Exhibit 10.1

FORM OF

 

 

ASSET PURCHASE AGREEMENT

 

 

among

 

AS KEVELT,

OJSC PHARMSYNTHEZ

 

and

 

XENETIC BIOSCIENCES, INC.

and

LIPOXEN TECHNOLOGIES, LTD.

dated as of

 

NOVEMBER 13, 2015

 

 

 

 

 

 

TABLE OF CONTENTS

ARTICLE I DEFINITIONS 3     ARTICLE II PURCHASE AND SALE 12 Section 2.01.
Purchased Assets Schedule 12 Section 2.02. Excluded Assets 12 Section 2.03.
Assumed Liabilities 13 Section 2.04. Excluded Liabilities 13 Section 2.05.
Purchase Price 13 Section 2.06. Allocation of Purchase Price 14 Section 2.07.
Withholding Tax 14 Section 2.08. Third Party Consents; CRO Contracts; Retained
Virexxa Contracts 14       ARTICLE III CLOSING 16 Section 3.01. Closing 16
Section 3.02. Closing Deliverables 16       ARTICLE IV REPRESENTATIONS AND
WARRANTIES OF SELLER 18 Section 4.01. Organization and Qualification of Seller
18 Section 4.02. Authority of Seller 18 Section 4.03. No Conflicts; Consents 19
Section 4.04. Material Contracts. 19 Section 4.05. Title to Purchased Assets 20
Section 4.06. Intellectual Property. 20 Section 4.07. Suppliers and Inventory 21
Section 4.08. Insurance 22 Section 4.09. Legal Proceedings; Governmental Orders.
22 Section 4.10. Compliance With Laws; Permits. 22 Section 4.11. Environmental
Matters. 23 Section 4.12. Brokers 23       ARTICLE V REPRESENTATIONS AND
WARRANTIES OF BUYERS 24 Section 5.01. Organization of Buyer 24 Section 5.02.
Authority of Buyer 24 Section 5.03. No Conflicts; Consents 24 Section 5.04.
Brokers 25 Section 5.05. Legal Proceedings 25 Section 5.06. 1934 Act Reports. 25
Section 5.07. Rights of Minority Holders 25       ARTICLE VI COVENANTS 25
Section 6.01. Conduct of Seller Operations Prior to the Closing 25 Section 6.02.
Access to Information 26 Section 6.03. Notice of Certain Events. 26 Section
6.04. Employees and Employee Benefits 28 Section 6.05. Confidentiality 29
Section 6.06. Non-competition; Non-solicitation. 29

 

1

 

 

Section 6.07. Governmental Approvals and Consents 30 Section 6.08. Books and
Records. 32 Section 6.09. Closing Conditions 32 Section 6.10. Public
Announcements 32 Section 6.11. Transfer Taxes 32 Section 6.12. Capital Raise 33
Section 6.13. Additional Loan Amount 34 Section 6.14. Further Assurances 35
Section 6.15. Listing 35 Section 6.16. Securities Restrictions 35 Section 6.17.
Shareholder Approval 36 Section 6.18. Additional Transactions 36 Section 6.19.
Conduct of Buyer Operations Prior to Closing 36       ARTICLE VII CONDITIONS TO
CLOSING 37 Section 7.01. Conditions to Obligations of All Parties 37 Section
7.02. Conditions to Obligations of Buyers 38 Section 7.03. Conditions to
Obligations of Seller and Parent 39       ARTICLE VIII INDEMNIFICATION 41
Section 8.01. Survival 41 Section 8.02. Indemnification by Seller and Parent 41
Section 8.03. Indemnification By Buyers 42 Section 8.04. Certain Limitations 42
Section 8.05. Indemnification Procedures 43 Section 8.06. Payments 45 Section
8.07. Tax Treatment of Indemnification Payments 45 Section 8.08. Effect of
Investigation 45 Section 8.09. Exclusive Remedies 46       ARTICLE IX
TERMINATION 46 Section 9.01. Termination 46 Section 9.02. Effect of Termination
47 ARTICLE X MISCELLANEOUS 47     Section 10.01. Expenses 47 Section 10.02.
Notices 47 Section 10.03. Interpretation, English Version Controls 48 Section
10.04. Headings 49 Section 10.05. Severability 49 Section 10.06. Entire
Agreement 49 Section 10.07. Successors and Assigns 49 Section 10.08. No
Third-party Beneficiaries 49 Section 10.09. Amendment and Modification; Waiver
50 Section 10.10. Governing Law; Submission to Jurisdiction; Waiver of Jury
Trial. 50 Section 10.11. Specific Performance 51 Section 10.12. Counterparts 51

 

2

 

 

ASSET PURCHASE AGREEMENT

 

This Asset Purchase Agreement (this “Agreement”), dated as of November 13, 2015,
is entered into among AS KEVELT, an Estonian company (“Seller”), OJSC
PHARMSYNTHEZ, a Russian pharmaceutical company and parent of Seller (“Parent”),
and XENETIC BIOSCIENCES, INC., a Nevada corporation (“Xenetic”) and LIPOXEN
TECHNOLOGIES, LTD., a U.K. corporation (“Lipoxen” each of Xenetic and Lipoxen
are hereinafter sometimes individually referred to as a “Buyer” and collectively
referred to as “Buyers”).

 

RECITALS

 

WHEREAS, Seller holds certain intellectual property rights with respect to the
immunomodulator product Virexxa® (Oxodihydroacridinylacetate sodium), as more
fully set forth on Exhibit A hereto (“Virexxa”);

 

WHEREAS, Seller uses the Purchased Assets (as defined below) to develop Virexxa
for, among other indications, the treatment of certain cancers, and use in
connection with immune modulation or interferon, and the Buyer shall have the
right to develop, market and license Virexxa for any Permitted Uses (as defined
below); and

 

WHEREAS, Seller wishes to sell and assign to Buyers, and Buyers wish to purchase
and assume from Seller, all of the Purchased Assets, subject to the terms and
conditions set forth herein.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

Article I

Definitions

 

The following terms have the meanings specified or referred to in this Article
I:

 

“1934 Act Reports” means those Annual Reports (on Form 10-K), Quarterly Reports
(on Form 10-Q) and Current Reports (on Form 8-K) filed by Xenetic pursuant to
its obligations as a reporting company under the Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.

 

“Action” means any claim, action, cause of action, demand, lawsuit, arbitration,
audit, notice of violation, proceeding, litigation, citation, summons or
subpoena of any nature, civil, criminal, administrative, regulatory or
otherwise, whether at law or in equity.

 

“Additional Convertible Note” means that certain convertible note or notes in
the form attached hereto as Exhibit B, which shall be secured by the Purchased
Assets, and which shall be payable in instalments according to the payment
schedule set forth as an exhibit to the Securities Purchase Agreement Amendment.

 

3

 

“Additional Loan Amount” has the meaning set forth in Section 6.13(a).

 

“Additional Purchase Amount” means (i) in the event of a Capital Raise, such
number of shares of Xenetic’s common stock calculated as follows: X = (Y-Z)/W;
where X is the number of shares of Xenetic’s common stock to be purchased; Y is
$10 million; Z is the Additional Loan Amount; and W is the Additional Purchase
Price Per Share of Xenetic’s common stock or (ii) in the event of a loan in lieu
of a Capital Raise, an aggregate principal amount equal to $10 million minus the
sum of the Additional Loan Amount and the amount of the Further Loan.

 

“Additional Purchase Price Per Share” means the offering price per share of
Xenetic’s common stock in the Capital Raise.

 

“Additional Warrant” means that certain warrant or warrants to purchase up to
11,666,667 shares of Xenetic common stock, in the form attached hereto as
Exhibit C.

 

“Affiliate” of a Person means any other Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with, such Person. The term “control” (including the terms
“controlled by” and “under common control with”) means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise. For the avoidance of doubt, SynBio and FDS Pharma ASS are
Affiliates of Sellers for purposes of this Agreement.

 

“Agreement” has the meaning set forth in the preamble.

 

“Allocation Schedule” has the meaning set forth in Section 2.06.

 

“Assigned Contracts” shall mean those contracts related to Virexxa set forth on
Schedule 2.01 and which are being specifically assigned by Seller to Buyers at
Closing.

 

“Assignment and Assumption Agreement” has the meaning set forth in Section
3.02(a)(ii).

 

“Assumed Liabilities” has the meaning set forth in Section 2.03.

 

“Bill of Sale” has the meaning set forth in Section 3.02(a)(i).

 

“Books and Records” means all books and records, including, but not limited to,
books of account, ledgers and general, financial and accounting records,
machinery and equipment maintenance files, customer lists, customer purchasing
histories, price lists, distribution lists, supplier lists, production data,
quality control records and procedures, customer complaints and inquiry files,
research and development files, records and data (including all correspondence
with any Governmental Authority), sales material and records (including pricing
history, total sales, terms and conditions of sale, sales and pricing policies
and practices), strategic plans, marketing and promotional surveys, material and
research and intellectual property files relating to the Intellectual Property
and the Intellectual Property Licenses.

 

“Business Day” means any day except Saturday, Sunday or any other day on which
commercial banks located in the State of Nevada, Estonia or Russia are
authorized or required by Law to be closed for business.

 

“Buyer” and “Buyers” have the meanings set forth in the preamble.

 

4

 

“Buyer Intellectual Property” means all of the following and similar intangible
property and related proprietary rights, interests and protections, however
arising of Buyers and, pursuant to the Laws of any jurisdiction throughout the
world that was invented, created, existing, filed, prosecuted and/or issued to
Buyers in any country, including any: (a) trademarks, service marks, trade
names, brand names, pre-clinical and clinical product names, logos, trade dress
and other proprietary indicia of goods and services, whether registered,
unregistered or arising by Law, and all registrations and applications for
registration of such trademarks, including intent-to-use applications, and all
issuances, extensions and renewals of such registrations and applications; (b)
internet domain names, whether or not trademarks, registered in any generic top
level domain by any authorized private registrar or Governmental Authority; (c)
original works of authorship in any medium of expression, whether or not
published, all copyrights (whether registered, unregistered or arising by Law),
all registrations and applications for registration of such copyrights, and all
issuances, extensions and renewals of such registrations and applications; (d)
confidential information, formulas, designs, devices, technology, know-how,
research and development, inventions, methods, processes, compositions and other
trade secrets, whether or not patentable; (e) patented and patentable designs
and inventions, all design, plant and utility patents, letters patent, utility
models, pending patent applications and provisional applications and all
issuances, divisions, continuations, continuations-in-part, reissues,
extensions, re-examinations and renewals of such patents and all patent
applications filed or in process and all data and research associated therewith;
(f) all investigational new drug applications (and work in preparation for
submission of the same), dossiers, files and data related to product candidates
under development by the Buyers, and (g) all studies (clinical and otherwise)
and all applications for approval for sale in any country of any product
candidate.

 

“Buyers’ Basket Exclusions” has the meaning set forth in Section 8.04(a).

 

“Buyers’ Closing Certificate” has the meaning set forth in Section 7.03(f).

 

“Buyers’ Indemnitees” has the meaning set forth in Section 8.02.

 

“Buyer Insurance Policies” has the meaning set forth in Section 5.10.

 

“Capital Raise” means the closing of a public and/or private offering of at
least $15 million of Xenetic’s common stock pursuant to the Securities Act.

 

“Closing” has the meaning set forth in Section 3.01.

 

“Closing Date” has the meaning set forth in Section 3.01.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Contracts” means all contracts, leases, deeds, mortgages, licenses,
instruments, notes, commitments, undertakings, indentures, joint ventures and
all other agreements, commitments and legally binding arrangements, whether
written or oral.

 

“CRO Contracts” means those Contracts with contract research organizations set
forth on Section 2.02(c) of the Disclosure Schedules.

 

5

 

“Current Convertible Note” means that certain convertible note attached hereto
as Exhibit D.

 

“Current Warrant” means that certain warrant to purchase shares of Xenetic
common stock attached hereto as Exhibit E.

 

“Direct Claim” has the meaning set forth in Section 8.05(c).

 

“Disclosure Schedules” means the Disclosure Schedules delivered by Seller and
Buyers concurrently with the execution and delivery of this Agreement.

 

“Dollars or $” means the lawful currency of the United States.

 

“Encumbrance” means any charge, community property interest, pledge, condition,
equitable interest, lien (statutory or other), option, license, security
interest, mortgage, easement, encroachment, right of way, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income or exercise of any other attribute of ownership.

 

“Environmental Claim” means any Action, Governmental Order, lien, fine, penalty,
or, as to each, any settlement or judgment arising therefrom, by or from any
Person alleging liability of whatever kind or nature (including liability or
responsibility for the costs of enforcement proceedings, investigations,
clean-up, governmental response, removal or remediation, natural resources
damages, property damages, personal injuries, medical monitoring, penalties,
contribution, indemnification and injunctive relief) arising out of, based on or
resulting from: (a) the presence, Release of, or exposure to, any Hazardous
Materials; or (b) any actual or alleged non-compliance with any Environmental
Law or term or condition of any Environmental Permit.

 

“Environmental Law” means any applicable Law, and any Governmental Order or
binding agreement with any Governmental Authority: (a) relating to pollution (or
the clean-up thereof) or the protection of natural resources, endangered or
threatened species, human health or safety, or the environment (including
ambient air, soil, surface water or groundwater, or subsurface strata); or (b)
concerning the presence of, exposure to, or the management, manufacture, use,
containment, storage, recycling, reclamation, reuse, treatment, generation,
discharge, transportation, processing, production, disposal or remediation of
any Hazardous Materials. The term “Environmental Law” includes, without
limitation, the following (including their implementing regulations and any
state analogs): the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended by the Superfund Amendments and
Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.; the Solid Waste Disposal
Act, as amended by the Resource Conservation and Recovery Act of 1976, as
amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901
et seq.; the Federal Water Pollution Control Act of 1972, as amended by the
Clean Water Act of 1977, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control
Act of 1976, as amended, 15 U.S.C. §§ 2601 et seq.; the Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq.; the Clean Air
Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C. §§
7401 et seq.; and the Occupational Safety and Health Act of 1970, as amended, 29
U.S.C. §§ 651 et seq.

 

6

 

“Environmental Notice” means any written directive, request for information,
notice of violation or infraction, or other notice respecting any Environmental
Claim relating to actual or alleged non-compliance with or liability pursuant to
any Environmental Law or any term or condition of any Environmental Permit.

 

“Environmental Permit” means any Permit, letter, clearance, consent, waiver,
closure, exemption, decision or other action required under or issued, granted,
given, authorized by or made pursuant to Environmental Law.

 

“Excluded Assets” has the meaning set forth in Section 2.02.

 

“Excluded Liabilities” has the meaning set forth in Section 2.04.

 

“Excluded Uses” shall mean the use of Virexxa in the Retained Territory for
those indications set forth on Exhibit K.

 

“Further Loan” has the meaning set forth in Section 6.12.

 

“GAAP” means United States generally accepted accounting principles in effect
from time to time.

 

“Genkin/Surkov IP Assignment” means that certain Intellectual Property
Assignment by and among Dimitry Genkin and Kirill Surkov on the one hand and
Buyers on the other hand, in the form attached hereto as Exhibit J.

 

“Governmental Authority” means any federal, state, local or foreign government
or political subdivision thereof, or any agency or instrumentality of such
government or political subdivision, or any self-regulated organization or other
non-governmental regulatory authority or quasi-governmental authority (to the
extent that the rules, regulations or orders of such organization or authority
have the force of Law), or any arbitrator, court or tribunal of competent
jurisdiction.

 

“Governmental Order” means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority.

 

“Hazardous Materials” means: (a) any material, substance, chemical, waste,
product, derivative, compound, mixture, solid, liquid, mineral or gas, in each
case, whether naturally occurring or manmade, that is hazardous, acutely
hazardous, toxic, or words of similar import or regulatory effect under any
Environmental Law; and (b) any petroleum or petroleum-derived products, radon,
radioactive materials or wastes, asbestos in any form, lead or lead-containing
materials, urea formaldehyde foam insulation and polychlorinated biphenyls.

