Exhibit 10.11

 

FORM OF

 

 

 

 

Transition, Services and Resupply Agreement

 

# 15-8-311

 

by and among

 

AS Kevelt,

 

OJSC Pharmsynthez

 

and

 

Xenetic Biosciences, Inc.

 

 

 

 

 

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Transition and Resupply Agreement

 

This Transition, Services and Resupply Agreement (the “Transition and Resupply
Agreement”), dated as of October __, 2015 (“Effective Date”) is entered into
among AS Kevelt, an Estonian pharmaceutical company (“Kevelt”), OJSC
Pharmsynthez, a Russian pharmaceutical company and parent of Kevelt
(“Pharmsynthez”) and Xenetic Biosciences, Inc., a Nevada corporation
(“Xenetic”).

 

RECITALS

 

WHEREAS, Xenetic has acquired all the assets, intellectual property and material
related to Virexxa for any Permitted Uses from Kevelt and Pharmsynthez through
an Asset Purchase Agreement entered into on October __, 2015 (the “Agreement”);

 

WHEREAS, Xenetic in accepting the transfer of the assets, intellectual property
and material related to Virexxa has also taken on all rights to continue any
ongoing clinical trials, though not the obligation to do so, initiate any new
preclinical and/or clinical trials, obtain marketing authorization, distribute,
offer to sell and sell Virexxa worldwide;

 

WHEREAS, the Agreement contemplates that Kevelt and Pharmsynthez will continue
to manufacture and supply for research, clinical and commercial purposes Virexxa
to Xenetic and if requested, transfer the manufacturing to a Xenetic or a third
party selected by Xenetic to supply and manufacture Virexxa; and

 

WHEREAS, Kevelt and Pharmsynthez wish to fulfill the commitments set forth in
this Transition and Resupply Agreement.

 

NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter set forth, the sufficiency of which is hereby acknowledged, Xenetic,
Kevelt and Pharmsynthez (individually each referred to as a “Party” and
collectively as “Parties”) hereby agree as follows:

 

Article I.

Definitions

 

Any capitalized terms not defined in this Transition and Resupply Agreement
shall have the meaning given such term(s) in the Agreement. Any references in
this Transition and Resupply Agreement to “Articles” and/or “Sections” shall
refer to Articles and/or Sections of this Transition and Resupply Agreement,
unless specified to be referring to Articles and/or Sections of the Agreement.
For purposes of this Transition and Resupply Agreement, the following
capitalized terms, whether used in the singular or plural, shall have the
following meanings:

 

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Section 1.01        “Kevelt/Pharmsynthez Manufacturing Know-How” means Virexxa
batch formula and production related data, methods, processes, standard
operating procedures (“SOP”), and relevant proprietary information together with
all applicable improvements, that are owned by Kevelt and Pharmsynthez or their
Affiliates.

 

Section 1.02        “Kevelt/Pharmsynthez Patents” means the Patents Owned by
Kevelt and/or Pharmsynthez and their Affiliates as of the Effective Date having
one or more valid and unexpired claims (i) that cover Virexxa; or (ii) that
cover processes directed to formulating and manufacturing Virexxa. For purposes
of this Transition andResupply Agreement, the phrase “valid and unexpired claim”
shall mean a composition of matter, method of use or method of manufacture claim
(or equivalent thereof) of an issued and unexpired Patent, or a composition of
matter, method of use or method of manufacture claim (or equivalent thereof) of
a pending application, which (i) has not been revoked or held unenforceable or
invalid by a decision of a court or other governmental agency of competent
jurisdiction, unappealable or unappealed within the time allowed for appeal; and
(ii) has not been abandoned, disclaimed, denied or admitted to be invalid or
unenforceable through reissue or disclaimer or otherwise.

 

Section 1.03        “Deliver” or “Delivery,” with respect to Virexxa means, and
shall take place upon, the transfer of possession of Virexxa to a Xenetic EXW
(Incoterms 2010) at the place the Virexxa will be shipped to Xenetic.

 

Section 1.04        “Excluded Uses” shall mean the use of Virexxa in the
Retained Territory for the treatment of all diseases included in Exhibit A
(Indications for Excluded Uses).

 

Section 1.05        “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.

 

Section 1.06        “Specification(s)” means the requirements, standards,
quality control testing and other attributes pertaining to Virexxa, as set forth
in a specification that shall be agreed upon by the Parties following the entry
of the Parties into this Transition and Resupply Agreement and as approved by
the appropriate governmental agencies and bodies.

 

Section 1.09        “Virexxa” shall mean medicinal product Sodium Cridanimod
(Virexxa®) (Oxodihydroacridinylacetate sodium containing a Sodium
2-(9-oxoacridin-10-yl) acetate, any derivatives, isomers, substitutions or any
other form, as an active pharmaceutical ingredient, developed by Kevelt and/or
Pharmsynthez and having properties described in the Chemical, Manufacturing and
Controls (“CMC”) and medicinal product dossier (“MPD”) for the Permitted Uses.

 

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Article II.

Manufacture and Supply, Technology Transfer and Transition

 

Section 2.01        Virexxa Manufacturing Procedures, Standards and Compliance
with Laws. All Virexxa used for pre-clinical, clinical and commercial purposes
but not more than a maximum of 5,000 ampoules per month at 250 mg per ampoule or
total equivalent amount will be manufactured, tested and released as described
in the most current version of the CMC (Annex [B].) by Kevelt and/or
Pharmsynthez according to established current good manufacturing practices
(“cGMPs”) and agreed upon by the Parties standard operating procedures (SOPs) ,
and applicable corresponding regulations in any country where the Virexxa CMC is
approved for pre-clinical, clinical and/or commercial purposes, including, but
not limited to those required by the United States Food and Drug Administration
(FDA) and the European Medicines Agency (EMA). During the term of this
Transition and Resupply Agreement, Kevelt and/or Pharmsynthez will be fully
responsible for maintaining its facilities and procedures, in compliance with
cGMPs, standards that are agreed upon by the Parties and applicable
corresponding regulations.

