and the Executive are parties to a letter of employment dated as of December 10, 2014, as amended by Amendment No. 1 to Letter of Employment dated as of May 19, 2017 (jointly, the “Employment Letter”); and 
WHEREAS, this Agreement amends and restates the employment relationship previously provided under the Employment Letter.
NOW, THEREFORE, in consideration of the foregoing and other consideration, the receipt and sufficiency of which hereby are acknowledged, the Company and the Executive hereby agree the Employment Letter is hereby amended and restated as follows:

1.    Employment.

(a)    Title and Duties. The Company will employ Executive, and Executive will be employed by the Company, as Chief Financial Officer (“CFO”), reporting to the CEO of the Company (“CEO”). Executive will have the responsibilities, duties and authority commensurate with said position.

(b)    Devotion to Duties. For so long as Executive is employed hereunder, Executive will faithfully execute the responsibilities of the Chief Financial Officer position, as may be defined by the CEO from time to time.

2.    Term of Employment.

(a)    Term. The Executive’s employment by the Company under this Agreement shall commence on July 28, 2017 (the “Commencement Date). The Executive is employed on an at-will basis and, subject to the provisions of Section 4, either the Executive or the Company may terminate the employment relationship at any time for any reason. The duration of Executive’s employment is hereafter referred to as the “Term.”

(b)    Termination. Notwithstanding anything else contained in this Agreement, Executive’s employment hereunder will terminate upon the earliest to occur of the following:

(i)    Death. Immediately upon Executive’s death;

(ii)   Disability. Immediately upon Executive’s disability. For purposes of this Agreement, “Disability” shall mean Executive’s inability, in good faith judgment of the Company, to further perform Executive’s duties and responsibilities as contemplated herein because Executive’s physical or mental health has become so impaired as to make such performance impossible or impractical, which inability continues for one hundred twenty (120) days or more within any twelve (12) month period (either consecutively or cumulatively).

(iii)   Termination by the Company.

(A)    If for Cause, then upon written notice to Executive by the Company to Executive that states that Executive’s employment is being terminated for Cause (as defined below) and sets forth the specific alleged Cause for termination and the factual basis supporting the alleged Cause, which termination shall be effective on the date of such notice or such later date as specified in writing by the CEO; or

(B)    If without Cause, then upon written notice by the Company to Executive that Executive’s employment is being terminated without Cause, which termination shall be effective on the date of such notice or such later date as specified in writing by the CEO; or

(iv)    Termination by Executive.

(A)    If for Good Reason (as defined below), then upon written notice by Executive to the Company that states that Executive is terminating Executive’s employment for Good Reason (as defined below) and that sets forth the specific alleged Good Reason for termination and the factual basis supporting the alleged Good Reason, which termination shall be effective thirty (30) days after the date of such notice; provided that if the Company has cured the circumstances giving rise to the Good Reason by such date, then such termination shall not be effective; or

(B)    If without Good Reason, then upon written notice by Executive to the Company that Executive is terminating Executive’s employment, which termination shall be effective immediately after the date of such notice.

Notwithstanding anything in this Section 2(b), the Company may at any point terminate Executive’s employment for Cause prior to the effective date of any other termination contemplated hereunder if such Cause exists.

(c)    Definition of “Cause”. For purposes of this Agreement, “Cause” shall mean that either Executive has (i) been grossly negligent in the performance of Executive’s duties to the Company; (ii) been convicted of, or pleaded guilty or nolo contendre, to a felony; (iii) committed a criminal act relating to the Executive’s employment or the Company involving, in the good faith judgment of the CEO, fraud, or theft, but excluding any conviction which results solely from Executive’s title or position with the Company and is not based on her personal conduct; (vi) breached any material provision of this Agreement or of any nondisclosure or non-competition agreement, between Executive and the Company, as all of the foregoing may be amended prospectively from time to time; (vii) intentionally breached a material provision of any code of conduct or ethics policy in effect at the Company, as all of the foregoing may be amended prospectively from time to time; or (viii) failed to perform any of her material obligations under this Agreement or failed to execute and perform any directions of the CEO.