 

“Hormone Resistant Provisional Patent Application” means the USPTO provisional
patent application #62076546 entitled “Method for Treatment of Primary Hormone
Resistant Endometrial and Breast Cancers” and International Patent Application
No. PCT/EP2015/075990 and all patents, divisions, reissues, continuations,
continuations-in-part, and any extensions thereof and rights of priority
therein, including the right to sue for past infringement and to any such
recovery.

 

“Indemnified Party” has the meaning set forth in Section 8.05.

 

7

 

“Indemnifying Party” has the meaning set forth in Section 8.05.

 

“Initial Funding Tranche” has the meaning set forth in Section 6.13.

 

“Insurance Policies” has the meaning set forth in Section 4.08.

 

“Intellectual Property” means all of the following and similar intangible
property and related proprietary rights, interests and protections, however
arising of Seller and its Affiliates, pursuant to the Laws of any jurisdiction
throughout the world that was invented, created, existing, filed, prosecuted
and/or issued to Seller in any country with respect to Virexxa or directly or
indirectly related to Virexxa, with respect to all Permitted Uses, including
any: (a) trademarks, service marks, trade names, brand names, pre-clinical and
clinical product names, logos, trade dress and other proprietary indicia of
goods and services, whether registered, unregistered or arising by Law, and all
registrations and applications for registration of such trademarks, including
intent-to-use applications, and all issuances, extensions and renewals of such
registrations and applications; (b) internet domain names, whether or not
trademarks, registered in any generic top level domain by any authorized private
registrar or Governmental Authority; (c) original works of authorship in any
medium of expression, whether or not published, all copyrights (whether
registered, unregistered or arising by Law), all registrations and applications
for registration of such copyrights, and all issuances, extensions and renewals
of such registrations and applications; (d) confidential information, formulas,
designs, devices, technology, know-how, research and development, inventions,
methods, processes, compositions and other trade secrets, whether or not
patentable; (e) patented and patentable designs and inventions, all design,
plant and utility patents, letters patent, utility models, pending patent
applications and provisional applications and all issuances, divisions,
continuations, continuations-in-part, reissues, extensions, re-examinations and
renewals of such patents and all patent applications filed or in process and all
data and research associated therewith; (f) all investigational new drug
applications (and work in preparation for submission of the same), dossiers,
files and data related to Virexxa for any Permitted Use, and (g) all studies
(clinical and otherwise) and all applications for approval for sale in any
country of Virexxa for any Permitted Use.

 

“Intellectual Property Assignments” has the meaning set forth in Section
3.02(a)(iii).

 

“Intellectual Property Licenses” means all licenses, sublicenses and other
agreements by or through which other Persons, including Seller’s Affiliates,
grant Seller exclusive or non-exclusive rights or interests in or to any
Purchased Assets.

 

“Intellectual Property Registrations” means all Purchased Assets that are
subject to any issuance, registration, application or other filing by, to or
with any Governmental Authority or authorized private registrar in any
jurisdiction, including registered trademarks, domain names, service marks, and
copyrights, issued and reissued patents, Supplementary Protection Certificate or
the like, and pending applications for any of the foregoing.

 

“Knowledge of Seller or Seller’s Knowledge” or any other similar knowledge
qualification, means the actual knowledge of any of Dmitry Genkin, Peter
Kruglyakov, Allan Ahtloo, Anna Gavrilovic, Srdjan Gavrilovic, Sergei Avtushenko,
Kirill Surkov, Konstantin Zakharov, Laura Douglass and Michelle Welborn.

 

8

 

“Knowledge of Buyers or Buyers’ Knowledge” or any other similar knowledge
qualification, means the actual knowledge of Scott Maguire.

 

“Law” means any statute, law, ordinance, regulation, rule, code, order,
constitution, treaty, common law, judgment, decree, other requirement or rule of
law of any Governmental Authority.

 

“Liabilities” means liabilities, obligations or commitments of any nature
whatsoever, asserted or un-asserted, known or unknown, absolute or contingent,
accrued or un-accrued, matured or un-matured or otherwise.

 

“Losses” means foreseeable and reasonable losses, damages, liabilities,
deficiencies, Actions, judgments, interest, awards, penalties, fines, costs or
expenses of whatever kind, including reasonable attorneys’ fees and the cost of
enforcing any right to indemnification hereunder and the cost of pursuing any
insurance providers; provided, however, that “Losses” shall not include
diminution in value, incidental, consequential or punitive damages, except in
the case of fraud or to the extent actually awarded to a Governmental Authority
or other third party.

 

“Management Warrants” means those certain warrants to purchase shares of
Xenetic’s common stock to be issued to members of Seller’s management, in the
form attached hereto as Exhibit F.

 

“Material Adverse Effect” means any event, occurrence, fact, condition or change
that is, or could reasonably be expected to become, individually or in the
aggregate, materially adverse to (i) the Purchased Assets or contemplated use
thereof by Buyers or their designees, in the case of the Seller or (ii) the
business, prospects, management, financial position, stockholders’ equity or
results of operations of Xenetic and its subsidiaries, taken as one entity, in
the case of the Buyers.

 

“Material Contracts” has the meaning set forth in Section 4.04(a).

 

“Material Suppliers” has the meaning set forth in Section 4.07.

 

“Outside Date” shall be the date that is the later of April 30, 2016 or 180 days
following the date of full execution and delivery of this Agreement.

 

“Parent” has the meaning set forth in the preamble.

 

“Parent New Shares” shall have the meaning set forth in Section 2.05(a)

 

“Permits” means all permits, licenses, franchises, approvals, authorizations,
registrations, certificates, variances and similar rights obtained, or required
to be obtained, from Governmental Authorities

 

“Permitted Encumbrances” has the meaning set forth in Section 4.05(a).

 

“Permitted Uses” shall mean the use of Virexxa and the Intellectual Property for
the treatment of all diseases and conditions other than the Excluded Uses.
Permitted Uses shall include but not be limited to the treatment of cancer
indications and the use of the Intellectual Property as an immune modulator or
in association with interferon.

 

9

 

“Person” means an individual, corporation, partnership, joint venture, limited
liability company, Governmental Authority, unincorporated organization, trust,
association or other entity.

 

“Pre-Closing CRO Contracts Expenses” has the meaning set forth in Section
2.08(b).

 

“Pre-Closing Retained Virexxa Contracts Expenses” has the meaning set forth in
Section 2.08(c).

 

“Purchase Price” has the meaning set forth in Section 2.05.

 

“Purchased Assets” means all Intellectual Property and other assets of Seller
being purchased from Seller hereunder that are set forth in Section 2.01 of the
Disclosure Schedules.

 

“Readout” shall mean with respect to the Phase II clinical trial for Virexxa,
the audited clinical data for a patient in the Phase II clinical trial.

 

“Registration Rights Agreement Amendment” shall mean an amendment to that
certain Registration Rights Agreement, dated July 1, 2015, by and between Buyer
and Seller in the form attached hereto as an exhibit to this Agreement.

 

“Representative” means, with respect to any Person, any and all directors,
officers, employees, consultants, financial advisors, counsel, accountants and
other agents of such Person.

 

“Restricted Business” means any business that involves researching, developing,
manufacturing, distributing, offering for sale, selling, importing, exporting or
supplying Virexxa (also known as Oxodihydroacridinylacetate sodium (and further
known as sodium cidanimod, Neovir, Camedon and Primavir)) for any Permitted Use,
or any other molecule, compound or substance that has a structural similarity to
the same or which functions in a similar manner when used for the treatment of
cancer.

 

“Restricted Period” has the meaning set forth in Section 6.06(a).

 

“Retained Territory” shall mean Armenia, Azerbaijan, Belarus, Georgia,
Kazakhstan, Kyrgyzstan, Moldova, the Russian Federation, Tajikistan,
Turkmenistan, Uzbekistan, Ukraine and Mongolia.

 

“Retained Virexxa Contracts” shall mean those contracts related to Virexxa for
any Permitted Use to which Seller or one of its Affiliates is a party and which
are not being assigned to Buyers pursuant to this Agreement, and which are
listed on Section 2.02(c) of the Disclosure Schedules.

 

“Revised Current Convertible Note” has the meaning set forth in Section 2.05(a).

 

“Revised Current Warrant” has the meaning set forth in Section 2.05(a).

 

10

 

“Securities Act” means the Securities Act of 1933, as amended and the rules and
regulations promulgated thereunder.

 

“Security Agreements” means a Security Agreement and Intellectual Property
Security Agreement covering the pledge of the Purchased Assets by Buyers in
favor of Seller as security for the Additional Convertible Note.

 

“Securities Purchase Agreement Amendment” shall mean an amendment to that
certain Securities Purchase Agreement, dated June 9, 2015, by and between Buyer
and Seller in the form attached hereto as an exhibit to this Agreement.

 

“Seller” has the meaning set forth in the preamble.

 

“Seller Basket Exclusions” has the meaning set forth in Section 8.04(b)

 

“Seller Closing Certificate” has the meaning set forth in Section 7.02(g).

 

“Seller Indemnitees” has the meaning set forth in Section 8.03

 

“Stock Condition” shall mean the effective amendment to Xenetic’s Articles of
Incorporation prior to the Closing Date to authorize the issuance of up to 1.5
billion shares of its common stock (before giving effect to forward or reverse
splits following the date of this Agreement) and to effect a not less than 1:10
reverse stock split.

 

“Subsidiary Guarantee Amendment” shall mean an amendment to the Subsidiary
Guarantee dated July 1, 2015, by and between Buyer and Seller in the form
attached hereto as an exhibit to this Agreement.

 

“SynBio” shall mean SynBio Limited Liability Company, a legal entity, organized
and existing under the laws of the Russian Federation, located at: 119333,
Russian Federation, Moscow, Leninsky Avenue, 55/1, bld. 2.

 

“SynBio Amendment” shall mean the amendments to the loan agreements between
SynBio and Xenetic Biosciences LLC, UK (formerly Lipoxen PLC, UK), dated May 10,
2011 and October 24, 2011.

 

“Taxes” means all federal, state, local, foreign and other income, gross
receipts, sales, use, production, ad valorem, transfer, documentary, franchise,
registration, profits, license, lease, service, service use, withholding,
payroll, employment, unemployment, estimated, excise, severance, environmental,
stamp, occupation, premium, property (real or personal), real property gains,
windfall profits, customs, duties or other taxes, fees, assessments or charges
of any kind whatsoever, together with any interest, additions or penalties with
respect thereto and any interest in respect of such additions or penalties.

 

“Tax Return” means any return, declaration, report, claim for refund,
information return or statement or other document relating to Taxes, including
any schedule or attachment thereto, and including any amendment thereof.

 

“Territory” means the United States, Europe and Asia.

 

11

 

“Third Party Claim” has the meaning set forth in Section 8.05(a).

 

“Transaction Documents” means this Agreement, the Bill of Sale, the Assignment
and Assumption Agreement, Intellectual Property Assignments, the Transition
Services and Resupply Agreement, the Additional Convertible Note, the Additional
Warrant, the Revised Current Note, the Revised Current Warrant, the SynBio
Amendment, the Securities Purchase Agreement Amendment, the Subsidiary Guarantee
Amendment, the Security Agreements, the Registration Rights Agreement Amendment
and the other agreements, instruments and documents required to be delivered at
the Closing.

 

“Transition Services and Resupply Agreement” has the meaning set forth in
Section 3.02(a)(iv).

 

“Virexxa” shall have the meaning set forth in the Recitals hereof.

 

“Virexxa Phase II Trial Cost” shall mean the cost to Xenetic and its
subsidiaries as computed on the accrual method of accounting for the fees, costs
and expenses associated with conducting the Phase II clinical trials for Virexxa
(assuming all costs, fees and expenses are expensed in the month incurred and
are not capitalized).

 

Article II

Purchase and Sale

 

Section 2.01. Purchased Assets Schedule. Subject to the terms and conditions set
forth herein, at the Closing, Seller shall sell, assign, transfer, convey and
deliver to Buyers, through one or more of Seller’s affiliates, and Buyers shall
purchase from Seller, through one or more of Seller’s affiliates, free and clear
of any Encumbrances other than Permitted Encumbrances, all of Seller’s right,
title and interest in, to and under all of the Intellectual Property of every
kind and nature which relate to, or are used or held for use in connection with,
the development of Virexxa for all Permitted Uses, with the Purchased Assets as
set forth in Section 2.01 of the Disclosure Schedules (collectively, the
“Purchased Assets”). Buyers and Seller agree that to the extent any of the
Purchased Assets include Intellectual Property Registrations that cover both
Excluded Uses and Permitted Uses, such Intellectual Property Registration shall
be jointly owned by Seller and Buyers, provided further that: (i) with respect
to such assets, Buyer’s use of such assets shall be limited to Permitted Uses
and Seller’s use of such assets shall be limited to the Excluded Uses; (ii) the
parties shall cooperate with each other, including causing their employees and
affiliates to provide testimony on an as needed basis with respect to any
enforcement action to prosecute the rights of any of the parties (or their
assigns) with respect to the jointly owned Intellectual Property or to defend
any patent infringement actions with respect to the jointly owned Intellectual
Property Registrations; and (iii) the obligations of the parties with respect to
subparagraphs (i) and (ii) above shall survive the closing of this Agreement.

 

Section 2.02. Excluded Assets. All other assets of Seller not specifically set
forth in Section 2.01 of the Disclosure Schedules shall remain the assets of
Seller and are not being purchased by Buyer hereunder (collectively, the
“Excluded Assets”), for the avoidance of doubt, Excluded Assets shall also
include (but in no way be limited to):

 

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(a) the assets, properties and rights specifically set forth on Section 2.02(a)
of the Disclosure Schedules;

 

(b) the right of Seller to sell the Virexxa product for uses other than the
Permitted Uses in the Retained Territory;

 

(c) the CRO Contracts and the Retained Virexxa Contracts set forth on Section
2.02(c) of the Disclosure Schedules; and

 

(d) the rights which accrue or will accrue to Seller under the Transaction
Documents.

 

Section 2.03. Assumed Liabilities. Subject to the terms and conditions set forth
herein, Buyers shall assume and agree to pay, perform and discharge only the
following Liabilities of Seller (collectively, the “Assumed Liabilities”), and
no other Liabilities:

 

(a) all Liabilities in respect of the Assigned Contracts but only to the extent
that such Liabilities thereunder accrue after the Closing Date and do not relate
to any failure to perform, improper performance, warranty or other breach,
default or violation by Seller on or prior to the Closing; and

 

(b) those Liabilities of Seller set forth on Section 2.03(b) of the Disclosure
Schedules.

 

Section 2.04. Excluded Liabilities. Notwithstanding the provisions of Section
2.03 or any other provision in this Agreement to the contrary, Buyers shall not
assume and shall not be responsible to pay, perform or discharge any Liabilities
of Seller or any of its Affiliates of any kind or nature whatsoever other than
the Assumed Liabilities (the “Excluded Liabilities”). Seller shall, and shall
cause each of its Affiliates to, pay and satisfy in due course all Excluded
Liabilities which they are obligated to pay and satisfy.

 

Section 2.05. Purchase Price. The aggregate consideration for the Purchased
Assets shall be set forth below (the “Purchase Price”), plus the assumption of
the Assumed Liabilities. The Purchase Price shall be comprised of the following:

 

(a) The issuance of 100,500,000 shares (the “Parent New Shares”) of newly issued
common stock of Xenetic (to be adjusted for forward or reverse splits occurring
after the date of this Agreement) to Parent;

 

(b) The Current Convertible Note shall be amended and restated in its entirety
to the form attached hereto as Exhibit G (the “Revised Current Convertible
Note”);

 

(c) The Current Warrant shall be amended and restated in its entirety to the
form attached hereto as Exhibit H (the “Revised Current Warrant”)

 

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(d) The maturity date of the loans to Xenetic Biosciences LLC, UK (formerly
Lipoxen PLC, UK) from SynBio, dated May 10, 2011 and October 24, 2011 shall be
extended to the Outside Date;

 

(e) Xenetic shall issue to the persons named on Exhibit L hereto, Management
Warrants to purchase an aggregate of up to 5,000,000 shares of Xenetic’s common
stock, at a price equal to $0.42 per share;

 

(f) Xenetic shall issue to Parent the Additional Convertible Note, the Security
Agreements and the Additional Warrant within five (5) Business Days of the date
hereof and Parent shall fully fund the Initial Funding Tranche of the Additional
Convertible Note; and

 

(g) If the Additional Convertible Note is not repaid or converted to equity by
the Outside Date, then Xenetic shall issue to Parent another warrant with the
same terms as the Additional Warrant; and

 

(h) Any New Parent Shares issuable pursuant to Section 6.12.