 

Section 2.02        Certificate of Analysis. Kevelt and/or Pharmsynthez shall
deliver to Xenetic with fulfillment of each Virexxa order a certificate of
analysis confirming that such order meets the Specifications applicable to
Virexxa (each, a “Certificate of Analysis”) and a certificate of compliance of
such order. Kevelt and/or Pharmsynthez shall test manufactured batches hereunder
in accordance with approved specifications covered by the CMC. Xenetic shall be
responsible for reasonable inspection of each order for physical damage in
shipping and storage. Within thirty (30) days after receipt of each order of
Virexxa, at Xenetic together with Kevelt’s and or Pharmsynthez's Certificate of
Analysis and certificate of compliance pertaining to each such order, Xenetic
shall notify Kevelt and/or Pharmsynthez if, in Xenetic's determination, such
order fails to conform to the Specifications. Xenetic shall provide written
notice of rejection of the applicable order to Kevelt and/or Pharmsynthez within
such thirty (30) day period. Orders not rejected within such thirty (30) day
period in a written notice of rejection sent to Kevelt and/or Pharmsynthez shall
be deemed to have been accepted by Xenetic. Once Xenetic accepts an order of
Virexxa within the thirty (30) day period, it shall not have the right to reject
such order thereafter. If Xenetic determines that such order does not conform to
Specifications, it shall send to Kevelt and/or Pharmsynthez, via fax, email,
overnight delivery service or certified mail, return receipt requested, within
such thirty (30) business day period a written notice of rejection with a
reasonably detailed description setting forth the reasons the order is being
rejected, along with a sample of the rejected order to Kevelt and/or
Pharmsynthez. If Kevelt and/or Pharmsynthez agree that the order is defective or
non-conforming, it will, at its option (i) replace such order, though such
replacement shall not include material that was rejected and reprocessed to meet
the required specification, or (ii) reimburse Xenetic its out-of-pocket costs
paid for such material. Furthermore, Kevelt and Pharmsynthez shall pay for the
shipping cost associated with the delivery of the replacement order, if any. If
Kevelt and/or Pharmsynthez do not agree with Xenetic's determination that such
order is defective or non-conforming, then after reasonable efforts to resolve
the disagreement, either Party may submit a sample from the order to a mutually
agreed upon independent third party laboratory for resolution of the dispute.
The independent laboratory’s results shall be final and binding. Unless
otherwise agreed to by the Parties in writing, the costs associated with such
testing and review shall be borne by the Party against whom the independent
laboratory rules. For purposes of this Section 2.02, the thirty (30) day period
shall commence on the date of Xenetic’s receipt of the order and the related
Certificate of Analysis.

 

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Section 2.03        Replacement of Defective Item. IN ACCORDANCE WITH THE TERMS
SET FORTH IN THIS TRANSITION AND RESUPPLY AGREEMENT, KEVELT AND/OR PHARMSYNTHEZ
SHALL REPLACE, AT ITS SOLE EXPENSE, ALL ITEMS THAT DO NOT COMPLY OR ARE FOUND
NOT TO COMPLY WITH THE SPECIFICATIONS (“DEFECTIVE ITEM”), OR SHALL CREDIT
XENETIC FOR AMOUNTS ALREADY PAID FOR THE DEFECTIVE ITEM. THE OBLIGATION OF
KEVELT AND/OR PHARMSYNTHEZ TO REPLACE DEFECTIVE ITEMS IN ACCORDANCE WITH THE
SPECIFICATIONS OR PROVIDE CREDIT SHALL BE XENETIC’S SOLE AND EXCLUSIVE REMEDY
UNDER THIS TRANSITION AND RESUPPLY AGREEMENT FOR DEFECTIVE ITEMS, AND IS IN LIEU
OF ANY OTHER REMEDY, EXPRESS OR IMPLIED.

 

Section 2.04        Delivery. Kevelt and/or Pharmsynthez shall tender Virexxa
for delivery, EXW Tallinn (Incoterms 2010). Xenetic shall be responsible for all
costs and risk of loss associated with the shipping of Virexxa, other materials
shipped (from and after Delivery) and shipping instructions.

 

Section 2.05        Manufacture of Virexxa.

 

(a)     Manufacture. With respect to Virexxa, from the Effective Date, Kevelt
and Pharmsynthez will be responsible for supplying Xenetic with Virexxa under
the following terms and conditions:

 

(i)          Forecasting. In accordance with Section 2.01, Virexxa shall be
supplied by Kevelt and/or Pharmsynthez to Xeneticin an amount that does not
exceed 5,000 ampoules of Virexxa per month. On or before the first day of each
calendar month, Xenetic shall furnish to Kevelt and/or Pharmsynthez a written
six (6) month rolling forecast of the quantity of Virexxa that Xenetic estimates
it will order from Kevelt and/or Pharmsynthez during such six (6) month forecast
period (the “Forecast”; the first of which is attached hereto as Schedule 1).
The first three (3) months of each Forecast shall constitute a binding order for
the quantities of Virexxa specified therein (the “Firm Commitment”), and the
following three (3) months of the Forecast shall be non-binding, good faith
estimates.