(d)    Definition of “Good Reason”. For the purposes of this Agreement, “Good Reason” shall mean: without the Executive’s express written consent, a material reduction by the Company in the Executive’s total compensation as in effect on the date hereof or as the same may be increased from time to time.

(e)    Definition of “Change in Control”. “Change in Control” of Kindred Biosciences, Inc. as used in this Agreement shall mean the following, but only to the extent it is interpreted in a manner consistent with the meaning of “a change in the ownership or effective control of the corporation, or in the ownership of a substantial portion of the assets of the corporation” under Section 409A of Internal Revenue Code of 1986, as amended (“Code Section 409A”), and any successor statute, regulation and guidance thereto, and limited to the extent necessary so that it will not cause adverse tax consequences with respect to Code Section 409A: (i) a merger or consolidation of the Company whether or not approved by the CEO of Directors, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or the parent of such corporation) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity or parent of such corporation, as the case may be, outstanding immediately after such merger or consolidation; or (ii) the stockholders of the Company approve an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.

3.    Compensation.

(a)    Base Salary. While Executive is employed hereunder, the Company will pay Executive a base salary at the gross annualized rate of $297,754 (the “Base Salary”), paid in accordance with the Company’s usual payroll practices.  The Base Salary will be subject to review annually and may be adjusted upwards at the discretion of the CEO and the Board of Directors. The Company will deduct from each such installment any amounts required to be deducted or withheld under applicable law or under any employee benefit plan in which Executive participates.

(b)    Annual Bonus. Executive may be eligible to earn an Annual Bonus relating to each fiscal year, based on the achievement of individual and Company written goals established on an annual basis by the CEO.  If the Executive meets the applicable goals, then the Executive may be awarded a bonus for that year up to 30% of then-current Base Salary. Such bonus is wholly discretionary, and is dependent on several factors including the performance of the company. The Executive is not entitled to a bonus solely as result of meeting her goals.

(c)    Equity Compensation.

(i)   On the Commencement Date, the Company will grant Executive an option to purchase 50,000 shares of the Company’s common stock (the “Option”), with the  Option to (i) have an exercise price equal to the closing price of the Company’s common stock on The NASDAQ Capital Market on the Commencement Date, and (ii) vest in annual increments over the four (4) year period following the Commencement Date, with vesting to begin on the one (1) year anniversary of the Commencement Date, with 25% of the total number of shares vesting and 1/48th of the total number of shares vesting monthly thereafter until fully vested.

(ii)  Executive will be eligible to earn an additional option to purchase shares of the Company’s common stock on an annual basis. Based on the achievement of individual and Company goals, the Executive will be eligible to be awarded a stock option that year up to a number equivalent to 0.3% of the outstanding shares. The grant of any such additional option is wholly discretionary, and is dependent on several factors including the performance of the company. The Executive is not entitled to an additional option solely as result of meeting her goals.

(d)    Fringe Benefits. In addition to any benefits provided by this Agreement, Executive shall be entitled to participate in all benefits plans maintained by the Company from time to time. Executive understands that, except when prohibited by applicable law, the Company's benefit plans and fringe benefits may be amended, enlarged, diminished or terminated prospectively by the Company from time to time.

(e)    Vacation. Executive will be entitled to accrue up to twenty vacation days per year that Executive remains employed by the Company. Executive’s vacation may be carried over from one calendar year to the next in accordance with Company policy.

(f)    Reimbursement of Expenses. The Company will promptly reimburse Executive for all ordinary and reasonable out-of-pocket business expenses that are incurred by Executive in furtherance of the Company’s business.