 

Section 2.06. Allocation of Purchase Price. Seller and Buyers agree that the
Purchase Price and the Assumed Liabilities (plus other relevant items) shall be
allocated among the Purchased Assets for all purposes (including Tax and
financial accounting) as shown on the allocation schedule (the “Allocation
Schedule”). A draft of the Allocation Schedule shall be prepared by Buyers and
delivered to Seller within thirty (30) days following the Closing Date. If
Seller notifies Buyers in writing that Seller objects to one or more items
reflected in the Allocation Schedule, Seller and Buyers shall negotiate in good
faith to resolve such dispute; provided, however, that if Seller and Buyers are
unable to resolve any dispute with respect to the Allocation Schedule within
thirty (30) days following the Closing Date, such dispute shall be resolved by
the Independent Accountants. The fees and expenses of such accounting firm shall
be borne equally by Seller and Buyers. Buyers and Seller shall file all Tax
Returns (including amended returns and claims for refund) and information
reports in a manner consistent with the Allocation Schedule.

 

Section 2.07. Withholding Tax. Buyers shall be entitled to deduct and withhold
from the Purchase Price all Taxes that any of Buyers may be required to deduct
and withhold under any provision of Tax Law. All such withheld amounts shall be
treated as delivered to Seller hereunder. Seller shall provide to Buyers such
duly executed forms and affidavits as Buyers shall require to enable Buyers to
determine and document the amount of withholding tax, if any, as is applicable.
The Buyer does not expect to deduct an amount in excess of ten percent (10%) of
the Purchase Price pursuant to this Section 2.07.

 

Section 2.08. Third Party Consents; CRO Contracts; Retained Virexxa Contracts.

 

(a) To the extent that Sellers’ rights under any Contract or Permit constituting
a Purchased Asset, or any other Purchased Asset, may not be assigned to Buyer
without the consent of another Person which has not been obtained, this
Agreement shall not constitute an agreement to assign the same if an attempted
assignment would constitute a breach thereof or be unlawful, and Seller shall
use its commercially reasonable efforts to obtain any such required consent(s)
as promptly as possible. If any such consent shall not be obtained or if any
attempted assignment would be ineffective or would impair Buyers’ rights under
the Purchased Asset in question so that Buyers would not in effect acquire the
benefit of all such rights, Seller, to the maximum extent permitted by law and
the Purchased Assets, shall act after the Closing as Buyers’ agent in order to
obtain for it the benefits thereunder and shall cooperate, to the maximum extent
permitted by Law and the Purchased Assets, with Buyers in any other reasonable
arrangement designed to provide such benefits to Buyers; provided that Seller
shall not have any obligation under this Section 2.08 following the third
anniversary of the Closing, and in no event shall the Seller be obligated to
expend more than $25,000 annually pursuant to its obligations under this Section
2.08. Notwithstanding any provision in this Section 2.08 to the contrary, Buyers
shall not be deemed to have waived their rights under Section 7.02(d) hereof
unless and until Buyers either provide written waivers thereof or elect to
proceed to consummate the transactions contemplated by this Agreement at
Closing.

 

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(b) With respect to the CRO Contracts, such contracts shall remain in the name
of Seller or its Affiliates as applicable as parties and Buyers shall not assume
such contracts, provided that: (i) to the extent that the following does not
impair or damage the Purchased Assets, Seller shall cease performing any
activities under each CRO Contract and shall request that the counterparties
thereto cease performing any activities thereunder and shall terminate each CRO
Contract promptly upon the request of Buyer (if not already terminated); (ii)
Seller shall not interfere with, nor otherwise prevent in any way, Buyer
entering into a new Contract with the counterparties thereof; and (iii) Seller
shall deliver or cause its Affiliates to deliver promptly to Buyers copies of
all correspondence received by Seller or its Affiliates from any counterparty or
delivered by Seller or any of its Affiliates to any counterparty (in each
instance translated into English if not in English) with respect to any of the
CRO Contracts to the extent such correspondence relates in any way to any of the
Purchased Assets. In the event Seller or any of its Affiliates fails to pay
within five days when due any amounts owing under any CRO Contract (“Pre-Closing
CRO Contracts Expenses”), Buyers may pay such amounts and then offset such
payments against amounts due under the Additional Convertible Note (which, for
the avoidance of doubt, shall not constitute a breach of the “Use of Proceeds”
requirements set forth in Section 4.9 of the Securities Purchase Agreement).

 

(c) With respect to the Retained Virexxa Contracts set forth on Section 2.02(c)
of the Disclosure Schedules, such contracts shall remain in the name of Seller
or its Affiliates as applicable as parties and Buyers shall not assume such
contracts, provided that: (i) to the extent that the following does not impair
or damage the Purchased Assets, Seller shall cease performing any activities
under each Retained Virexxa Contract and shall request that the counterparties
thereto cease performing any activities thereunder and shall terminate each
Retained Virexxa Contract promptly upon the request of Buyer (if not already
terminated); (ii) Seller shall not interfere with, nor otherwise prevent in any
way, Buyer entering into a new Contract with the counterparties thereof; and
(iii) Seller shall deliver or cause its Affiliates to deliver promptly to Buyers
copies of all correspondence received by Seller or its Affiliates from any
counterparty or delivered by Seller or any of its Affiliates to any counterparty
(in each instance translated into English if not in English) with respect to any
of the Retained Virexxa Contracts to the extent such correspondence relates in
any way to any of the Purchased Assets. In the event Seller or any of its
Affiliates fails to pay within five days when due any amounts owing under any
Retained Virexxa Contract (“Pre-Closing Retained Virexxa Contracts Expenses”),
Buyers may pay such amounts and then offset such payments against amounts due
and owing under the Additional Convertible Note (which, for the avoidance of
doubt, shall not constitute a breach of the “Use of Proceeds” requirements set
forth in Section 4.9 of the Securities Purchase Agreement).

 

15

 

Section 2.09. Intermediate Transfers. The parties acknowledge that the transfer
of the Purchased Assets will be effected through one or more of the Seller’s
Affiliates. The Purchased Assets will be transferred from the Seller to LifeBio
Laboratories LLC, and then to Parent, who will transfer the Purchased Assets to
Buyers, provided that none of such transfers shall be made in a manner in which
the obligations of Seller to Buyers hereunder are lessened as a result of such
transfers or where the Purchased Assets being transferred are further encumbered
in such process.

 

Section 2.10 Assignment of Hormone Resistant Provisional Patent Applications.
Simultaneous with the funding of the execution of this Agreement, Seller shall
cause Dimitry Genkin and Kirill Surkhov (the “Inventors”) to assign the Hormone
Resistant Provisional Patent Application and International Patent Application
No. PCT/EP2015/075990 and all patents, divisions, reissues, continuations,
continuations-in-part, and any extensions thereof and rights of priority
therein, including the right to sue for past infringement and to any such
recovery, to Lipoxen in consideration for the issuance of 5,500,000 shares of
Xenetic Common Stock to each of them (11,000,000 shares in the aggregate—the
“Inventors’ Shares”). The assignment shall be made in accordance with the form
of Genkin/Surkhov IP Assignment attached hereto as Exhibit J. Seller further
agrees, at its sole cost and expense to fund the costs and fees necessary to
convert the Hormone Resistant Provisional Patent Application to a full patent
application in favor of Lipoxen.

 

Article III

Closing

 

Section 3.01. Closing. Subject to the terms and conditions of this Agreement,
the consummation of the transactions contemplated by this Agreement (the
“Closing”) shall take place via email exchange of signature pages on the
Business Day after all of the conditions to Closing set forth in Article VII are
either satisfied or waived (other than conditions which, by their nature, are to
be satisfied on the Closing Date), or at such other time, date or place as
Seller and Xenetic may mutually agree upon in writing. The date on which the
Closing is to occur is herein referred to as the “Closing Date.”

 

Section 3.02. Closing Deliverables.

 

(a) At the Closing, Seller and/or Parent (as applicable) shall deliver to Buyers
the following:

 

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(i) a bill of sale in form and substance reasonably satisfactory to Buyers and
Seller (the “Bill of Sale”) and duly executed by Seller, transferring the
tangible personal property included in the Purchased Assets to Lipoxen or its
designee;

 

(ii) an assignment and assumption agreement in form and substance reasonably
satisfactory to Buyers and Seller (the “Assignment and Assumption Agreement”)
and duly executed by Seller, effecting the assignment to and assumption by
Lipoxen of the Purchased Assets and the Assumed Liabilities;

 

(iii) assignments in form and substance reasonably satisfactory to Buyers and
Seller (the “Intellectual Property Assignments”) and duly executed by Seller or
Parent or their Affiliates (as applicable), transferring all of such party’s
right, title and interest in and to the Purchased Assets and the Intellectual
Property Licenses to Lipoxen or its designee, together with the originals of all
Contracts, Environmental Permits and documentation associated with the Purchased
Assets. For clarity, Purchased Assets that constitute Intellectual Property
shall be transferred from Parent (or an Affiliate) to Lipoxen, while any other
Purchased Assets shall be transferred directly from Seller to Lipoxen.

 

(iv) the Transition Services and Resupply Agreement in form and substance
satisfactory to Buyers (the “Transition Services and Resupply Agreement”) and
duly executed by Seller and Parent, which will provide for, among other things,
Parent and Seller’s continued supply of the Virexxa molecule (and any related
active pharmaceutical ingredients associated with production of Virexxa) to
Lipoxen and its designees on a cost to manufacture plus 20% basis, and subject
to Buyers’ right to inspect all books and records of Seller and its Affiliates
to verify proper pricing of the molecule;

 

(v) proof of insurance in place to cover claims from patients in clinical trials
or under recruitment programs with respect to Virexxa naming Seller or one of
its Affiliates as an insured and naming each of Buyers as additional insureds at
the Closing;

 

(vi) the Seller Closing Certificate;

 

(vii) the certificates of the CEO or Board member of Seller required by Section
7.02(h) and Section 7.02(i);

 

(viii) the Revised Current Convertible Note and the Revised Current Warrant duly
executed by Parent and Xenetic;

 

(ix) the Securities Purchase Agreement Amendment and Registration Rights
Agreement Amendment;

 

(x) the Genkin/Surkov IP Assignment duly executed by Dimitry Genkin and Kirill
Surkov;

 

(xi) the SynBio Amendment duly executed by SynBio and Sellers; and

 

17

 

(xii) such other customary instruments of transfer, assumption, filings or
documents, in form and substance reasonably satisfactory to Buyers, as may be
required to give effect to this Agreement.

 

(b) At the Closing, Buyers shall deliver to Seller and/or Parent (as applicable)
the following:

 

(i) the Assignment and Assumption Agreement duly executed by Lipoxen or its
designee;

 

(ii) the Buyers Closing Certificate;

 

(iii) proof that the Stock Condition has been satisfied;

 

(iv) the SynBio Amendment duly executed by Xenetic;

 

(v) the certificates of the Secretary or Assistant Secretaries of Buyers
required by Section 7.03(g) and Section 7.03(h);

 

(vi) the Securities Purchase Agreement Amendment and Registration Rights
Agreement Amendment;

 

(vii) the Revised Current Convertible Note and the Revised Current Warrant; and

 

(viii) the Genkin/Surkov IP Assignment duly executed by Buyers.

 

Article IV

Representations and warranties of seller

 

Except as set forth in the correspondingly numbered section of the Disclosure
Schedules, each of Seller and Parent jointly and severally represents and
warrants to Buyers that the statements contained in this Article IV are true and
correct as of the date hereof.

 

Section 4.01. Organization and Qualification of Seller. Seller is a corporation
duly organized, validly existing and in good standing under the Laws of Estonia.
Parent is a corporation duly organized, validly existing and in good standing
under the Laws of Russia. Seller has full corporate power and authority to own
or operate the Purchased Assets. Seller is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which the ownership of
the Purchased Assets makes such licensing or qualification necessary.

 

Section 4.02. Authority of Seller. Each of Seller and Parent has full corporate
power and authority to enter into this Agreement and the other Transaction
Documents to which Seller or Parent is a party, to carry out its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery by each of Seller and Parent of this
Agreement and any other Transaction Document to which Seller or Parent is a
party, the performance by Seller or Parent of its obligations hereunder and
thereunder and the consummation by Seller or Parent of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
corporate action on the part of Seller and Parent. This Agreement has been duly
executed and delivered by Seller and Parent, and this Agreement constitutes a
legal, valid and binding obligation of each of Seller and Parent enforceable
against each of Seller and Parent in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
other laws of general applicability relating to or affecting creditors’ rights
and to general equity principles. When each other Transaction Document to which
Seller or Parent is or will be a party has been duly executed and delivered by
Seller and Parent (assuming due authorization, execution and delivery by each
other party thereto), such Transaction Document will constitute a legal and
binding obligation of Seller and Parent (as applicable) enforceable against it
in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors’ rights and to general equity principles.

 

18

 

Section 4.03. No Conflicts; Consents. The execution, delivery and performance by
each of Seller and Parent of this Agreement and the other Transaction Documents
to which it is a party, and the consummation of the transactions contemplated
hereby and thereby, do not and will not: (a) conflict with or result in a
violation or breach of, or default under, any provision of the organizational
documents of Parent or Seller; (b) conflict with or result in a violation or
breach of any provision of any Law or Governmental Order applicable to Seller,
Parent or the Purchased Assets; (c) require the consent, notice or other action
by any Person under, conflict with, result in a violation or breach of,
constitute a default or an event that, with or without notice or lapse of time
or both, would constitute a default under, result in the acceleration of or
create in any party the right to accelerate, terminate, modify or cancel any
Contract or Permit included in the Purchased Assets or to which any of the
Purchased Assets are subject (including any Assigned Contract); or (d) result in
the creation or imposition of any Encumbrance other than Permitted Encumbrances
on the Purchased Assets, except, in the case of (b), (c) and (d), as could not
reasonably be expected to result in a Material Adverse Effect. No consent,
approval, Permit, Governmental Order, declaration or filing with, or notice to,
any Governmental Authority is required by or with respect to Seller in
connection with the execution and delivery of this Agreement or any of the other
Transaction Documents and the consummation of the transactions contemplated
hereby and thereby.

 

Section 4.04. Material Contracts.

 

(a) Section 4.04(a) of the Disclosure Schedules lists each Contract of Seller or
Parent (x) by which any of the Purchased Assets are bound or affected or (y) to
which Seller or Parent is a party, or by which it is bound, in connection with
the Purchased Assets (such Contracts, together with all Contracts relating to
Purchased Assets set forth in Section 4.06(c) and Section 4.06(e) of the
Disclosure Schedules, being “Material Contracts”).

 

(b) Each Material Contract is valid and binding on Seller or Parent (as
applicable) in accordance with its terms and is in full force and effect. None
of Seller or, to Seller’s Knowledge, any other party thereto is in breach of or
default under (or is alleged to be in breach of or default under), or has
provided or received any notice of any intention to terminate, any Material
Contract. No event or circumstance has occurred that, with notice or lapse of
time or both, would constitute an event of default under any Material Contract
or result in a termination thereof or would cause or permit the acceleration or
other changes of any right or obligation or the loss of any benefit thereunder.
True and complete copies of each Material Contract (including all modifications,
amendments and supplements thereto and waivers thereunder) have been made
available to Buyers. To Seller’s Knowledge, there are no material disputes
pending or threatened under any Contract included in the Purchased Assets.