 

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(ii)          Purchase Orders. On or before the first (1st) day of each calendar
month, Xenetic shall submit a purchase order for the Firm Commitment portion of
the Forecast, as to which no purchase order has been previously submitted, which
specifies the actual quantities of Virexxa to be delivered to Xenetic hereunder
for the relevant calendar month and the requested shipping dates for each order
(“Purchase Order”). As the Forecast contains Firm Commitments for the first
three (3) months, the Purchase Orders to be presented during such months, may
vary in quantities through such three (3) months, but the summarized quantities
for the said period must meet the quantities as stated in the Firm Commitment.
All Purchase Orders shall reflect orders of a size that the Parties have agreed
are within the reasonably anticipated capacity of Kevelt and/or Pharmsynthez.

 

(iii)          Raw Material or Capacity Shortage. In the event that Kevelt
and/or Pharmsynthez is unable to supply Xenetic with Virexxa in the quantities
ordered by Xenetic in accordance with Section 2.05(a)(ii), due to Kevelt’s
and/or Pharmsynthez’s insufficient supplies of raw materials necessary to
manufacture Virexxa or other manufacturing capacity constraints, Kevelt and/or
Pharmsynthez shall use commercially reasonable efforts to equitably allocate
available raw materials or manufacturing capacity, as the case may be, in a
manner consistent with the Parties’ anticipated needs. Notwithstanding the
foregoing, Kevelt and/or Pharmsynthez shall prioritize allocation of
manufacturing capacity and raw materials to the manufacture of Virexxa for
Xenetic.

 

(iv)          Xenetic Modification or Cancellation. Xenetic may request
modification of the delivery date or quantity of Virexxa in a Purchase Order
only by submitting a written change order to the Party to whom such Purchase
Order was submitted, though such modification request shall not change the
amount of Virexxa Xenetic is to purchase based on the then relevant Forecast as
set forth in Section 2.05(a)(i). Such change order shall be effective and
binding against the Party to whom the Purchase Order was submitted only upon
written acceptance by such Party. Notwithstanding the foregoing, Xenetic shall
remain responsible for the Firm Commitment portion of the Forecast. The
manufacturing Party (Kevelt and/or Pharmsynthez) shall notify Xenetic of its
approval or rejection of any such change order within fourteen (14) business
days after receipt thereof.

 

(v)          Transitional Period Plan. Upon notice by Xenetic of Xenetic’s
intent to transfer the manufacturing to itself or a third party manufacturer
selected by Xenetic at Xenetic’s sole discretion, the Parties shall negotiate in
good faith and devise a transitional period plan which will set forth, among
other things, the Parties’ responsibilities relating to the manufacture of
Virexxa during the transfer of manufacturing technology from Kevelt and/or
Pharmsynthez to Xenetic, the time frame for such transfer, and the Parties’
mutually determined collaborative and comprehensive plan that will ensure a
supply of Virexxa and a smooth transition of manufacturing of Virexxa from
Kevelt and/or Pharmsynthez to Xenetic.

 

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Section 2.06        Technology Transfer. The Parties shall cooperate to expedite
transfer of Kevelt’s and Pharmsynthez’sVirexxa manufacturing technology to a
facility designated by Xenetic, where Virexxa manufacturing will be conducted by
or on behalf of Xenetic. Kevelt and Pharmsynthez will make employees of
appropriate skill and experience reasonably available to Xenetic to facilitate
such transfer. Kevelt, Pharmsynthez and Xenetic will cooperate to minimize the
expenses associated with such transfer and to ensure that the transfer of
Virexxa manufacturing is effectively coordinated.

 

Section 2.07        Hiring of Employees. With the written consent of the Party
from whom such employees are to be hired, such consent not to be unreasonably
withheld, Xenetic shall have the right, but not the obligation, to hire or
contract with Kevelt and Pharmsynthez employees, including those Kevelt and
Pharmsynthez employees that are involved in the manufacture, quality assurance,
quality control, packaging and clinical and commercial regulatory approvals for
Virexxa, as are needed to facilitate the transfer of Virexxa to Xenetic’s
facility or one selected by Xenetic. Any such hiring decisions, and the terms
thereof, shall be solely at Xenetic’s discretion. To the extent requested by
Xenetic, Kevelt and Pharmsynthez shall assist Xenetic in making its hire/no hire
decision regarding Kevelt and Pharmsynthez employees.

 

Section 2.08        Costs of Technology Transfer. Except for such costs to be
borne by Kevelt and Pharmsynthez as set forth herein, Xenetic shall be solely
responsible for any and all costs associated with the transfer of manufacturing
of Virexxa to the facility where Virexxa is to be manufactured by or on behalf
of Xenetic. To facilitate the transfer, Kevelt and Pharmsynthez shall provide
all employees necessary to effectuate the transfer at minimum cost to Xenetic,
other than reimbursement to Kevelt and Pharmsynthez of out-of-pocket expenses
related thereto. Kevelt and Pharmsynthez shall be responsible for all costs
associated with their termination of manufacturing Virexxa (including any
severance or other payments owed to employees following the termination of
manufacturing Virexxa by Kevelt and Pharmsynthez).

 

Section 2.09        Batch Records and Data. Upon Xenetic’s request, within
thirty (30) days following Delivery of a lot of Virexxa, Kevelt and Pharmsynthez
shall provide Xenetic with properly completed copies of batch records consisting
of complete information relating to the production operations and the controls
of each batch; provided, however, that if testing reveals an
“out-of-Specification” result, Kevelt and Pharmsynthez shall provide such batch
records within seven (7) days following resolution of the “out-of-Specification”
result. The Parties agree that Kevelt and Pharmsynthez shall provide these
records to Xenetic solely for the purpose of assisting with the transfer of
Virexxa manufacturing technology, and Xenetic shall not bear the responsibility
for correction of any “out-of-Specification” results.