4.    Severance Compensation.

(a)   Definition of Accrued Obligations. For purposes of this Agreement, “Accrued Obligations” means (i) the portion of Executive’s Base Salary that has accrued prior to any termination of Executive’s employment with the Company and has not yet been paid; (ii) to the extent required by law and the Company’s policy, an amount equal to the value of Executive’s accrued unused vacation days; and (iii) the amount of any expenses properly incurred by Executive on behalf of the Company prior to any such termination and not yet reimbursed. Executive's entitlement to any other compensation or benefit under any plan or policy of the Company, including but not limited to applicable option plans, shall be governed by and determined in accordance with the terms of such plans or policies, except as otherwise specified in this Agreement.

(b)    Termination By the Company for Cause, By the Executive Without Good Reason, or as a Result of Executive’s Disability or Death. If Executive’s employment hereunder is terminated either by the Company for Cause, by Executive without Good Reason, or if Executive’s employment terminates as a result of the Executive’s disability or death, the Company will pay the Accrued Obligations to Executive within 7 days following the effective date of such termination and shall have no further obligations to Executive.

(c)    Termination By the Company Without Cause, By Executive With Good Reason. If Executive’s employment hereunder is terminated by the Company without Cause, or by Executive with Good Reason, then:

(i)    The Company will pay the Accrued Obligations to Executive promptly following the effective date of such termination;

(ii)   The Company will pay Executive a total amount equal to twelve (12) months of Executive’s then current Base Salary, less applicable taxes and deductions; such payment to be made within 7 days of termination.

(iii)   The Company will continue to provide medical insurance coverage for Executive and Executive’s family at no cost to Executive for eighteen (18) months; provided, that the Company shall have no obligation to provide such coverage if Executive fails to elect COBRA benefits in a timely fashion or if Executive becomes eligible for medical coverage with another employer; and

(d)    Termination Following A Change In Control. If Executive’s employment is terminated within the twelve (12) month period following a Change in Control by the Company, then the Executive shall be entitled to receive the payments and benefits set forth in Section 4(c) above, and

(i)     Any options or restricted stock previously awarded to Executive shall vest and be immediately exercisable by the Executive.

(e)    Release of Claims/Resignation. The Company shall not be obligated to provide Executive any of the benefits or equity acceleration set forth in Section 4(c) until Executive has executed a separation agreement in a form mutually acceptable to the Company and the Executive, which shall include a releases of claims between the Company and the Executive, including provisions regarding mutual non-disparagement and confidentiality.

(f)    No Other Payments or Benefits Owing. The payments and benefits set forth in this Section 4 shall be the sole amounts owing to Executive as separation pay upon termination of Executive’s employment. Executive shall not be eligible for any other payments, including but not limited to additional Base Salary payments, bonuses, commissions, or other forms of compensation or benefits, except as may otherwise be set forth in this Agreement or other Company plan documents with respect to plans in which Executive is a participant.

5.    Property and Records. Upon termination of Executive’s employment, Executive will deliver to the Company any property of the Company which may be in Executive’s possession.

6.    General.

(a)    Notices. Except as otherwise specifically provided herein, any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given as indicated: (i) by personal delivery when delivered personally; (ii) by overnight courier upon written verification of receipt; (iii) by telecopy or facsimile transmission upon acknowledgment of receipt of electronic transmission; or (iv) by certified or registered mail, return receipt requested, upon verification of receipt. Notices to Executive shall be sent to the last known address in the Company's records or such other address as Executive may specify in writing. Notices to the Company shall be sent to the Company's Chairman or to such other Company representative as the Company may specify in writing.

(b)    Entire Agreement/Modification. This Agreement, together with the Confidentiality, Non-Competition and Intellectual Property Agreement attached hereto and the other agreements specifically referred to herein, embodies the entire agreement and understanding between the parties hereto and supersedes all prior oral or written agreements and understandings relating to the subject matter hereof. No statement, representation, warranty, covenant or agreement of any kind not expressly set forth in this Agreement (or in a subsequent written modification or amendment executed by the parties hereto) will affect, or be used to interpret, change or restrict, the express terms and provisions of this Agreement.