 

19

 

Section 4.05. Title to Purchased Assets. Seller has good and valid title to all
of the Purchased Assets. All such Purchased Assets are free and clear of
Encumbrances except for the following (collectively referred to as “Permitted
Encumbrances”):

 

(a) those items set forth in Section 4.05 of the Disclosure Schedules;

 

(b) liens for Taxes not yet due and payable or being contested in good faith by
appropriate procedures;

 

(c) mechanics’, carriers’, workmen’s, repairmen’s or other like liens arising or
incurred in the ordinary course of business consistent with past practice or
amounts that are not delinquent and which are not, individually or in the
aggregate, material to the Purchased Assets; or

 

(d) liens arising under original purchase price conditional sales contracts and
equipment leases with third parties entered into in the ordinary course of
business consistent with past practice which are not, individually or in the
aggregate, material to the Purchased Assets.

 

Section 4.06. Intellectual Property.

 

(a) Section 4.06(a) of the Disclosure Schedules lists all (i) Intellectual
Property Registrations and (ii) Purchased Assets that are not registered but
that are material to the contemplated development of Virexxa for all Permitted
Uses worldwide, subject to the rights of Seller to exploit the Excluded Uses in
the Retained Territory. Except as could not reasonably be expected to result in
a Material Adverse Effect, all required filings and fees related to the
Intellectual Property Registrations have been timely filed with and paid to the
relevant Governmental Authorities and authorized registrars, and all
Intellectual Property Registrations are otherwise in good standing. Seller has
provided Buyers with true and complete copies of file histories, documents,
certificates, office actions, correspondence, dockets and other materials
related to all Intellectual Property Registrations.

 

(b) Except as could not reasonably be expected to result in a Material Adverse
Effect, seller owns, exclusively all right, title and interest in and to the
Purchased Assets, free and clear of Encumbrances. Without limiting the
generality of the foregoing, Seller has entered into binding, written agreements
with every current and former employee of Seller, and with every current and
former independent contractor or any other Person who in any manner has a claim
of inventorship or ownership of any of the Purchased Assets, whereby such
employees, independent contractors or Persons (i) assign to Seller any ownership
interest and right they may have in the Purchased Assets; (ii) acknowledge
Seller’s exclusive ownership of all Purchased Assets; and (iii) agree to
cooperate with Seller and its assigns in connection with any lawsuit or
administrative proceeding related to the enforcement or defense of the
Intellectual Property and related to obtaining patent and other protection
associated with the Intellectual Property. Seller has provided Buyers with true
and complete copies of all such agreements. Seller is in full compliance with
all legal requirements applicable to the Purchased Assets and Seller’s ownership
and use thereof.

 

20

 

(c) Section 4.06(c) of the Disclosure Schedules lists all Intellectual Property
Licenses. Seller has made available to Buyers with true and complete copies of
all such Intellectual Property Licenses. All such Intellectual Property Licenses
are valid, binding and enforceable between Seller and the other parties thereto,
and Seller and such other parties are in full compliance with the terms and
conditions of such Intellectual Property Licenses.

 

(d) To the best of Seller’s Knowledge, the Intellectual Property does not
infringe upon, violate or misappropriate the intellectual property rights of any
person or entity. Seller has not received any communication, and no Action has
been instituted, settled or, to Seller’s Knowledge, threatened that alleges any
such infringement, violation or misappropriation of Intellectual Property of any
person, and none of the Purchased Assets are subject to any outstanding Lien
and/or Governmental Order.

 

(e) Section 4.06(e) of the Disclosure Schedules lists all licenses, sublicenses
and other agreements pursuant to which Seller grants rights or authority to any
Person with respect to any Purchased Assets or Intellectual Property Licenses.
Seller has provided Buyers with true and complete copies of all such agreements.
All such agreements are valid, binding and enforceable between Seller and the
other parties thereto, and Seller and, to the Seller’s Knowledge, such other
parties are in full compliance with the terms and conditions of such agreements.

 

(f) Section 4.06(f) of the Disclosure Schedules sets forth: (i) a list of all
patent law firms and any attorneys at such law firms involved in the
preparation, prosecution and maintenance of any patent whose rights are provided
to Xenetic pursuant to this Agreement; (ii) a list of all patents, pending or
issued, that are owned, controlled, or licensed by either Seller that contain
one or more claims that covers Virexxa for a Permitted Use.

 

Section 4.07. Suppliers and Inventory. Section 4.07 of the Disclosure Schedules
sets forth with respect to the Purchased Assets: (i) each supplier to whom
Seller has paid consideration for goods or services rendered in an amount
greater than or equal to $10,000 for each of the two most recent completed
fiscal years (collectively, the “Material Suppliers”); and (ii) a list of the
goods and services purchased from such supplier. Seller has not received any
notice, and has no Knowledge, that any of the Material Suppliers has ceased, or
intends to cease, to supply goods or services to Seller.

 

All Virexxa inventory (including the location thereof) is set forth in Section
4.07 of the Disclosure Schedules, is free and clear of all Encumbrances, and
consists of a quality and quantity usable and testable for the purposes for
which such inventory was produced, including but not limited to use in research,
development, clinical trials and as otherwise used by Seller in the past.

 

21

 

Section 4.08. Insurance. Section 4.08 of the Disclosure Schedules sets forth (a)
a true and complete list of all current policies or binders of liability,
product liability, umbrella liability and medical liability insurance (including
by not limited to coverage for patients in clinical trials or under recruitment
programs which may assert claims against Seller, its Affiliates or assigns)
maintained by Seller or its Affiliates and relating to the Purchased Assets or
the Assumed Liabilities (collectively, the “Insurance Policies”); and (b) with
respect to the Purchased Assets or the Assumed Liabilities, a list of all
pending claims and the claims history for Seller since January 1, 2014. There
are no claims related to the Purchased Assets or the Assumed Liabilities pending
under any such Insurance Policies as to which coverage has been questioned,
denied or disputed or in respect of which there is an outstanding reservation of
rights. Neither Seller nor, to Seller’s Knowledge, any of its Affiliates has
received any written notice of cancellation of, premium increase with respect
to, or alteration of coverage under, any of such Insurance Policies. All
premiums due on such Insurance Policies have either been paid or, if not yet
due, accrued. All such Insurance Policies (a) are in full force and effect and
enforceable in accordance with their terms; and (b) have not been subject to any
lapse in coverage. None of Seller or, to the Seller’s Knowledge, any of its
Affiliates is in default under, or has otherwise failed to comply with, in any
material respect, any provision contained in any such Insurance Policy. True and
complete copies of the Insurance Policies have been made available to Buyers.

 

Section 4.09. Legal Proceedings; Governmental Orders.

 

(a) Except as set forth in Section 4.09(a) of the Disclosure Schedules, as of
the date hereof there are no Actions pending or, to Seller’s Knowledge,
threatened against or by Seller or any of its Affiliates: (a) relating to or
affecting the Purchased Assets or the Assumed Liabilities; (b) seeking damages
for personal injury related to usage of Virexxa; or (c) that challenge or seek
to prevent, enjoin or otherwise delay the transactions contemplated by this
Agreement.

 

(b) Except as set forth in Section 4.09(b) of the Disclosure Schedules, there
are no outstanding Governmental Orders and no unsatisfied judgments, penalties
or awards against, relating to or affecting the Purchased Assets.

 

Section 4.10. Compliance With Laws; Permits.

 

(a) Except as could not reasonably be expected to result in a Material Adverse
Effect, each of Seller and Parent has complied during the last three years, and
is now complying, with all Laws applicable to the ownership and use of the
Purchased Assets.

 

(b) All material Permits required for the ownership and use of the Purchased
Assets have been obtained by Seller and are valid and in full force and effect.
Except as could not reasonably be expected to result in a Material Adverse
Effect, all fees and charges with respect to such Permits as of the date hereof
have been paid in full. Section 4.10(b) of the Disclosure Schedules lists all
current material Permits issued to Seller which are related to the conduct of
the ownership and use of the Purchased Assets, including the names of the
Permits and their respective dates of issuance and expiration. To the Seller’s
Knowledge, no event has occurred that, with or without notice or lapse of time
or both, would reasonably be expected to result in the revocation, suspension,
lapse or limitation of any Permit set forth in Section 4.10(b) of the Disclosure
Schedules.

 

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Section 4.11. Environmental Matters.

 

(a) The operations of Seller with respect to the Purchased Assets are currently
and have been during the last five years in compliance with all applicable
Environmental Laws. Seller has not received from any Person, with respect to the
Purchased Assets, any: (i) Environmental Notice or Environmental Claim; or (ii)
written request for information pursuant to Environmental Law, which, in each
case, either remains pending or unresolved, or is the source of ongoing
obligations or requirements.

 

(b) To Seller’s Knowledge, there does not exist any Environmental condition,
event or circumstance that might prevent or impede the contemplated use by
Buyers of the Purchased Assets or preclude the transfer of any of the Purchased
Assets.

 

(c) To the Seller’s Knowledge, there has been no Release of Hazardous Materials
giving rise to potential liability pursuant to or in contravention of any
applicable Environmental Law with respect to the Purchased Assets, and Seller
has not received any Environmental Notice that could adversely impact the
contemplated use by the Buyers of the Purchased Assets related to any Hazardous
Materials or applicable Environmental Law.

 

(d) Seller has not retained or assumed, by contract or operation of Law, any
liabilities or obligations of third parties under any applicable Environmental
Law.

 

(e) To the Seller’s Knowledge, there is not any condition, event or circumstance
concerning the Release or regulation of Hazardous Materials that might, after
the Closing Date, prevent, impede or materially increase the costs associated
with the ownership, performance or use of the Purchased Assets as currently
carried out.

 

Section 4.12. Brokers. No broker, finder or investment banker is entitled to any
brokerage, finders or other fee or commission in connection with the
transactions contemplated by this Agreement or any other Transaction Document
based upon arrangements made by or on behalf of Seller or Parent.

 

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Article V

Representations and warranties of buyers

 

Buyers represent and warrant to Seller that the statements contained in this
Article V are true and correct as of the date hereof.

 

Section 5.01. Organization of Buyer. Xenetic is a corporation duly organized,
validly existing and in good standing under the Laws of the state of Nevada.
Lipoxen is a corporation duly organized, validly existing and in good standing
under the Laws of the United Kingdom.

 

Section 5.02. Authority of Buyer. Subject to meeting the Stock Condition, each
of Buyers has full corporate power and authority to enter into this Agreement
and the other Transaction Documents to which it is a party, to carry out its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by Buyers of this
Agreement and any other Transaction Document to which either or both Buyers is a
party, the performance by Buyers of their obligations hereunder and thereunder
and the consummation by Buyers of the transactions contemplated hereby and
thereby have been duly authorized by all requisite corporate action on the part
of Buyers, with the exception of the Stock Condition. This Agreement has been
duly executed and delivered by Buyers, and (assuming due authorization,
execution and delivery by Seller) this Agreement constitutes a legal, valid and
binding obligation of Buyers enforceable against Buyers in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and other laws of general applicability relating to or affecting
creditors’ rights and to general equity principles. When each other Transaction
Document to which a Buyer is or will be a party has been duly executed and
delivered by Buyer(s) (assuming due authorization, execution and delivery by
each other party thereto), such Transaction Document will constitute a legal and
binding obligation of the Buyer(s) party thereto, enforceable against it in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and other laws of general applicability
relating to or affecting creditors’ rights and to general equity principles.

 

Section 5.03. No Conflicts; Consents. The execution, delivery and performance by
Buyers of this Agreement and the other Transaction Documents to which either or
both of them is a party, and the consummation of the transactions contemplated
hereby and thereby, do not and will not, with the exception of the Stock
Condition (which must be satisfied prior to the Closing Date): (a) conflict with
or result in a violation or breach of, or default under, any provision of the
certificate of incorporation, by-laws or other organizational documents of
Buyers; (b) conflict with or result in a violation or breach of any provision of
any Law or Governmental Order applicable to Buyers; or (c) except as set forth
in Section 5.03 of the Disclosure Schedules, require the consent, notice or
other action by any Person under any Contract to which a Buyer is a party.
Except for the need to satisfy the Stock Condition, no consent, approval,
Permit, Governmental Order, declaration or filing with, or notice to, any
Governmental Authority is required by or with respect to Buyers in connection
with the execution and delivery of this Agreement and the other Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby, except for such consents, approvals, Permits, Governmental Orders,
declarations, filings or notices which, in the aggregate, would not have a
Material Adverse Effect.

 

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Section 5.04. Brokers. No broker, finder or investment banker is entitled to any
brokerage, finders or other fee or commission in connection with the
transactions contemplated by this Agreement or any other Transaction Document
based upon arrangements made by or on behalf of Buyers.

 

Section 5.05. Legal Proceedings. There are no Actions pending or, to Buyers’
knowledge, threatened against or by either Buyer or any Affiliate of either
Buyer that challenge or seek to prevent, enjoin or otherwise delay the
transactions contemplated by this Agreement. No event has occurred or
circumstances exist that may give rise or serve as a basis for any such Action.

 

Section 5.06. 1934 Act Reports. Xenetic’s 1934 Act Reports are true and correct
in all material respects as of the date(s) filed and include all current
material information regarding Xenetic and its business, other than those items
set forth on Section 5.06 of the Disclosure Schedules.

 

Section 5.07. Rights of Minority Holders. There no rights of holders of Xenetic
securities, whether arising by contract, under the certificate of incorporation
or other governance documents or under the laws of the State of Nevada, which
would serve as a basis for any claim or action against the Seller or its
affiliates as a result of the transactions contemplated hereby.

 

Article VI

Covenants

 

Section 6.01. Conduct of Seller Operations Prior to the Closing. From the date
hereof until the Closing, except as otherwise provided in this Agreement or
consented to in writing by either Buyer (which consent shall not be unreasonably
withheld or delayed), Seller shall (x) conduct ongoing research and development
with respect to the Purchased Assets in the ordinary course of business
consistent with past practice; and (y) use commercially reasonable efforts to
maintain and preserve intact the Purchased Assets. Without limiting the
foregoing, from the date hereof until the Closing Date, Seller shall:

 

(a) preserve and maintain all Permits presently in place and which will be
required for the ownership or contemplated use by Buyers of the Purchased
Assets;

 

(b) pay the debts, Taxes and other obligations of associated with the Purchased
Assets when due;

 

(c) maintain the Purchased Assets in the same condition as they were on the date
of this Agreement;

 

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(d) continue in full force and effect without modification all Insurance
Policies, except as required by applicable Law;

 

(e) defend and protect the properties and assets included in the Purchased
Assets from infringement or usurpation;

 

(f) perform all of its obligations under all Assigned Contracts;

 

(g) maintain the Books and Records in accordance with past practice;

 

(h) continue to maintain the Purchased Assets set forth in Section 4.06(a) of
the Disclosure Schedules;

 

(i) comply in all material respects with all Laws applicable to the Purchased
Assets; and

 

(j) continue to file and pay any fees due for any Purchased Assets.

 

Section 6.02. Access to Information.

 

(a) From the date hereof until the Closing, Seller shall (a) afford Buyers and
their Representatives full and free access to and the right to inspect all of
the Purchased Assets, and any Books and Records, Contracts and other documents
and data related to the Purchased Assets; (b) furnish Buyers and their
Representatives with such financial, operating and other data and information
related to the Purchased Assets as Buyers or any of their Representatives may
reasonably request; and (c) instruct the Representatives of Seller to cooperate
with Buyers in their investigation of the Purchased Assets. Any investigation
pursuant to this Section 6.02(a) shall be conducted during normal business hours
and in such manner as not to interfere unreasonably with the conduct of research
and development effort associated with the Purchased Assets or any other
businesses of Seller. No investigation by Buyers or other information received
by Buyers shall operate as a waiver or otherwise affect any representation,
warranty or agreement given or made by Seller in this Agreement.

 

(b) From the date hereof until the Closing, Buyers shall (a) afford Seller and
its Representatives full and free access to and the right to inspect all of the
properties, assets (including, but not limited to the Buyer Intellectual
Property), premises, Books and Records, Contracts and other documents and data
related to the Buyers’ business; (b) furnish Seller and its Representatives with
such financial, operating and other data and information related to the Buyers’
business as Seller or any of its Representatives may reasonably request; and (c)
instruct the Representatives of Buyers to cooperate with Seller in its
investigation of the Buyers’ business. Any investigation pursuant to this
Section 6.02(b) shall be conducted in such manner as not to interfere
unreasonably with the conduct of the Buyers’ business. No investigation by
Seller or other information received by Seller shall operate as a waiver or
otherwise affect any representation, warranty or agreement given or made by
Buyers in this Agreement.