 

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Article III.

Transition

 

Section 3.01 Kevelt and/or Pharmsynthez Provision of Information and Documents
to Xenetic

 

(a)     Following entry of the Parties into this Transition and Resupply
Agreement, Kevelt and Pharmsynthez shall provide to Xenetic the following within
thirty sixty (60) days of the Effective Date:

 

(i) a list all notebooks, records, data, results, information, filings,
regulatory papers submissions and submission related correspondence and
information regarding Virexxa requested or ordered by Xenetic or known by Kevelt
and/or Pharmsynthez to be necessary for Xenetic to carry out the research,
development and commercialization of Virexxa® pursuant to the terms of the IP
Asset Purchase Agreement, whether in paper, electronic or some other form,
including their location, the identity of all individuals with access to them
and the date such notebooks, records, data, results, information, filings,
regulatory papers, information shall be provided to Xenetic;

 

(ii) all copies of original notebooks, records, data, results, filings,
submissions and submission related correspondence regulatory papers and
information regarding Virexxa, whether in paper, electronic or some other form;

 

(iii) a list of all Approved Suppliers to Kevelt and/or Pharmsynthez that have
been, are or will be involved in the research, development, commercialization,
testing or manufacturing of Virexxa, including their addresses and contact
information;

 

(iv) a list of all information, know-how and/or trade secrets in the possession
of Kevelt and/or Pharmsynthez that relate in any manner to Virexxa for the
Permitted Uses

 

(v) a list identifying all current stocks of Virexxa in the possession of Kevelt
and/or Pharmsynthez or their Affiliates, contractors, or other third parties
contracted in any manner by Kevelt and/or Pharmsynthez and the date upon which
ownership such stocks of Virexxa shall be transferred to Xenetic, a valuation of
the value of such stocks of Virexxa and instructions provided to Xenetic to
effectuate the transfer of such stocks of Virexxa to Xenetic; and,

 

(vi) copies of all documents and records related to communications with
regulatory authorities relating to the Permitted Uses, including, those related
to current or previous clinical development, manufacturing, product safety and
pharmacovigilance.

 

(vii) copies of all documents and records related to the manufacture of Virexxa,
including, the manufacture of bulk API as well as final drug product.

 

(viii) any other material information or records related in any manner to
Virexxa for the Permitted Uses.

 

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Article IV.

Records; Regulatory Matters

 

Section 4.01        Record keeping. Kevelt and/or Pharmsynthez shall maintain
true and accurate books, records, test and laboratory data, reports and all
other information relating to manufacturing under this Transition and Resupply
Agreement, including all information required to be maintained by applicable
laws and regulations, including but not limited to cGMP. Such information shall
be maintained in forms, notebooks and records for a period of at least one (1)
years from the relevant finished Virexxa expiration date, or longer if required
under applicable laws.

 

Section 4.02        Regulatory Responsibility and Compliance.

 

(a)Kevelt and/or Pharmsynthez agrees to use commercially reasonable efforts to
cause, within three (3) months after the Effective Date, the transfer of title
and ownership to Xenetic of any and all regulatory approvals and related
regulatory filings relating to Virexxa for the Permitted Uses which are owned by
Kevelt and/or Pharmsynthez and are filed, issued and in full force and effect as
of the Effective Date.

 

(b)Kevelt and/or Pharmsynthez shall be responsible for transferring according to
Section 4.02(a) and Xenetic shall be responsible for obtaining and maintaining
any establishment licenses or permits required by the FDA or other regulatory
authorities, by applicable laws or by regulatory authorities that pertain to
Virexxa manufacturing. Kevelt and/or Pharmsynthez hereby grant to Xenetic the
right to reference such establishment files for the purpose of obtaining and
maintaining regulatory approval.

 

Section 4.03        Governmental Inspections and Requests. Kevelt and/or
Pharmsynthez shall advise Xenetic within three (3) Business Days if an
authorized agent of any regulatory authority visits a facility where
manufacturing activity with respect to Virexxa takes place, where the interest
of the regulatory authority is specifically related to manufacturing activity
with respect to Virexxa. In such circumstance, Kevelt and/or Pharmsynthez shall
furnish to Xenetic a copy of sections of the report by such regulatory
authority, which are specifically related to Virexxa within five (5) days of
receipt of such report if such report is received in English by Kevelt and/or
Pharmsynthez. If the sections of the report by such regulatory authority are not
in English, the receiving Party shall translate the sections of the report into
English and shall provide such translated sections of the report to Xenetic
within ten (10) days of receipt of such report. Further, upon receipt of a
regulatory authority written request to inspect a Kevelt and/or Pharmsynthez
manufacturing facility, or to audit Kevelt’s and/or Pharmsynthez’s books and
records with respect to manufacturing of Virexxa under this Transition and
Resupply Agreement, Kevelt and/or Pharmsynthez shall notify Xenetic thereof
within three (3) days, and shall provide Xenetic with a copy of any written
document received from such regulatory authority if the document is written in
English. If the document is not written in English, Pharmsynthez and/or Kevelt
shall provide Xenetic with an English translation within ten (10) days of the
receipt of the document. Kevelt and/or Pharmsynthez shall provide Xenetic with
notice of any such non-written inspection request from a regulatory authority
which specifically relates to Virexxa as promptly as reasonably practicable
under the circumstances. Kevelt and/or Pharmsynthez shall also provide to
Xenetic such notice as is reasonably practicable under the circumstances of any
action by a regulatory authority, resulting from an inspection of a facility
where manufacturing activity with respect to Virexxa takes place, which is
reasonably anticipated to materially affect Kevelt’s and/or Pharmsynthez’s
ability to perform its obligations under this Transition and Resupply Agreement.
Nothing in this Section 4.03 shall require Kevelt and/or Pharmsynthez to submit
to Xenetic any books, records, data or information relating to the manufacture
or distribution of any products other than Virexxa.