(c)    Waivers and Consents. The terms and provisions of this Agreement may be waived, or consent for the departure therefrom granted, only by written document executed by the party entitled to the benefits of such terms or provisions. No such waiver or consent will be deemed to be or will constitute a waiver or consent with respect to any other terms or provisions of this Agreement, whether or not similar. Each such waiver or consent will be effective only in the 

specific instance and for the purpose for which it was given, and will not constitute a continuing waiver or consent.

(d)    Assignment and Binding Effect. The Company may assign its rights and obligations hereunder to any person or entity that succeeds to all or substantially all of the Company’s business or that aspect of the Company’s business in which Executive is principally involved. Executive may not assign Executive’s rights and obligations under this Agreement without the prior written consent of the Company. This Agreement shall be binding upon Executive, Executive’s heirs, executors and administrators and the Company, and its successors and assigns, and shall inure to the benefit of Executive, Executive’s heirs, executors and administrators and the Company, and its successors and assigns.

(e)    Indemnification. The Company shall indemnify Executive to the fullest extent permitted by law against any expenses, judgments, fines, penalties and amounts paid in settlement in connection with any Company related proceeding in which Executive is involved.

(f)    Governing Law/Jury Waiver. This Agreement and the rights and obligations of the parties hereunder will be construed in accordance with and governed by the law of the state of California, without giving effect to conflict of law principles. Both the Executive and the Company hereby waive right to jury trial with respect to any claims related to this Agreement or to Executive’s employment with the Company.

(g)    Severability. The parties intend this Agreement to be enforced as written. However, should any provisions of this Agreement be held by a court of law to be illegal, invalid or unenforceable, the legality, validity and enforceability of the remaining provisions of this Agreement shall not be affected or impaired thereby.

7.    Counterparts. This Agreement may be executed in two or more counterparts, and by different parties hereto on separate counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. For all purposes a signature by fax shall be treated as an original.

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

	
		
	 
	The Company:
Kindred Biosciences, Inc.
By:   /s/ Richard Chin
Name: Richard Chin
Title: Chief Executive Officer

	 
	Employee:
Wendy Wee

By:   /s/ Wendy Wee
Name: Wendy Wee

EXHIBIT A
TERMINATION CERTIFICATION

This is to certify that I do not have in my possession, nor have I failed to return, any devices, records, data, notes, reports, proposals, lists, correspondence, specifications, drawings, blueprints, sketches, laboratory notebooks, flow charts, materials, equipment, other documents or property, or copies or reproductions of any aforementioned items belonging to Kindred Biosciences, Inc., a Delaware corporation, its subsidiaries, affiliates, successors or assigns (collectively, the “Company”).

I further certify that I have complied with all the terms of the Company’s Confidential Information and Invention Assignment Agreement signed by me, including the reporting of any Inventions (as defined therein), conceived or made by me (solely or jointly with others) covered by that agreement.

I further agree that, in compliance with the Confidential Information and Invention Assignment Agreement, I will preserve as confidential all trade secrets, confidential knowledge, data or other proprietary information relating to products, processes, know-how, designs, formulas, developmental or experimental work, computer programs, data bases, other original works of authorship, customer lists, business plans, financial information or other subject matter pertaining to any business of the Company or any of its employees, clients, consultants or licensees.

I further agree that for twelve (12) months from the date of this Certification, I shall not either directly or indirectly solicit, induce, recruit or encourage any of the Company’s employees or consultants to terminate their relationship with the Company, or attempt to solicit, induce, recruit, encourage or take away employees or consultants of the Company, either for myself or for any other person or entity.

Further, I agree that for twelve (12) months from the date of this Certification, I shall not use any Confidential Information of the Company to negatively influence any of the Company’s clients or customers from purchasing Company products or services or to solicit or influence or attempt to influence any client, customer or other person either directly or indirectly, to direct any purchase of products and/or services to any person, firm, corporation, institution or other entity in competition with the business of the Company.

Date:_______________________    

Employee:

Wendy Wee

_________________________

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