 

Section 6.03. Notice of Certain Events.

 

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(a) From the date hereof until the Closing, Seller shall promptly notify Buyers
in writing of:

 

(i) any fact, circumstance, event or action, the existence, occurrence or taking
of which (A) has had, or could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect, (B) has resulted in, or could
reasonably be expected to result in, any representation or warranty made by
Seller hereunder not being true and correct or (C) has resulted in, or could
reasonably be expected to result in, the failure of any of the conditions set
forth in Section 7.02 to be satisfied;

 

(ii) any written notice or other written communication from any Person alleging
that the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;

 

(iii) any written notice or other written communication from any Governmental
Authority in connection with the Purchased Assets and any transactions
contemplated by this Agreement; and

 

(iv) any Actions commenced or, to Seller’s Knowledge, threatened against Parent
or Seller relating to the Purchased Assets or the Assumed Liabilities that, if
pending on the date of this Agreement, would have been required to have been
disclosed pursuant to Section 4.09 or that relates to the consummation of the
transactions contemplated by this Agreement.

 

(b) Buyers’ receipt of information pursuant to this Section 6.03 shall not
operate as a waiver or otherwise affect any representation, warranty or
agreement given or made by Seller in this Agreement (including Section 8.02 and
Section 9.01(b)) and shall not be deemed to amend or supplement the Disclosure
Schedules.

 

(c) From the date hereof until the Closing, Buyers shall promptly notify Seller
in writing of:

 

(i) any fact, circumstance, event or action the existence, occurrence or taking
of which (A) has had, or could reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect, (B) has resulted in, or could
reasonably be expected to result in, any representation or warranty made by
Buyers hereunder not being true and correct or (C) has resulted in, or could
reasonably be expected to result in, the failure of any of the conditions set
forth in Section 7.03 to be satisfied;

 

(ii) any notice or other communication from any Person alleging that the consent
of such Person is or may be required in connection with the transactions
contemplated by this Agreement;

 

(iii) any notice or other communication from any Governmental Authority in
connection with the assets (including Buyer Intellectual Property) and any
transactions contemplated by this Agreement; and

 

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(iv) any Actions commenced or, to Buyers’ Knowledge, threatened against,
relating to or involving or otherwise affecting the Buyers’ business or the
Buyers’ assets or properties that, if pending on the date of this Agreement,
would have been required to have been disclosed pursuant to Section 5.11 or that
relates to the consummation of the transactions contemplated by this Agreement.

 

(d) Seller’s receipt of information pursuant to this Section 6.03 shall not
operate as a waiver or otherwise affect any representation, warranty or
agreement given or made by Buyers in this Agreement (including Section 8.03 and
Section 9.01(c)) and shall not be deemed to amend or supplement the Disclosure
Schedules.

 

Section 6.04. Employees and Employee Benefits

 

(a) In the event that the Transition Services and Resupply Agreement is not
entered into, commencing on the Closing Date either of Buyers, at their sole
discretion, may retain as an independent contractor or offer employment, on an
“at will” (or other) basis, to Srdjan Gavrilovic, an employee of Seller who
provides services to Seller related to the Purchased Assets (Buyers may also
elect not to engage or employ Srdjan Gavrilovic pursuant to this sentence).
Either Buyer shall notify Seller (at least two Business Days prior to the
Closing Date) if it desires to retain or offer employment to Srdjan Gavrilovic,
and Seller shall terminate his employment on the Closing Date. In the event that
such termination results in severance pay being owed, Buyer shall be responsible
for such amounts.

 

(b) Except as expressly set forth above, Seller shall be solely responsible, and
Buyers shall have no obligations whatsoever for, any compensation or other
amounts payable to any current or former employee, officer, director,
independent contractor or consultant of the Seller or its Affiliates with
respect to the Purchased Assets, including, without limitation, hourly pay,
commission, bonus, salary, accrued vacation, fringe, pension or profit sharing
benefits for any period relating to the service with Seller at any time on or
prior to the Closing Date and Seller shall pay all such amounts to all entitled
persons on or prior to the Closing Date.

 

(c) Seller shall remain solely responsible for the satisfaction of all claims
for medical, dental, life insurance, health accident or disability benefits
brought by or in respect of current or former employees, officers, directors,
independent contractors or consultants performing work with respect to the
Purchased Assets or the spouses, dependents or beneficiaries thereof, which
claims relate to events occurring on or prior to the Closing Date. Seller also
shall remain solely responsible for all worker’s compensation claims of any
current or former employees, officers, directors, independent contractors or
consultants performing work with respect to the Purchased Assets which relate to
events occurring on or prior to the Closing Date. Seller shall pay, or cause to
be paid, all such amounts to the appropriate persons as and when due.

 

(d) Each employee of Seller who have performed work with respect to the
Purchased Assets and who becomes employed by a Buyer in connection with the
transaction shall be given service credit for the purpose of eligibility under
the group health plan and eligibility and vesting only under the defined
contribution retirement plan for his or her period of service with the Seller
prior to the Closing Date. Buyers will provide benefits equal to those received
from Seller to each such employee for a minimum of twelve months from the
Closing Date.

 

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Section 6.05. Confidentiality. From and after the Closing, Seller shall, and
shall cause its Affiliates to, hold, and shall use its reasonable best efforts
to cause its or their respective Representatives to hold, in confidence any and
all information, whether written or oral, concerning the Purchased Assets,
except to the extent that Seller can show that such information (a) is generally
available to and known by the public through no fault of Seller, any of its
Affiliates or their respective Representatives; or (b) is lawfully acquired by
Seller, any of its Affiliates or their respective Representatives from and after
the Closing from sources which are not prohibited from disclosing such
information by a legal, contractual or fiduciary obligation. If Seller or any of
its Affiliates or their respective Representatives are compelled to disclose any
information by judicial or administrative process or by other requirements of
Law, Seller shall promptly notify Buyers in writing and shall disclose only that
portion of such information which Seller is advised by its counsel is legally
required to be disclosed, provided that Seller shall use reasonable best efforts
at Buyers’ expense to obtain an appropriate protective order or other reasonable
assurance that confidential treatment will be accorded such information.

 

Section 6.06. Non-competition; Non-solicitation.

 

(a) For a period of five years commencing on the Closing Date (the “Restricted
Period;” (other than with respect to those jurisdictions in which a five-year
restrictive period would result in the infringement of anti-competition law
which may be punishable as a criminal offense, in which case the Restricted
Period for such jurisdiction shall be limited to three years from the Closing
Date)), other than as contemplated by the Transition Services and Resupply
Agreement, Seller shall not, and shall not permit any of its Affiliates to,
directly or indirectly: (i) engage in the Restricted Business in the Territory;
(ii) have an interest in any Person that engages directly or indirectly in the
Restricted Business in the Territory in any capacity, including as a partner,
shareholder, member, employee, principal, agent, trustee or consultant; or (iii)
cause or knowingly induce or encourage any material supplier or licensor of the
technology, goods or services associated with the Purchased Assets, or any other
Person who has a material business relationship with the research and
development activities associated with the Purchased Assets, to terminate or
modify any such actual or prospective relationship or lessen the amount of
business they do with either Buyer (or its Affiliates) with respect to such
Buyer’s (or its Affiliates’) use of the Purchased Assets. Notwithstanding the
foregoing, Seller may own, directly or indirectly: (i) capital stock of Xenetic;
and (ii) solely as an investment, securities of any Person traded on any
national securities exchange if Seller is not a controlling Person of, or a
member of a group which controls, such Person and does not, directly or
indirectly, own 10% or more of any class of securities of such Person.

 

(b) During the Restricted Period, Seller shall not, and shall not permit any of
its Affiliates to, directly or indirectly, hire or solicit any person who is
offered employment by either Buyer pursuant to Section 6.04(a) or is or was
employed by either Buyer or its Affiliates with respect to activities associated
with the Purchased Assets during the Restricted Period, or encourage any such
employee to leave such employment or hire any such employee who has left such
employment, except pursuant to a general solicitation which is not directed
specifically to any such employees; provided, that nothing in this Section
6.06(b) shall prevent Seller or any of its Affiliates from hiring (i) any
employee whose employment has been terminated by a Buyer or (ii) after 180 days
from the date of termination of employment, any employee whose employment has
been terminated by the employee.

 

29

 

(c) Seller acknowledges that a breach or threatened breach of this Section 6.06
would give rise to irreparable harm to Buyers, for which monetary damages would
not be an adequate remedy, and hereby agrees that in the event of a breach or a
threatened breach by Seller of any such obligations, Buyers shall, in addition
to any and all other rights and remedies that may be available to it in respect
of such breach, be entitled to seek equitable relief, including a temporary
restraining order, an injunction, specific performance and any other relief that
may be available from a court of competent jurisdiction (without any requirement
to post bond).

 

(d) Seller acknowledges that the restrictions contained in this Section 6.06 are
reasonable and necessary to protect the legitimate interests of Buyers and
constitute a material inducement to Buyers to enter into this Agreement and
consummate the transactions contemplated by this Agreement. In the event that
any covenant contained in this Section 6.06 should ever be adjudicated to exceed
the time, geographic, product or service or other limitations permitted by
applicable Law in any jurisdiction, then any court is expressly empowered to
reform such covenant, and such covenant shall be deemed reformed, in such
jurisdiction to the maximum time, geographic, product or service or other
limitations permitted by applicable Law. The covenants contained in this Section
6.06 and each provision hereof are severable and distinct covenants and
provisions. The invalidity or unenforceability of any such covenant or provision
as written shall not invalidate or render unenforceable the remaining covenants
or provisions hereof, and any such invalidity or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such covenant or
provision in any other jurisdiction.

 

Section 6.07. Governmental Approvals and Consents

 

(a) Each party hereto shall, as promptly as possible, (i) make, or cause or be
made, all filings and submissions required under any Law applicable to such
party or any of its Affiliates; and (ii) use reasonable best efforts to obtain,
or cause to be obtained, all consents, authorizations, orders and approvals from
all Governmental Authorities that may be or become necessary for its execution
and delivery of this Agreement and the performance of its obligations pursuant
to this Agreement and the other Transaction Documents. Each party shall
cooperate fully with the other party and its Affiliates in promptly seeking to
obtain all such consents, authorizations, orders and approvals. The parties
hereto shall not willfully take any action that will have the effect of
delaying, impairing or impeding the receipt of any required consents,
authorizations, orders and approvals. Further, following the execution of this
Agreement (upon the request of Buyer), Kevelt will cooperate with Buyer to
transfer to Buyer all United States orphan designations of Virexxa (including,
but not limited to, treatment of progesterone receptor negative endometrial
cancer in conjunction with progesterone therapy, under the generic name
Cridanimod), including, but not limited to, assisting Buyer with the preparation
of any filings necessary to effectuate such transfer and providing writing
consent to such transfer.

 

30

 

(b) Seller and Buyers shall use reasonable best efforts to give all notices to,
and obtain all consents from, all third parties that are described in Section
6.07 of the Disclosure Schedules.

 

(c) Without limiting the generality of the parties’ undertakings pursuant to
subsections (a) and (b) above, each of the parties hereto shall use all
reasonable best efforts to:

 

(i) respond to any inquiries by any Governmental Authority regarding antitrust
or other matters with respect to the transactions contemplated by this Agreement
or any other Transaction Document;

 

(ii) avoid the imposition of any order or the taking of any action that would
restrain, alter or enjoin the transactions contemplated by this Agreement or any
other Transaction Document; and

 

(iii) in the event any Governmental Order adversely affecting the ability of the
parties to consummate the transactions contemplated by this Agreement or any
other Transaction Document has been issued, to have such Governmental Order
vacated or lifted.

 

(d) All analyses, appearances, meetings, discussions, presentations, memoranda,
briefs, filings, arguments, and proposals made by or on behalf of either party
before any Governmental Authority or the staff or regulators of any Governmental
Authority, in connection with the transactions contemplated hereunder (but, for
the avoidance of doubt, not including any interactions between Seller or Buyers
with Governmental Authorities in the ordinary course of business, any disclosure
which is not permitted by Law or any disclosure containing confidential
information) shall be disclosed to the other party hereunder in advance of any
filing, submission or attendance, it being the intent that the parties will
consult and cooperate with one another, and consider in good faith the views of
one another, in connection with any such analyses, appearances, meetings,
discussions, presentations, memoranda, briefs, filings, arguments, and
proposals. Each party shall give notice to the other party with respect to any
meeting, discussion, appearance or contact with any Governmental Authority or
the staff or regulators of any Governmental Authority, with such notice being
sufficient to provide the other party with the opportunity to attend and
participate in such meeting, discussion, appearance or contact.

 

(e) Notwithstanding the foregoing, nothing in this Section 6.07 shall require,
or be construed to require, Buyers or any of their Affiliates to agree to (i)
sell, hold, divest, discontinue or limit, before or after the Closing Date, any
assets, businesses or interests of Buyers or any of their Affiliates; (ii) any
conditions relating to, or changes or restrictions in, the operations of any
such assets, businesses or interests which, in either case, would reasonably be
expected to result in a Material Adverse Effect or materially and adversely
impact the economic or business benefits to Buyers of the transactions
contemplated by this Agreement and the other Transaction Documents; or (iii) any
material modification or waiver of the terms and conditions of this Agreement.

 

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Section 6.08. Books and Records.

 

(a) In order to facilitate the resolution of any claims made against or incurred
by Seller prior to the Closing, or for any other reasonable purpose, for a
period of five (5) years after the Closing, Buyers shall:

 

(i) retain the Books and Records (including personnel files) relating to periods
prior to the Closing in a manner reasonably consistent with the prior practices
of Seller; and

 

(ii) upon reasonable notice, afford the Seller’s Representatives reasonable
access (including the right to make, at Seller’s expense, photocopies), during
normal business hours, to such Books and Records.

 

(b) In order to facilitate the resolution of any claims made by or against or
incurred by Buyers after the Closing, or for any other reasonable purpose, for a
period of five (5) years following the Closing, Seller shall:

 

(i) retain the books and records (including personnel files) of Seller which
relate to the Purchased Assets for periods prior to the Closing; and

 

(ii) upon reasonable notice, afford either Buyer’s Representatives reasonable
access (including the right to make, at Buyers’ expense, photocopies), during
normal business hours, to such books and records.

 

(c) Neither Buyers nor Seller shall be obligated to provide the other party or
parties with access to any books or records (including personnel files) pursuant
to this Section 6.08 where such access would violate any Law.

 

Section 6.09. Closing Conditions. From the date hereof until the Closing, each
party hereto shall use reasonable best efforts to take such actions as are
necessary to expeditiously satisfy the closing conditions set forth in Article
VII hereof.

 

Section 6.10. Public Announcements. Unless otherwise required by applicable Law
or stock exchange requirements (based upon the reasonable advice of counsel), no
party to this Agreement shall make any public announcements in respect of this
Agreement or the transactions contemplated hereby or otherwise communicate with
any news media without the prior written consent of the other party (which
consent shall not be unreasonably withheld or delayed), and the parties shall
cooperate as to the timing and contents of any such announcement.

 

Section 6.11. Transfer Taxes. All transfer, documentary, sales, use, stamp,
registration, value added and other such Taxes and fees (including any penalties
and interest) incurred in connection with this Agreement and the other
Transaction Documents (including any real property transfer Tax and any other
similar Tax) shall be paid equally by Seller and Buyer when due. Seller shall,
at its own expense and subject to Buyer approval of the preparation thereof,
timely file any Tax Return or other document with respect to such Taxes or fees
(and Buyers shall cooperate with respect thereto as necessary).