 

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Section 4.04        Recall and Field Corrective Action.

 

This Section 4.04 shall govern recall arising after the Effective Date from
Virexxa manufactured by Kevelt and/or Pharmsynthez for Xenetic. In the event
that Xenetic believes a recall, field alert, Virexxa withdrawal, or field
corrective action may be necessary with regard to Virexxa provided to Xenetic
under this Transition and Resupply Agreement, Xenetic shall immediately notify
Kevelt and/or Pharmsynthez in writing. Xenetic shall provide reasonable
cooperation and assistance to Kevelt and/or Pharmsynthez required to allow
Kevelt and/or Pharmsynthez to respond to a recall, field alert, Virexxa
withdrawal, or field corrective action. The cost of a Virexxa product related
recall, field alert Virexxa withdrawal or field corrective action shall be borne
by Kevelt and/or Pharmsynthez if such recall, field alert, Virexxa withdrawal,
or field corrective action is caused in material part by Kevelt and/or
Pharmsynthez's breach of its obligations under this Transition and Resupply
Agreement, or applicable laws, or by its willful misconduct. Xenetic shall bear
responsibility for the cost of a Virexxa product related recall, field alert
Virexxa withdrawal or field corrective action for all other reasons.. For
purposes of this Section 4.04, the Party bearing the costs of any recall, field
alert, Virexxa withdrawal, or field corrective action shall only be required to
reimburse the other Party for reasonable, actual and documented out-of-pocket
costs incurred by such other Party for such recall, field alert, Virexxa
withdrawal, or field corrective action (including costs of retrieving Virexxa
already delivered to customers, costs and expenses such other Party is required
to pay for notification, shipping and handling charges, and all other costs
reasonably related to such recall, field alert, Virexxa withdrawal, or field
corrective action), and the cost to replace, or the actual replacement of
Virexxa.

 

Section 4.05        Quality Agreement. The Parties shall execute a separate
Quality Agreement, which will reflect the division of quality responsibilities
while Virexxa is manufactured, released and supplied by Kevelt and/or
Pharmsynthez for Xenetic (“Quality Agreement”). Kevelt and/or Pharmsynthez shall
use commercially reasonable efforts to comply with the Quality Agreement, but in
any event shall comply with applicable laws. In the event of a conflict between
the terms of this Transition and Resupply Agreement and the Quality Agreement,
this Transition and Resupply Agreement shall control, unless the issues relate
to quality wherein the Quality Agreement shall control. Kevelt and/or
Pharmsynthez shall in any event comply with applicable laws. The failure of a
Party to comply with a requirement of the Quality Agreement shall not be
actionable, unless it constitutes a material violation of law of any
jurisdiction in which Virexxa is distributed.

 

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Section 4.06        Quality, Environmental, Health and Safety Audits. Kevelt
and/or Pharmsynthez shall permit Xenetic’s personnel or authorized
representative, upon reasonable notice, at reasonable intervals, and for
reasonable duration during regular business hours, to visit the facility where
Virexxa is manufactured, tested, or stored by, or on behalf of, Kevelt and/or
Pharmsynthez; or to audit compliance with this Transition and Resupply
Agreement, however, that such audits shall be conducted not more than twice in
any twelve (12) month period, other than "for cause" audits, which Xenetic shall
be entitled to conduct following the implementation of measures in response to
letters from the FDA to Kevelt and/or Pharmsynthez pertaining to the manufacture
of Virexxa.

 

All information obtained by Xenetic in any such review, including without
limitation the findings and results related thereto, shall be deemed Kevelt
and/or Pharmsynthez Confidential Information. Kevelt and/or Pharmsynthez will
have responsibility to audit its permitted subcontractors and suppliers at
reasonable intervals for compliance with (i) the Specifications, (ii) current
GMPs, and (iii) applicable laws. Xenetic shall have the right to confirm audits
of subcontractors and suppliers of Kevelt and/or Pharmsynthez for Virexxa
manufactured under this Transition and Resupply Agreement.

 

Section 4.07        Complaints and Adverse Events. The Party responsible for all
permits and licenses required by any regulatory authority with respect to
Virexxa under this Transition and Resupply Agreement, including any product
licenses, applications and amendments in connection therewith, shall be
responsible for evaluating and investigating complaints and for reporting all
Adverse Events to regulatory authorities in any country Virexxa is used and/or
sold. If the responsible Party becomes aware of any Adverse Event, it shall
evaluate, investigate and determine the necessity of reporting all information
in its possession regarding such Adverse Event as soon as practicable, in order
to fulfill regulatory reporting obligations within the time frames required by
regulatory authorities and law; provided, however, that Kevelt and/or
Pharmsynthez shall not be required to communicate with customers of Xenetic. The
Parties will comply with all applicable reporting laws, rules and regulations
governing Adverse Events. Xenetic and Kevelt and/or Pharmsynthez agree to supply
all complaint information (including Adverse Event information) to the
responsible Party within three (3) Business Days of learning of a complaint or
event; to cooperate with investigations and corrective actions; and to comply
with all applicable reporting laws, rules and regulations governing Adverse
Events.

 

Section 4.08        Compliance. The obligations of Kevelt and/or Pharmsynthez
and Xenetic set forth in this Article 4 are intended to comply with the laws,
rules and regulations of each country in which Virexxa is approved. The
requirements of this Article 4 shall therefore be construed and interpreted to
comply with all such laws, rules and regulations. To the extent provisions of
this Article 4 do not adequately reflect any such law, rule or regulation, such
provisions shall be revised to the extent reasonably necessary to make such
provisions legal and valid in accordance with such laws, rules and regulations.

 

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Article V.

Cost for Manufacturing and Supply of Virexxa to Xenetic

 

Section 5.01        Virexxa Manufacturing and Supply Costs. Xenetic shall pay to
the manufacturer of Virexxa, Kevelt and/or Pharmsynthez all the manufacturing
cost of Virexxa, which includes, but is not limited to, all direct costs related
to the manufacturing of Virexxa and related operational expenses as stated in
the pre-approved costs specifications (which forms an annex of this Transition,
Manufacturing and Supply Agreement, plus fifteen percent (15%) on a per unit
basis (“Purchase Price”). Xenetic shall be entitled to audit such manufacturing
costs pursuant to the terms of this Transition and Resupply Agreement.

 

Section 5.02        Invoicing. Kevelt and/or Pharmsynthez shall provide Xenetic
with an invoice following the delivery of Virexxa. Xenetic shall pay Kevelt
and/or Pharmsynthez within thirty (30) days of the receipt of an invoice.

 

Section 5.03        Currency. Unless otherwise agreed by the Parties in writing,
all amounts paid by Xenetic under this Transition- and Resupply Agreement shall
be paid to Kevelt and/or Pharmsynthez in Euros by wire transfer to a financial
institution to be designated by Kevelt and/or Pharmsynthez. Subject to Section
5.02, such payments shall be without deduction of collection, wire transfer or
other charges, and, specifically, without deduction of withholding or similar
taxes or other government imposed fees or taxes. The pre-approved cost
specification shall state a currency exchange rate range based on which the
Purchase Price is determined. In case the currency exchange rate fluctuation
exceeds such rate range, the Purchase Price shall be modified by the percentage
exceeding the agreed range.

 

Section 5.04        Interest Due. In case of any delay in payment by Xenetic to
Kevelt and/or Pharmsynthez, interest on the overdue payment shall accrue at an
annual interest rate equal to seven and one half percent (7.5%), except to the
extent that a regulatory or other governmental agency requires that the annual
interest rate exceed that stated in this Section 5.04, the rate shall be raised
to that set forth by the regulatory or other governmental agency with the
understanding that Kevelt and/or Pharmsynthez shall provide documentary
verification that such rate increase is legally required. The foregoing interest
shall be due from Xenetic without any special notice, and shall be in addition
to any other remedies that Kevelt and/or Pharmsynthez may have pursuant to this
Transition- and Resupply Agreement.

 

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Section 5.05        Taxes. The Parties agree that any taxes that either Party is
required by law to withhold from amounts payable to the other Party under this
Transition- and Resupply Agreement (whether under this Article 5 or otherwise)
shall be deducted by the paying Party from the amounts paid to the non-paying
Party hereunder at the rate(s) required by applicable law, and shall be promptly
paid to the appropriate governmental authority on behalf of the non-paying
Party. However, the pre-approved cost specification as stated in the annex of
this Transition, Manufacturing and Supply Agreement, shall state the Purchase
Price after all such tax withholdings. The paying Party shall promptly provide
to the non-paying Party receipts from the government or taxing authority
evidencing payment of such taxes, if available, or other written proof of
payment if official receipts are not available, and shall provide reasonable
assistance to the non-paying Party to obtain tax credits therefor.

 

Section 5.06        Manufacturing Cost Audit. Upon the written request of
Xenetic, Kevelt and/or Pharmsynthez shall permit an independent certified public
accounting firm of recognized national standing in the United States, selected
by Xenetic and reasonably acceptable to Kevelt and/or Pharmsynthez, at the
Xenetic’s expense, to have access to Kevelt’s and/or Pharmsynthez’s records
related to all manufacturing costs billed to Xenetic as may be reasonably
necessary to verify the accuracy of any amounts payable by Xenetic to Kevelt
and/or Pharmsynthez under this Transition- and Resupply Agreement. Such audits
shall be conducted under conditions of confidentiality and may be made no more
than once each calendar year, during normal business hours at reasonable times
mutually agreed by the Parties. If the audit discloses that the manufacturing
costs charged to Xenetic by Kevelt and/or Pharmsynthez was over twelve and a
half percent (12.5%) higher than the actual manufacturing costs, then Kevelt
and/or Pharmsynthez shall pay the reasonable fees and expenses charged by such
accounting firm and reimburse Xenetic the amount overcharged along with a charge
of ten percent (10%) interest on the amount overcharged.

 

Article VI.

Representations and Warranties

 

Section 6.01        Representations and Warranties of KEVELT AND/OR
PHARMSYNTHEZ.