 

32

 

Section 6.12. Capital Raise. Xenetic shall use commercially reasonable efforts
to conduct the Capital Raise and, if the Capital Raise is a public offering,
Xenetic will prepare and file a registration statement on Form S-1 (or any
successor form) no later than 15 days following the Closing Date with respect to
the Capital Raise (or such later date as deemed advisable by the underwriter of
the Capital Raise); provided, however, in the event Xenetic reasonably
determines that an audit of the activities associated with the Purchased Assets
is required to be performed by a registered public account firm pursuant to U.S.
federal securities laws in connection with any such registration statement or
Xenetic’s reporting obligations, the Form S-1 shall be filed no later than 15
days following completion of the audit. Seller shall comply with any and all
requests of any kind related to the audit and any delay due to Seller’s failure
to timely provide any and all responses to auditor’s requests shall result in an
extension of time in the performance of any obligations of Buyer under this
Agreement that is equivalent to the time of the delay plus 30 days. Xenetic
shall work diligently to obtain effectiveness of such registration statement, if
a public offering, and conduct the Capital Raise as soon as reasonably
practicable after effectiveness thereof or otherwise in the case of a private
placement. Seller shall timely provide to Buyers all information reasonably
requested by either Buyer with respect to Virexxa, Seller and Seller’s
Affiliates necessary for Xenetic to file such registration statement or prepare
such offering documents as may be needed in a private placement (including, any
information necessary to complete an audit of Seller and/or the activities
associated with the Purchased Assets if so required, and any other information
regarding Seller or its Affiliates or the Purchased Assets that is required for
inclusion in any registration statement in the event that the Capital Raise is a
public offering). Parent or its designees shall purchase in the Capital Raise,
or in a private placement concurrent with the Capital Raise in the event of a
public offering, such number of shares of Xenetic’s common stock equal to the
Additional Purchase Amount. After March 31, 2016, in the event Xenetic has been
unable, despite using commercially reasonable efforts to do so, to cause the
listing of its common stock on a U.S. national stock exchange or on any NASDAQ
market tier or any NYSE market tier (including NYSE MKT) (as contemplated by
Section 6.15) then, in lieu of the requirements of the immediately preceding
sentence, Parent shall loan to Xenetic an amount up to the Additional Purchase
Amount at such times and in such increments as requested by Xenetic upon five
(5) Business Day written notice (each such loan, a “Further Loan”). Each such
Further Loan shall be evidenced by an amendment to the Additional Convertible
Note (or an additional note which will be considered included in the term
Additional Convertible Note) to reflect a corresponding increase the
then-outstanding principal balance thereof.

 

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Further, at or prior to the close of business on the last business day
immediately preceding the date of initial closing of the Capital Raise (the
“Measurement Date”), Parent shall convert the Revised Current Convertible Note
and Additional Convertible Note to shares of Xenetic’s common stock in
accordance with the conversion terms contained therein, and shall exercise the
Current Warrant and Additional Warrant on a cashless exercise basis in
accordance with their terms in the event that the stock price of Xenetic Common
Stock as of the Measurement Date is above the exercise price on the Current
Warrant and the Additional Warrant. In the event that immediately prior to the
initial closing of the Capital Raise (should it occur), Parent together with its
Affiliates own in the aggregate less than 72% of the outstanding shares of
common stock of Xenetic, as determined in accordance with the procedure below,
as of the Measurement Date, then as of the date of the initial closing of the
Capital Raise Xenetic will issue to Parent additional shares of common stock of
Xenetic (the “New Parent Shares”). In making such computation for the number of
New Parent Shares, the percentage of Xenetic shares held on the Measurement Date
shall be determined by computing first, the “Parent Ownership Amount,” which is
the number of shares of Xenetic common stock held by any of Parent and its
Affiliates as of the Measurement Date plus the number of shares of Xenetic
common stock issuable to Parent pursuant to its undertaking to purchase the
Additional Purchase Amount in the Capital Raise plus the shares of Xenetic
common stock issuable to the Parent and its Affiliates with respect to stock
options and warrants issued by Xenetic that are “vested and in the money”. For
the avoidance of doubt, the Inventor Shares shall not be included in the
calculation of either the Parent Ownership Amount or the Xenetic Outstanding
Stock. The “Outstanding Xenetic Stock” is the sum of (I) the Parent Ownership
Amount, plus (II) the sum of the following as of the Measurement Date: (a) all
issued and outstanding shares of common stock of Xenetic other than those
included in: (i) the Parent Ownership Amount; and (ii) the amount of the
Inventors’ Shares (i.e. 11,000,000 shares); plus (b) all shares of common stock
of Xenetic issuable to Scott Maguire and Flagship Consulting, Inc. with respect
to their accrued, unpaid base compensation; plus (c) the number of shares of
Xenetic common stock issuable (and not covered in (a) or (b) immediately above)
with respect to all other convertible notes, stock options and warrants issued
by Xenetic that are “vested and in the money” (i.e., the exercise or conversion
price is at a price per share below the per share price of the stock being sold
at the initial closing of the Capital Raise and relates to the vested portion
only).

 

In the event that the quotient of the Parent Ownership Amount divided by the
Outstanding Xenetic Stock is less than 72%, then Xenetic, as of the initial
closing of the Capital Raise, Xenetic agrees to issue to Parent the New Parent
Shares. Where the New Parent Shares is equal to “N” and “N” is calculated as
follows:

 

N = (0.72* Y / 0.28) – (Z / 0.28)

 

In the foregoing computation “Y” is equal to the Xenetic Outstanding Stock and
“Z” is equal to the Parent Ownership Amount.

 

Effective as of` the date of funding of the Initial Funding Tranche, Xenetic
shall provide to each of Scott Maguire and Flagship Consulting, Inc. the right
to convert all of their accrued, unpaid compensation to common stock of Xenetic
as of the date hereof and hereafter accruing through the Outside Date (the
“Deferred Salary”) on pro rata terms to the conversion rights with respect to
the Additional Convertible Note and shall provide for accrued interest with
respect to the Deferred Salary from the dates of accrual (from time to time) at
the same rate of interest as is applicable to the Additional Convertible Note
(which shall also be convertible), with all such Deferred Salary coming due on
the Outside Date.

 

Section 6.13. Additional Loan Amount(a) . (i) Within five (5) Business Days
following the issuance of the Inventors’ Shares, Parent shall loan to Xenetic
$1.5 million (the “Initial Funding Tranche”) and Xenetic shall issue to Seller
the Additional Convertible Note and the Additional Warrant; (ii) within five (5)
Business Days of written notice from Xenetic to Parent (provided such notice
shall be delivered on or after December 1, 2015) but no later than December 31,
2015, Parent shall have loaned to Xenetic an additional $1 million which loan
shall be evidenced by an amendment to the Additional Convertible Note (or an
additional note which will be considered included in the term Additional
Convertible Note) to reflect a corresponding increase the then-outstanding
principal balance thereof and shall be governed by the terms thereof; and (iii)
within five (5) Business Days of written notice from Xenetic to Parent (provided
such notice shall be delivered on or after February 1, 2016) but no later than
February 28, 2016, Parent shall have loaned to Xenetic an additional $1 million
which loan shall be evidenced by a further amendment to the Additional
Convertible Note (or an additional note which will be considered included in the
term Additional Convertible Note) to reflect a corresponding increase the
then-outstanding principal balance thereof and shall be governed by the terms
thereof (with the amounts loaned pursuant to (i)-(iv) of this Section 6.13 being
referred to as the “Additional Loan Amount”).

 

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Section 6.14. Further Assurances. Following the Closing, each of the parties
hereto shall, and shall cause their respective Affiliates to, execute and
deliver such additional documents, instruments, conveyances and assurances and
take such further actions as may be reasonably required to carry out the
provisions hereof and give effect to the transactions contemplated by this
Agreement and the other Transaction Documents.

 

Section 6.15. Listing. Xenetic shall use commercially reasonable efforts to
cause the listing of Xenetic’s common stock on a U.S. national stock exchange or
on any NASDAQ market tier or any NYSE market tier (including NYSE MKT) as soon
as practicable following the initial closing of the Capital Raise, and to that
end Seller agrees to cause all of its Affiliates holding Xenetic’s common stock
to vote in favor of such corporate actions of Xenetic as necessary to effect
such listing.

 

Section 6.16. Securities Restrictions. Until the earliest to occur of the
initial closing of the Capital Raise or March 31, 2016 Xenetic shall not, other
than pursuant to its obligations under this Agreement: (i) directly or
indirectly, offer, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase or otherwise transfer or dispose of any shares of Xenetic
common stock or any securities convertible into or exercisable or exchangeable
for shares of Xenetic’s common stock, or file any registration statement under
the Securities Act with respect to any of the foregoing; or (ii) enter into any
swap or any other agreement or any transaction that transfers, in whole or in
part, directly or indirectly, the economic consequence of ownership of shares of
Xenetic’s common stock, whether any such swap or transaction described in (i) or
(ii) is to be settled by delivery of shares of Xenetic’s common stock or such
other securities, in cash or otherwise; provided, however, the restrictions in
this Section 6.15 shall not apply to: (a) Xenetic raising up to $1 million in
working capital prior to the initial closing of the Capital Raise; or (b) the
issuance of stock options authorized for issuance by Buyer at its August 27,
2015 board of directors meeting, or the issuance of common stock upon the
exercise of any existing stock options or warrants outstanding as of the date of
this Agreement or otherwise contemplated to be issued pursuant to the terms of
this Agreement.

 

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Section 6.17. Shareholder Approval. Xenetic shall use its best efforts to obtain
any necessary approval by its shareholders in connection with the transactions
contemplated by this Agreement. Parent agrees to vote all of its shares of
Xenetic common stock and to cause all of its controlled Affiliates to vote their
shares of Xenetic common stock in favor of an amendment to Xenetic’s Articles of
Incorporation to authorize the issuance of up to 1.5 billion shares of common
stock and in favor of any reverse stock split proposed by Buyer in order to seek
to obtain listing of its common stock on NASDAQ or NYSE MKT.

 

Section 6.18. Additional Transactions. Following the Capital Raise, Parent
intends to create NewCo and, at the written request of Parent, Xenetic and
Parent shall undertake the transactions shown in Annex A hereto in a
commercially reasonable time frame; provided, however, Parent agrees to be
responsible for all costs and expenses incurred by Xenetic in the undertaking of
the transactions contemplated by Annex A (including, but not limited to, any
regulatory or audit costs and fees associated therewith). To the extent Parent
fails to timely pay all such costs and expenses, Xenetic may pay such amounts
and then offset such payments against amounts due and owing under the Additional
Convertible Note (which, for the avoidance of doubt, shall not constitute a
breach of the “Use of Proceeds” requirements set forth in Section 4.9 of the
Securities Purchase Agreement). Xenetic agrees that following the creation of
NewCo, Xenetic will issue shares of Xenetic on a 1:1 basis (1 new issued share
for 1 share of Xenetic owned by NewCo) to holders of NewCo in exchange for all
outstanding shares of NewCo (which exchange may occur pursuant to one or more
agreements with shareholders of Newco).

 

Section 6.19. Conduct of Buyer Operations Prior to Closing. From the date hereof
until the Closing, except as otherwise provided in this Agreement or consented
to in writing by Buyer (which consent shall not be unreasonably withheld or
delayed), Buyers shall (x) conduct the Buyers’ business in the ordinary course
of business consistent with past practice; and (y) use reasonable best efforts
to maintain and preserve intact their current organization, operations and
franchise and to preserve the rights, franchises, goodwill and relationships of
their employees, customers, lenders, suppliers, regulators and others having
relationships with the Buyers’ business. Without limiting the foregoing, from
the date hereof until the Closing Date, Buyers shall:

 

(a) preserve and maintain all Permits required for the conduct of the Buyers’
business as currently conducted or the ownership and use of the Buyers’ assets
and properties;

 

(b) maintain the Buyers’ properties and assets in the same condition as they
were on the date of this Agreement, subject to reasonable wear and tear;

 

(c) continue in full force and effect without modification all Buyer Insurance
Policies, except as required by applicable Law;

 

(d) defend and protect the Buyers’ properties and assets from infringement or
usurpation;

 

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(e) perform all of its obligations under all Buyer Material Contracts;

 

(f) maintain the Books and Records in accordance with past practice;

 

(g) continue to maintain all Buyer Intellectual Property set forth in Section
5.09(a) of the Disclosure Schedules;

 

(h) continue to file and pay any fees due for any Buyer Intellectual Property;
and

 

(i) comply in all material respects with all Laws applicable to the conduct of
the Buyers’ business or the ownership and use of the Buyers’ assets and
properties.

 

Article VII

Conditions to closing

 

Section 7.01. Conditions to Obligations of All Parties. The obligations of each
party to consummate the transactions contemplated by this Agreement shall be
subject to the fulfillment, at or prior to the Closing, of each of the following
conditions and the satisfaction of the closing conditions set forth in Section
7.02 below (except to the extent waived by Buyers) and the satisfaction of the
closing conditions set forth in Section 7.03 below (except to the extent waived
by Seller), as promptly as practicable following the satisfaction of the
conditions set forth below (or waiver by the party in whose favor the closing
conditions are made):

 

(a) No Governmental Authority shall have enacted, issued, promulgated, enforced
or entered any Governmental Order which is in effect and has the effect of
making the transactions contemplated by this Agreement illegal, otherwise
restraining or prohibiting consummation of such transactions or causing any of
the transactions contemplated hereunder to be rescinded following completion
thereof.

 

(b) Seller and/or Parent shall have received all consents, authorizations,
orders and approvals from the Governmental Authorities referred to in Section
4.03 and Buyers shall have received all consents, authorizations, orders and
approvals from the Governmental Authorities referred to in Section 5.03, in each
case, in form and substance reasonably satisfactory to Buyers and Seller, and no
such consent, authorization, order and approval shall have been revoked;
provided however, that any consent, authorization, order or approval that cannot
reasonably be determined to have a Material Adverse Effect on a party (as
determined in the good faith discretion by the party for whose benefit such
consent, authorization, order or approval runs) shall not be required as a
condition precedent to Closing.

 

(c) The Stock Condition shall have been satisfied by way of a shareholders
meeting to be held on or before February 28, 2016 by Xenetic. Parent agrees to
vote all of its shares of Xenetic common stock and to cause all of its
Affiliates to vote their shares of Xenetic common stock in favor of an amendment
to Xenetic’s Articles of Incorporation to authorize the issuance of up to 1.5
billion shares of common stock (or such other amount as is proposed by Xenetic
at its next stockholders meeting) and in favor of any reverse stock split
proposed by Xenetic in order to seek to obtain listing of its common stock on
NASDAQ or NYSE MKT.

 

37

 

(d) Xenetic and Parent shall have amended and restated the Original Convertible
Note and Original Warrant in the form attached hereto as the New Original
Convertible Note and Warrant.

 

Section 7.02. Conditions to Obligations of Buyers. The obligations of Buyers to
consummate the transactions contemplated by this Agreement shall be subject to
the fulfillment or Buyers’ waiver (by Xenetic acting on behalf of Buyers), at or
prior to the Closing, of each of the following conditions:

 

(a) Other than the representations and warranties of Seller or Parent contained
in Section 4.01, Section 4.02, and Section 4.13, the representations and
warranties of Seller contained in this Agreement shall be true and correct in
all respects (in the case of any representation or warranty qualified by
materiality or Material Adverse Effect) or in all material respects (in the case
of any representation or warranty not qualified by materiality or Material
Adverse Effect) on and as of the date hereof and on and as of the Closing Date
with the same effect as though made at and as of such date (except those
representations and warranties that address matters only as of a specified date,
the accuracy of which shall be determined as of that specified date in all
respects). The representations and warranties of Seller or Parent contained in
Section 4.01, Section 4.02 and Section 4.13 shall be true and correct in all
respects on and as of the date hereof and on and as of the Closing Date with the
same effect as though made at and as of such date (except those representations
and warranties that address matters only as of a specified date, the accuracy of
which shall be determined as of that specified date in all respects).

 

(b) Each of Seller and Parent shall have duly performed and complied in all
material respects with all agreements, covenants and conditions required by this
Agreement to be performed or complied with by it prior to or on the Closing
Date.

 

(c) No Action shall have been commenced against Buyers, Seller or Parent, which
would prevent the Closing. No injunction or restraining order shall have been
issued by any Governmental Authority, and be in effect, which restrains or
prohibits any transaction contemplated hereby.