 

(a)     Authorization. Kevelt and/or Pharmsynthez, jointly and severally,
represents, warrants and covenants that:

 

(i) this Transition- and Resupply Agreement has been duly executed and delivered
by Kevelt and/or Pharmsynthez and constitutes a valid and binding obligation of
Kevelt and/or Pharmsynthez, enforceable against Kevelt and/or Pharmsynthez in
accordance with its terms, except as enforceability may be limited by
bankruptcy, fraudulent conveyance, insolvency, reorganization, moratorium and
other laws relating to or affecting creditors’ rights generally and by general
equitable principles;

 

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(ii) the execution, delivery and performance of this Manufacturing Agreement
have been duly authorized by all necessary action on the part of Kevelt and/or
Pharmsynthez, its officers and directors and does not conflict with any
agreement, instrument or understanding, oral or written, to which Kevelt and/or
Pharmsynthez is a party or by which it may be bound, and, to the best of its
knowledge, does not violate any material law or regulation of any court,
governmental body or administrative or other agency having authority over it;

 

(iii) Kevelt and/or Pharmsynthez has full power and authority to perform the
obligations set forth herein, and that Kevelt and/or Pharmsynthez is not subject
to any order, decree or injunction by a court of competent jurisdiction which
may prevent or materially delay the consummation of the transactions
contemplated by this Transition and Resupply Agreement;

 

(iv) Kevelt and/or Pharmsynthez is duly organized, validly existing and in good
standing under the laws of the jurisdiction where it is organized; and

 

(b)Kevelt and/or Pharmsynthez’s Rights (Virexxa). As of the Effective Date,
Kevelt and/or Pharmsynthez, jointly and severally, represent and warrant, with
respect to manufacture and supply of Virexxa as of the Effective Date, that to
its knowledge, upon reasonable inquiry, the granting of the rights to Xenetic
hereunder does not conflict with any contractual obligation to any Third Party.

 

(c)No Conflicting Agreements. Kevelt and/or Pharmsynthez, jointly and severally,
represent and warrant that they have not to their knowledge granted, and during
the term of this Transition and Resupply Agreement will not grant, any right to
a Third Party that would conflict with the licenses and rights granted to
Xenetic hereunder.

 

Section 6.02        Representations and Warranties of Xenetic.

 

(a)Authorization. Xenetic represents, warrants and covenants that:

 

(i) this Transition- and Resupply Agreement has been duly executed and delivered
by Xenetic and constitutes a valid and binding obligation of Xenetic,
enforceable against Xenetic in accordance with its terms, except as
enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium and other laws relating to or affecting creditors’
rights generally and by general equitable principles;

 

(ii) the execution, delivery and performance of this Transition and Resupply
Agreement by Xenetic have been duly authorized by all necessary action on the
part of Xenetic, its officers and directors, and does not conflict with any
agreement, instrument or understanding, oral or written, to which Xenetic is a
party or by which it may be bound, and, to the best of its knowledge, does not
violate any material law or regulation of any court, governmental body or
administrative or other agency having authority over it;

 

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(iii) Xenetic has full power and authority to perform the obligations set forth
herein, and that Xenetic is not subject to any order, decree or injunction by a
court of competent jurisdiction which may prevent or materially delay the
consummation of the transactions contemplated by this Transition and Resupply
Agreement; and

 

(iv) Xenetic is duly organized, validly existing and in good standing under the
laws of the jurisdiction where it is organized.

 

(b)No Impairing Agreements. Xenetic represents, warrants and covenants that,
during the term of this Transition and Resupply Agreement, it will not knowingly
enter into any agreements, oral or written, that would in any way impair its
ability to fulfill its obligations under this Transition and Resupply Agreement.

 

Article VII.

Limitations on Representations and Warranties

 

Limitations on Representations and Warranties. THE LIMITED WARRANTIES CONTAINED
IN ARTICLE 5 ARE THE SOLE WARRANTIES GIVEN BY THE PARTIES HEREUNDER, AND ARE
MADE EXPRESSLY IN LIEU OF AND EXCLUDE ANY IMPLIED WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OR OTHERWISE, AND ALL OTHER
EXPRESS OR IMPLIED REPRESENTATIONS AND WARRANTIES PROVIDED BY COMMON LAW,
STATUTE OR OTHERWISE ARE HEREBY DISCLAIMED BY BOTH PARTIES. IN NO EVENT SHALL
EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR INDIRECT, PUNITIVE, SPECIAL,
CONSEQUENTIAL OR EXEMPLARY DAMAGES OF ANY KIND, INCLUDING WITHOUT LIMITATION,
LOSS OF PROFITS AND LOSS OR INTERRUPTION OF BUSINESS. THE FOREGOING PROVISION
SHALL NOT BE CONSTRUED TO LIMIT A PARTY'S INDEMNIFICATION OBLIGATION UNDER THIS
TRANSITION AND RESUPPLY AGREEMENT FOR THIRD PARTY CLAIMS WHICH MAY INCLUDE
CONSEQUENTIAL, PUNITIVE OR OTHER TYPES OF DAMAGES.

 

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Article VIII.

Confidentiality

 

Section 8.01        Confidentiality.

 

 (a)No Disclosure or Use. During the term of this Transition and Resupply
Agreement, and for a period of ten (10) years thereafter, each Party shall keep
confidential all information received from the other Party (the “Confidential
Information”), and shall not disclose or use such Confidential Information
without the other Party’s explicit written consent, except to the extent
contemplated by this Transition and Resupply Agreement. This restriction shall
not, however, prevent disclosure of such Confidential Information if and to the
extent that disclosure is clearly required by law; provided that the disclosing
Party informs the other Party without delay of any such requirement, in order to
allow such other Party to object to such disclosure and to seek an appropriate
protective order or similar protection prior to disclosure.     (b)No
Misappropriation. The Parties agree that the transfer of rights in regulatory
documentation by one Party to the other Party pursuant to this Transition and
Resupply Agreement shall not, to the actual knowledge of the transferring Party,
misappropriate the proprietary or trade secret information of a Third Party.