 

(d) All approvals, consents and waivers that are listed on Section 4.03 of the
Disclosure Schedules shall have been received, and executed counterparts thereof
shall have been delivered to Buyers at or prior to the Closing, provided
however, that any approval, consent or waiver that cannot reasonably be
determined to have a Material Adverse Effect on a party (as determined in the
good faith discretion of the party for whose benefit such approval, consent or
waiver runs)

 

(e) From the date of this Agreement, there shall not have occurred any Material
Adverse Effect, nor shall any event or events have occurred that, individually
or in the aggregate, with or without the lapse of time, would reasonably be
expected to result in a Material Adverse Effect.

 

38

 

(f) Seller and Parent shall have delivered to Buyers duly executed counterparts
to the Transaction Documents (other than this Agreement) to which it is a party
and such other documents and deliveries set forth in Section 3.02(a).

 

(g) All Encumbrances relating to the Purchased Assets shall have been released
in full, other than Permitted Encumbrances, and Seller shall have delivered to
Buyers written evidence, in form satisfactory to Buyers in their sole
discretion, of the release of any such Encumbrances.

 

(h) Buyers shall have received a certificate, dated the Closing Date and signed
by a duly authorized officer of Seller, that each of the conditions set forth in
Section 7.02(a) and Section 7.02(b) have been satisfied and that all Permits
necessary for Seller to continue to operate under the Seller Retained Contracts
remain in force and effect (the “Seller Closing Certificate”).

 

(i) Buyers shall have received a certificate of the Chief Executive Officer or a
Director of Seller certifying that attached thereto are true and complete copies
of all resolutions adopted by the board of directors of Seller authorizing the
execution, delivery and performance of this Agreement and the other Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby, and that all such resolutions are in full force and effect and are all
the resolutions adopted in connection with the transactions contemplated hereby
and thereby.

 

(j) Buyers shall have received a certificate of the Chief Executive Officer or a
Director of Seller certifying the names and signatures of the officers of Seller
authorized to sign this Agreement, the Transaction Documents and the other
documents to be delivered hereunder and thereunder.

 

(k) Seller shall have delivered to Buyers such other documents or instruments as
Buyers reasonably request and are reasonably necessary to consummate the
transactions contemplated by this Agreement.

 

Section 7.03. Conditions to Obligations of Seller and Parent. The obligations of
Seller and Parent to consummate the transactions contemplated by this Agreement
shall be subject to the fulfillment or Seller’s or Parent’s waiver, at or prior
to the Closing, of each of the following conditions:

 

(a) Other than the representations and warranties of Buyers contained in Section
5.01, Section 5.02 and Section 5.04, the representations and warranties of
Buyers contained in this Agreement, the other Transaction Documents and any
certificate or other writing delivered pursuant hereto shall be true and correct
in all respects (in the case of any representation or warranty qualified by
materiality or Material Adverse Effect) or in all material respects (in the case
of any representation or warranty not qualified by materiality or Material
Adverse Effect) on and as of the date hereof and on and as of the Closing Date
with the same effect as though made at and as of such date (except those
representations and warranties that address matters only as of a specified date,
the accuracy of which shall be determined as of that specified date in all
respects). The representations and warranties of Buyers contained in Section
5.01, Section 5.02 and Section 5.04 shall be true and correct in all respects on
and as of the date hereof and on and as of the Closing Date with the same effect
as though made at and as of such date.

 

39

 

(b) Buyers shall have duly performed and complied in all material respects with
all agreements, covenants and conditions required by this Agreement and each of
the other Transaction Documents to be performed or complied with by them prior
to or on the Closing Date.

 

(c) No injunction or restraining order shall have been issued by any
Governmental Authority, and be in effect, which restrains or prohibits any
material transaction contemplated hereby.

 

(d) All approvals, consents and waivers that are listed on Section 5.03 of the
Disclosure Schedules shall have been received, and executed counterparts thereof
shall have been delivered to Seller at or prior to the Closing.

 

(e) Buyers shall have delivered to Seller or Parent (as applicable) duly
executed counterparts to the Transaction Documents (other than this Agreement)
and such other documents and deliveries set forth in Section 3.02(b).

 

(f) Seller shall have received a certificate, dated the Closing Date and signed
by a duly authorized officer of each Buyer, that each of the conditions set
forth in Section 7.03(a) and Section 7.03(b) have been satisfied (the “Buyer
Closing Certificate”).

 

(g) Seller shall have received a certificate of the Secretary or an Assistant
Secretary (or equivalent officer) of each Buyer certifying that attached thereto
are true and complete copies of all resolutions adopted by the board of
directors of Buyer authorizing the execution, delivery and performance of this
Agreement and the other Transaction Documents and the consummation of the
transactions contemplated hereby and thereby, and that all such resolutions are
in full force and effect and are all the resolutions adopted in connection with
the transactions contemplated hereby and thereby.

 

(h) Seller shall have received a certificate of the Secretary or an Assistant
Secretary (or equivalent officer) of each Buyer certifying the names and
signatures of the officers of Buyer authorized to sign this Agreement, the
Transaction Documents and the other documents to be delivered hereunder and
thereunder.

 

(i) Xenetic shall have appointed Dr. Curtis Lockshin as Chief Operating Officer
of Xenetic.

 

(j) Xenetic shall have issued to Parent the shares referenced in Section
2.05(a).

 

40

 

(k) Buyers shall have delivered to Seller such other documents or instruments as
Seller reasonably requests and are reasonably necessary to consummate the
transactions contemplated by this Agreement.

 

Article VIII

Indemnification

 

Section 8.01. Survival. Subject to the limitations and other provisions of this
Agreement, the representations and warranties contained herein shall survive the
Closing and shall remain in full force and effect until the date that is two (2)
years from the Closing Date; provided, that the representations and warranties
in Section 4.01, Section 4.02, Section 4.05, Section 4.06, Section 5.01, Section
5.02 and Section 5.04 shall survive until five (5) years from the Closing Date.
All covenants and agreements of the parties contained herein shall survive the
Closing indefinitely or for the period explicitly specified therein.
Notwithstanding the foregoing, any claims asserted in good faith with reasonable
specificity (to the extent known at such time) and in writing by notice from the
non-breaching party to the breaching party prior to the expiration date of the
applicable survival period shall not thereafter be barred by the expiration of
the relevant representation or warranty and such claims shall survive until
finally resolved.

 

Section 8.02. Indemnification by Seller and Parent. Subject to the other terms
and conditions of this Article VIII, each of Seller and Parent shall, jointly
and severally, indemnify and defend each of Buyers and their Affiliates and
their respective Representatives (collectively, the “Buyer Indemnitees”)
against, and shall hold each of them harmless from and against, and shall pay
and reimburse each of them for, any and all Losses incurred or sustained by, or
imposed upon, the Buyer Indemnitees based upon, arising out of, with respect to
or by reason of:

 

(a) any inaccuracy in or breach of any of the representations or warranties of
Seller contained in this Agreement or in any certificate or instrument delivered
by or on behalf of Seller pursuant to this Agreement, as of the date such
representation or warranty was made or as if such representation or warranty was
made on and as of the Closing Date (except for representations and warranties
that expressly relate to a specified date, the inaccuracy in or breach of which
will be determined with reference to such specified date);

 

(b) any breach or non-fulfillment of any covenant, agreement or obligation to be
performed by Seller pursuant to this Agreement or any of the other Transaction
Documents;

 

(c) any Excluded Asset or any Excluded Liability;

 

(d) any Third Party Claim based upon, resulting from or arising out of the
business, operations, properties, assets or obligations of Seller or any of its
Affiliates (other than the Purchased Assets or Assumed Liabilities) conducted,
existing or arising on or prior to the Closing Date;

 

(e) with respect to the Intellectual Property Registrations jointly owned by
Seller and Buyers, any Third Party Claim based upon, resulting from or arising
out of the business, operations, properties, assets or obligations of Seller or
any of its Affiliates (other than the Buyers) conducted, existing or arising on
or after the Closing Date.

 

41

 

Section 8.03. Indemnification By Buyers. Subject to the other terms and
conditions of this Article VIII, Buyers shall indemnify and defend each of
Seller and its Affiliates and their respective Representatives (collectively,
the “Seller Indemnitees”) against, and shall hold each of them harmless from and
against, and shall pay and reimburse each of them for, any and all Losses
incurred or sustained by, or imposed upon, the Seller Indemnitees based upon,
arising out of, with respect to or by reason of:

 

(a) any inaccuracy in or breach of any of the representations or warranties of
Buyers contained in this Agreement or in any certificate or instrument delivered
by or on behalf of Buyers pursuant to this Agreement, as of the date such
representation or warranty was made or as if such representation or warranty was
made on and as of the Closing Date (except for representations and warranties
that expressly relate to a specified date, the inaccuracy in or breach of which
will be determined with reference to such specified date);

 

(b) any breach or non-fulfillment of any covenant, agreement or obligation to be
performed by Buyers pursuant to this Agreement or any of the other Transaction
Documents;

 

(c) any Assumed Liability; or

 

(d) any Third Party Claim based upon, resulting from or arising out of the
business, operations, properties, assets or obligations of Buyers or any of
their Affiliates conducted, existing or arising on or prior to the Closing Date;
or

 

(e) with respect to the Intellectual Property Registrations jointly owned by
Seller and Buyers, any Third Party Claim based upon, resulting from or arising
out of the business, operations, properties, assets or obligations of Buyers or
any of its Affiliates (other than the Seller or Parent) conducted, existing or
arising on or after the Closing Date

 

Section 8.04. Certain Limitations. The indemnification provided for in Section
8.02 and Section 8.03 shall be subject to the following limitations:

 

(a) Seller shall not be liable to the Buyer Indemnitees for indemnification
under Section 8.02(a) (other than with respect to a claim for indemnification
based upon, arising out of, with respect to or by reason of any inaccuracy in or
breach of any representation or warranty in Section 4.01, Section 4.02. Section
4.05 and Section 4.06 (the “Buyer Basket Exclusions”)), until the aggregate
amount of all Losses in respect of indemnification under Section 8.02(a) (other
than those based upon, arising out of, with respect to or by reason of the Buyer
Basket Exclusions) exceeds $100,000, in which event Seller shall be required to
pay or be liable for all such Losses from the first dollar after $100,000.

 

(b) Buyers shall not be liable to the Seller Indemnitees for indemnification
under Section 8.03(a) (other than with respect to a claim for indemnification
based upon, arising out of, with respect to or by reason of any inaccuracy in or
breach of any representation or warranty in Section 5.01, Section 5.02 and
Section 5.04 (the “Seller Basket Exclusions”)) until the aggregate amount of all
Losses in respect of indemnification under Section 8.03(a) (other than those
based upon, arising out of, with respect to or by reason of the Seller Basket
Exclusions) exceeds $100,000, in which event Buyers shall be required to pay or
be liable for all such Losses from the first dollar after $100,000.

 

42

 

(c) For purposes of this Article VIII, any inaccuracy in or breach of any
representation or warranty shall be determined without regard to any
materiality, Material Adverse Effect or other similar qualification contained in
or otherwise applicable to such representation or warranty.

 

(d) Notwithstanding anything to the contrary, in no event shall Seller and
Parent, on the one hand, or Buyers, on the other hand be liable under this
Article VIII for Losses exceeding $4,000,000.

 

Section 8.05. Indemnification Procedures. The party making a claim under this
Article VIII is referred to as the “Indemnified Party” and the party against
whom such claims are asserted under this Article VIII is referred to as the
“Indemnifying Party.”

 

(a) Third Party Claims. If any Indemnified Party receives notice of the
assertion or commencement of any Action made or brought by any Person who is not
a party to this Agreement or an Affiliate of a party to this Agreement or a
Representative of the foregoing (a “Third Party Claim”) against such Indemnified
Party with respect to which the Indemnifying Party is obligated to provide
indemnification under this Agreement, the Indemnified Party shall give the
Indemnifying Party reasonably prompt written notice thereof, but in any event
not later than 10 calendar days after receipt of such notice of such Third Party
Claim. The failure to give such prompt written notice shall not, however,
relieve the Indemnifying Party of its indemnification obligations, except and
only to the extent that the Indemnifying Party forfeits rights or defenses by
reason of such failure. Such notice by the Indemnified Party shall describe the
Third Party Claim in reasonable detail, shall include copies of all material
written evidence thereof and shall indicate the estimated amount, if reasonably
practicable, of the Loss that has been or may be sustained by the Indemnified
Party. The Indemnifying Party shall have the right to participate in, or by
giving written notice to the Indemnified Party, to assume the defense of any
Third Party Claim at the Indemnifying Party’s expense and by the Indemnifying
Party’s own counsel, and the Indemnified Party shall cooperate in good faith in
such defense. In the event that the Indemnifying Party assumes the defense of
any Third Party Claim, subject to Section 8.05(b), it shall have the right to
take such action as it deems necessary to avoid, dispute, defend, appeal or make
counterclaims pertaining to any such Third Party Claim in the name and on behalf
of the Indemnified Party. The Indemnified Party shall have the right to
participate in the defense of any Third Party Claim with counsel selected by it
subject to the Indemnifying Party’s right to control the defense thereof. The
fees and disbursements of such counsel shall be at the expense of the
Indemnified Party, provided, that if in the reasonable opinion of counsel to the
Indemnified Party, (A) there are legal defenses available to an Indemnified
Party that are different from or additional to those available to the
Indemnifying Party; or (B) there exists a conflict of interest between the
Indemnifying Party and the Indemnified Party that cannot be waived, the
Indemnifying Party shall be liable for the reasonable fees and expenses of one
counsel to the Indemnified Party. If the Indemnifying Party elects not to
compromise or defend such Third Party Claim or fails to promptly notify the
Indemnified Party in writing of its election to defend as provided in this
Agreement, the Indemnified Party may, upon prior written consent of the
Indemnifying Party (such consent not to be unreasonably withheld), subject to
Section 8.05(b), pay, compromise, defend such Third Party Claim and seek
indemnification for any and all Losses based upon, arising from or relating to
such Third Party Claim. Seller and Buyers shall cooperate with each other in all
reasonable respects in connection with the defense of any Third Party Claim,
including making available (subject to the provisions of Section 6.05) records
relating to such Third Party Claim and furnishing, without expense (other than
reimbursement of actual out-of-pocket expenses) to the defending party,
management employees of the non-defending party as may be reasonably necessary
for the preparation of the defense of such Third Party Claim.

 

43

 

(b) Settlement of Third Party Claims. Notwithstanding any other provision of
this Agreement, the Indemnifying Party shall not enter into settlement of any
Third Party Claim without the prior written consent of the Indemnified Party
(such consent not to be unreasonably withheld), except as provided in this
Section 8.05(b). If a firm offer is made to settle a Third Party Claim without
leading to liability or the creation of a financial or other obligation on the
part of the Indemnified Party and provides, in customary form, for the
unconditional release of each Indemnified Party from all liabilities and
obligations in connection with such Third Party Claim and the Indemnifying Party
desires to accept and agree to such offer, the Indemnifying Party shall give
written notice to that effect to the Indemnified Party. If the Indemnified Party
fails to consent to such firm offer within ten days after its receipt of such
notice, the Indemnified Party may continue to contest or defend such Third Party
Claim and in such event, the maximum liability of the Indemnifying Party as to
such Third Party Claim shall not exceed the amount of such settlement offer. If
the Indemnified Party fails to consent to such firm offer and also fails to
assume defense of such Third Party Claim, the Indemnifying Party may settle the
Third Party Claim upon the terms set forth in such firm offer to settle such
Third Party Claim. If the Indemnified Party has assumed the defense pursuant to
Section 8.05(a), it shall not agree to any settlement without the written
consent of the Indemnifying Party (which consent shall not be unreasonably
withheld or delayed).

 

(c) Direct Claims. Any Action by an Indemnified Party on account of a Loss which
does not result from a Third Party Claim (a “Direct Claim”) shall be asserted by
the Indemnified Party giving the Indemnifying Party reasonably prompt written
notice thereof, but in any event not later than 30 days after the Indemnified
Party becomes aware of such Direct Claim. The failure to give such prompt
written notice shall not, however, relieve the Indemnifying Party of its
indemnification obligations, except and only to the extent that the Indemnifying
Party forfeits rights or defenses by reason of such failure. Such notice by the
Indemnified Party shall describe the Direct Claim in reasonable detail, shall
include copies of all material written evidence thereof and shall indicate the
estimated amount, if reasonably practicable, of the Loss that has been or may be
sustained by the Indemnified Party. The Indemnifying Party shall have 30 days
after its receipt of such notice to respond in writing to such Direct Claim. The
Indemnified Party shall allow the Indemnifying Party and its professional
advisors to investigate the matter or circumstance alleged to give rise to the
Direct Claim, and whether and to what extent any amount is payable in respect of
the Direct Claim and the Indemnified Party shall assist the Indemnifying Party’s
investigation by giving such information and assistance (including access to the
Indemnified Party’s premises and personnel and the right to examine and copy any
accounts, documents or records) as the Indemnifying Party or any of its
professional advisors may reasonably request. If the Indemnifying Party does not
so respond within such 30 day period, the Indemnifying Party shall be deemed to
have rejected such claim, in which case the Indemnified Party shall be free to
pursue such remedies as may be available to the Indemnified Party on the terms
and subject to the provisions of this Agreement.

 

44

 

(d) Cooperation, Mitigation. Upon a reasonable request by the Indemnifying
Party, each Indemnified Party seeking indemnification hereunder in respect of
any Direct Claim, hereby agrees to consult with the Indemnifying Party and act
reasonably to take actions reasonably requested by the Indemnifying Party in
order to attempt to reduce the amount of Losses in respect of such Direct Claim.
Any costs or expenses associated with taking such actions shall be included as
Losses hereunder. Each Party shall be obligated to use reasonable good faith
efforts to take actions which would mitigate the liability of an Indemnifying
Party, to the extent that such mitigation efforts will not require it to expend
in excess of $25,000.

 

Section 8.06. Payments. Once a Loss is agreed to by the Indemnifying Party or
finally adjudicated to be payable pursuant to this Article VIII, the
Indemnifying Party shall satisfy its obligations within 15 Business Days of such
final, non-appealable adjudication by wire transfer of immediately available
funds. Further, the Buyer Indemnitees may, in their sole discretion offset any
agreed-to Loss against amounts due and owing under the Additional Convertible
Note. The parties hereto agree that should an Indemnifying Party not make full
payment of any such obligations within such 15 Business Day period, any amount
payable shall accrue interest from and including the date of agreement of the
Indemnifying Party or final, non-appealable adjudication to and including the
date such payment has been made at a rate per annum equal to the prime rate of
interest as announced by Bank of America (or any successor entity) on the last
day of such 15 Business Day period. Such interest shall be calculated daily on
the basis of a 365 day year and the actual number of days elapsed, without
compounding.

 

Section 8.07. Tax Treatment of Indemnification Payments. All indemnification
payments made under this Agreement shall be treated by the parties as an
adjustment to the Purchase Price for Tax purposes, unless otherwise required by
Law.

 

Section 8.08. Effect of Investigation. The representations, warranties and
covenants of the Indemnifying Party, and the Indemnified Party’s right to
indemnification with respect thereto, shall not be affected or deemed waived by
reason of any investigation made by or on behalf of the Indemnified Party
(including by any of its Representatives) or by reason of the fact that the
Indemnified Party or any of its Representatives knew or should have known that
any such representation or warranty is, was or might be inaccurate or by reason
of the Indemnified Party’s waiver of any condition set forth in Section 7.02 or
Section 7.03, as the case may be.

 

45

 

Section 8.09. Exclusive Remedies. Subject to Section 6.06 and Section 10.11, the
parties acknowledge and agree that their sole and exclusive remedy with respect
to any and all claims (other than claims arising from fraud, criminal activity
or willful misconduct on the part of a party hereto in connection with the
transactions contemplated by this Agreement) for any breach of any
representation, warranty, covenant, agreement or obligation set forth herein or
otherwise relating to the subject matter of this Agreement, shall be pursuant to
the indemnification provisions set forth in this Article VIII. In furtherance of
the foregoing, each party hereby waives, to the fullest extent permitted under
Law, any and all rights, claims and causes of action for any breach of any
representation, warranty, covenant, agreement or obligation set forth herein or
otherwise relating to the subject matter of this Agreement it may have against
the other parties hereto and their Affiliates and each of their respective
Representatives arising under or based upon any Law, except pursuant to the
indemnification provisions set forth in this Article VIII. Nothing in this
Section 8.09 shall limit any Person’s right to seek and obtain any equitable
relief to which any Person shall be entitled or to seek any remedy on account of
any Person’s fraudulent, criminal or intentional misconduct.

 

Article IX

Termination

 

Section 9.01. Termination. This Agreement may be terminated at any time prior to
the Closing:

 

(a) by the mutual written consent of Seller and Buyers;

 

(b) by Buyers by written notice to Seller if:

 

(i) Buyers are not then in material breach of any provision of this Agreement
and there has been a breach, inaccuracy in or failure to perform any
representation, warranty, covenant or agreement made by Seller pursuant to this
Agreement that would give rise to the failure of any of the conditions specified
in Article VII and such breach, inaccuracy or failure has not been cured by
Seller within 15 days of Seller’s receipt of written notice of such breach from
Buyers; or

 

(ii) any of the conditions set forth in Section 7.01 or Section 7.02 shall not
have been, or if it becomes apparent that any of such conditions will not be,
fulfilled by February 28, 2016 unless such failure shall be due to the failure
of Buyers to perform or comply with any of the covenants, agreements or
conditions hereof to be performed or complied with by it prior to the Closing;

 

(c) by Seller or Parent by written notice to Buyers if:

 

(i) Neither Seller nor Parent is then in material breach of any provision of
this Agreement and there has been a breach, inaccuracy in or failure to perform
any representation, warranty, covenant or agreement made by one or more of
Buyers pursuant to this Agreement that would give rise to the failure of any of
the conditions specified in Article VII and such breach, inaccuracy or failure
has not been cured by the applicable Buyers within ten days of their receipt of
written notice of such breach from Seller; or

 

46

 

(ii) any of the conditions set forth in Section 7.01 or Section 7.03 shall not
have been, or if it becomes apparent that any of such conditions will not be,
fulfilled by February 28, 2016 unless such failure shall be due to the failure
of Seller or Parent to perform or comply with any of the covenants, agreements
or conditions hereof to be performed or complied with by it prior to the
Closing; or

 

(d) by Buyers or Seller in the event that (i) there shall be any Law that makes
consummation of the transactions contemplated by this Agreement illegal or
otherwise prohibited or (ii) any Governmental Authority shall have issued a
Governmental Order restraining or enjoining the transactions contemplated by
this Agreement, and such Governmental Order shall have become final and
non-appealable.

 

Section 9.02. Effect of Termination. In the event of the termination of this
Agreement in accordance with this Article, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto except:

 

(a) as set forth in this Article IX and Section 6.05 and Article X hereof; and

 

(b) that nothing herein shall relieve any party hereto from liability for any
willful breach of any provision hereof.

 

Article X

Miscellaneous

 

Section 10.01. Expenses. Except as otherwise expressly provided herein, all
costs and expenses, including, without limitation, fees and disbursements of
counsel, financial advisors and accountants, incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such costs and expenses, whether or not the Closing shall have
occurred.

 

Section 10.02. Notices. All notices, requests, consents, claims, demands,
waivers and other communications hereunder shall be in writing and shall be
deemed to have been given (a) when delivered by hand (with written confirmation
of receipt); (b) when received by the addressee if sent by a nationally
recognized overnight courier (receipt requested); (c) on the date sent by
facsimile or e-mail of a PDF document (with confirmation of transmission) if
sent during normal business hours of the recipient, and on the next Business Day
if sent after normal business hours of the recipient or (d) on the third day
after the date mailed, by certified or registered mail, return receipt
requested, postage prepaid. Such communications must be sent to the respective
parties at the following addresses (or at such other address for a party as
shall be specified in a notice given in accordance with this Section 10.02):

 

47

 

 

 

If to Seller:

AS Kevelt

Teaduspargi 3/1, 12618,

Tallinn, Estonia,

E-mail a.ahtloo@kevelt.ee

Attention: Allan Ahtloo, management board member

 

Parent:

OJSC Pharmsynthez

IT Park, 25 Liter ZH

Krasnogo Kursanta, ul.

St. Petersburg, Russia 19-7110

Facsimile: 7 (8 12) 329-8089

E-mail: pkruglyakov@pharmsynthez.com

Attention: Peter V. Kruglyakov, CEO

 

with a copy to:

Covington & Burling LLP

The New York Times Building

620 Eighth Avenue

New York, New York 10018

Facsimile: (646) 441-9113

Email: eblanchard@cov.com

Attention: Eric Blanchard

 

If to either Buyer:

Attn. Xenetic Biosciences, Inc.

99 Hayden Avenue, Suite 230

Lexington, Mass. 02421

Facsimile: 781-538-4327

E-mail: s.maguire@xeneticbio.com

Attention: Scott Maguire, CEO

 

with a copy to:

Taft, Stettinius & Hollister LLP

111 E. Wacker Drive, Suite 2800

Chicago, IL 60601

Facsimile: 312-275-7569

E-mail: mgoldsmith@taftlaw.com

Attention: Mitchell D. Goldsmith, Esq.

 

 

Section 10.03. Interpretation, English Version Controls. For purposes of this
Agreement, (a) the words “include,” “includes” and “including” shall be deemed
to be followed by the words “without limitation;” (b) the word “or” is not
exclusive; and (c) the words “herein,” “hereof,” “hereby,” “hereto” and
“hereunder” refer to this Agreement as a whole. Unless the context otherwise
requires, references herein: (x) to Articles, Sections, Disclosure Schedules and
Exhibits mean the Articles and sections of, and Disclosure Schedules and
Exhibits attached to, this Agreement; (y) to an agreement, instrument or other
document means such agreement, instrument or other document as amended,
supplemented and modified from time to time to the extent permitted by the
provisions thereof and (z) to a statute means such statute as amended from time
to time and includes any successor legislation thereto and any regulations
promulgated thereunder. This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting an instrument or causing any instrument to be drafted. The Disclosure
Schedules and Exhibits referred to herein shall be construed with, and as an
integral part of, this Agreement to the same extent as if they were set forth
verbatim herein. In the event that this Agreement is translated into a language
other than English (including but not limited to Russian or Estonian), the
English version of this Agreement shall control and be the governing document
with respect to any dispute regarding the terms of this Agreement.

 

48

 

Section 10.04. Headings. The headings in this Agreement are for reference only
and shall not affect the interpretation of this Agreement.

 

Section 10.05. Severability. If any term or provision of this Agreement is
invalid, illegal or unenforceable in any jurisdiction, such invalidity,
illegality or unenforceability shall not affect any other term or provision of
this Agreement or invalidate or render unenforceable such term or provision in
any other jurisdiction. Except as provided in Section 6.06(d), upon such
determination that any term or other provision is invalid, illegal or
unenforceable, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in a mutually acceptable manner in order that the transactions
contemplated hereby be consummated as originally contemplated to the greatest
extent possible.

 

Section 10.06. Entire Agreement. This Agreement and the other Transaction
Documents constitute the sole and entire agreement of the parties to this
Agreement with respect to the subject matter contained herein and therein, and
supersede all prior and contemporaneous understandings and agreements, both
written and oral, with respect to such subject matter. In the event of any
inconsistency between the statements in the body of this Agreement and those in
the other Transaction Documents, the Exhibits and Disclosure Schedules (other
than an exception expressly set forth as such in the Disclosure Schedules), the
statements in the body of this Agreement will control.

 

Section 10.07. Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and permitted assigns. Neither party may assign its rights or obligations
hereunder without the prior written consent of the other party, which consent
shall not be unreasonably withheld or delayed; provided, however, that prior to
the Closing Date, Buyers may, without the prior written consent of Seller,
assign all or any portion of their rights under this Agreement to one or more of
its direct or indirect wholly-owned subsidiaries. No assignment shall relieve
the assigning party of any of its obligations hereunder.

 

Section 10.08. No Third-party Beneficiaries. Except as provided in Article VIII,
this Agreement is for the sole benefit of the parties hereto and their
respective successors and permitted assigns and nothing herein, express or
implied, is intended to or shall confer upon any other Person or entity any
legal or equitable right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement.

 

49

 

Section 10.09. Amendment and Modification; Waiver. This Agreement may only be
amended, modified or supplemented by an agreement in writing signed by each
party hereto. No waiver by any party of any of the provisions hereof shall be
effective unless explicitly set forth in writing and signed by the party so
waiving. No waiver by any party shall operate or be construed as a waiver in
respect of any failure, breach or default not expressly identified by such
written waiver, whether of a similar or different character, and whether
occurring before or after that waiver. No failure to exercise, or delay in
exercising, any right, remedy, power or privilege arising from this Agreement
shall operate or be construed as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege.

 

Section 10.10. Governing Law; Submission to Jurisdiction; Waiver of Jury Trial.

 

(a) This Agreement shall be governed by and construed in accordance with the
internal laws of the State of Massachusetts without giving effect to any choice
or conflict of law provision or rule (whether of the State of Massachusetts or
any other jurisdiction) that would cause the application of Laws of any
jurisdiction other than those of the State of Massachusetts.

 

(b) ANY LEGAL SUIT, ACTION OR PROCEEDING ARISING OUT OF OR BASED UPON THIS
AGREEMENT, THE OTHER TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY MAY BE INSTITUTED IN THE FEDERAL COURTS OF THE UNITED STATES
OF AMERICA OR THE COURTS OF THE STATE OF MASSACHUSETTS IN EACH CASE LOCATED IN
THE CITY OF BOSTON, AND EACH PARTY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF SUCH COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING. SERVICE OF
PROCESS, SUMMONS, NOTICE OR OTHER DOCUMENT BY MAIL TO SUCH PARTY’S ADDRESS SET
FORTH HEREIN SHALL BE EFFECTIVE SERVICE OF PROCESS FOR ANY SUIT, ACTION OR OTHER
PROCEEDING BROUGHT IN ANY SUCH COURT. THE PARTIES IRREVOCABLY AND
UNCONDITIONALLY WAIVE ANY OBJECTION TO THE LAYING OF VENUE OF ANY SUIT, ACTION
OR ANY PROCEEDING IN SUCH COURTS AND IRREVOCABLY WAIVE AND AGREE NOT TO PLEAD OR
CLAIM IN ANY SUCH COURT THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

 

(c) EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE
UNDER THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE OTHER
TRANSACTION DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH
PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF
ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION,
(B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO
THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 10.10(c).

 

50

 

Section 10.11. Specific Performance. The parties agree that irreparable damage
would occur if any provision of this Agreement were not performed in accordance
with the terms hereof and that the parties shall be entitled to seek specific
performance of the terms hereof, in addition to any other remedy to which they
are entitled at law or in equity.

 

Section 10.12. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall be
deemed to be one and the same agreement. A signed copy of this Agreement
delivered by facsimile, e-mail or other means of electronic transmission shall
be deemed to have the same legal effect as delivery of an original signed copy
of this Agreement.

 

 

 

 

 

 

 

 

 

 

[SIGNATURE PAGE FOLLOWS]

 

 

51

 

 

 

 

 

SELLER:

 

AS KEVELT

 

 

By__________________________________

Name:

Title:

 

 

PARENT:

 

OJSC PHARMSYNTHEZ

 

 

By__________________________________

Name:

Title:

 

 

BUYERS:

XENETIC BIOSCIENCES, INC.

 

 

By /s/ M. Scott Maguire

Name: M. Scott Maguire

Title: Chief Executive Officer

 

LIPOXEN TECHNOLOGIES, INC.

 

By ____________________________

Name: M. Scott Maguire

Title: Chief Executive Officer

 

 

 

 

 

52

 

 

 

ANNEX A

 

Step 1: Creation of and Transfer of Securities to NewCo

 

 

[ex1001_image1.jpg]

 

 

 

 

Step 2: NewCo Spin-off

 

 

[ex1001_image2.jpg]

 

 

 

Step 3: Xenetic Exchanges Shares for Shares of NewCo

 

 [ex1001_image3.jpg]