 

(c)Exceptions. The above obligations shall not apply, or shall cease to apply,
to Confidential Information of the disclosing Party which:

 

(i) is now, or hereafter becomes, through no act or failure to act on the part
of the receiving Party, generally known or available;

 

(ii) is known by the receiving Party at the time of receiving such Confidential
Information, as evidenced by its written records;

 

(iii) is hereafter furnished to the receiving Party by a Third Party, as a
matter of right and without restriction on disclosure;

 

(iv) is independently developed by the receiving Party without resort to the
Confidential Information of the disclosing Party or any breach of this Article
7;

 

(v) is entered into evidence in a legal proceeding or submitted for use in a
dispute resolution proceeding to enforce one or more rights of a Party under
this Transition and Resupply Agreement; provided that the receiving Party shall
give the disclosing Party prompt written notice and sufficient opportunity to
object to such use or disclosure, or to request confidential treatment of the
Confidential Information; or

 

(vi) is the subject of a written permission to disclose provided by the
disclosing Party.

 

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Section 8.02        Permitted Disclosures.

 

(a) Each Party may disclose Confidential Information: (i) for the purpose of
preparing, filing, prosecuting and maintaining Patents; (ii) for obtaining
Regulatory Approvals; (iii) for the manufacture, marketing, distribution or sale
of Virexxa; or (iv) to any individuals that are required by law, contract or
otherwise not to use or disclose such Confidential Information except as
permitted by this Transition and Resupply Agreement. Each Party will use at
least the same standard of care as it uses to protect proprietary or
confidential information of its own to ensure that such individuals do not
disclose or make any unauthorized use of the Confidential Information.

 

(b) In order to exploit rights retained by or granted to the Parties under this
Transition and Resupply Agreement, each Party may publish or publicly present
any research or other data which may involve the disclosure of Confidential
Information; provided that the publishing Party agrees to furnish the
non-publishing Party with copies of any proposed oral, written, graphic or
electronic public disclosure prior to submission for publication or
presentation. The non-publishing Party shall then have thirty (30) days to
review such contemplated publication or presentation. At the end of the thirty
(30) day period, the publishing Party may proceed with the contemplated
publication or presentation unless (i) the non-publishing Party reasonably
requests additional time to fully protect its intellectual property rights, in
which case any such contemplated publication or presentation containing the
details of a patentable invention must be withheld by the publishing Party for
an additional period of thirty (30) days or until a patent application is filed
thereon by the non-publishing Party, whichever is earlier in time; or (ii) the
non-publishing Party reasonably requests that trade secret information or other
Confidential Information of the non-publishing Party be redacted from the
contemplated publication or presentation, in which case any such request shall
be honored by the publishing Party.

 

Section 8.03        Disclosure of Transition and Resupply Agreement. Except as
required by law, neither Kevelt and/or Pharmsynthez nor Xenetic shall release to
any Third Party or publish in any way any Confidential Information with respect
to the terms of this Transition and Resupply Agreement or concerning their
cooperation without the prior written consent of the other Party, which consent
will not be unreasonably withheld or delayed; provided; however, that either
Party may disclose the terms of this Transition and Resupply Agreement (a) to
the extent required to comply with applicable laws, and (b) in any instance
where a Party becomes legally compelled (by deposition, interrogatory, request
for documents, subpoena, civil investigative demand or similar process).
Notwithstanding any other provision of this Transition and Resupply Agreement,
each Party may disclose the terms of this Transition and Resupply Agreement (i)
to its legal counsel or (ii) to lenders, investment bankers, attorneys,
financial advisors and other financial institutions of its choice solely for
purposes of financing the business operations of such Party, or to a potential
acquirer of all or substantially all of the assets or equity interests of such
Party (a) upon the written consent of the other Party, or (b) if the Party
disclosing such terms obtains a signed confidentiality agreement with such
intended recipient with respect to such Confidential Information, upon terms
substantially similar to those contained in this Article 7.

 

Section 8.04        Confidential Information of Each Party. The Parties agree
that the material financial terms of the Transition and Resupply Agreement shall
be considered the Confidential Information of both Parties.

 

Section 8.05        Employee Obligations. Each Party shall undertake to ensure
that all of its employees who have access to Confidential Information are under
obligations of confidentiality to such Party.

 

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Article IX.

Term and Termination

 

Section 9.01        Term.

 

(a)Term. The supply of Virexxa by Kevelt and/or Pharmsyntez shall continue until
as the earliest of (i) such time as Xenetic requests the transfer of the
manufacturing process to itself or a Third Party manufacturer selected by
Xenetic pursuant to Article II of this Transition, Services and Resupply
Agreement; (ii) such time as Xenetic discontinues the development of a Virexxa
clinical or commercial program; (iii) eight (8) years from the Effective Date or
(iv) upon Xenetic’s written notice to be provided no later than three (3) months
prior to the termination date.

 

(b)Termination with Cause. Either Party may terminate this Transition and
Resupply Agreement for cause pursuant to Sections 9.02 and 9.03.

 

(c)Accrued Obligations. Except where explicitly provided elsewhere herein,
termination of this Transition and Resupply Agreement for any reason, will not
affect: (i) obligations of the Parties, including any payments which have
accrued as of the date of termination or expiration, or (ii) rights and
obligations of the Parties at law or in equity which, from the context thereof,
are intended to survive termination of this Transition and Resuupply Agreement;
nor prejudice any Party’s right to obtain performance of any obligation then due
and owing.

 

Section 9.02        Termination for Insolvency. Either Party may terminate this
Transition- and Resupply Agreement immediately upon delivery of written notice
to the other Party: (i) upon the institution by or against the other Party of
insolvency, receivership or bankruptcy proceedings or any other proceedings for
the settlement of the other Party’s debts; provided, however, with respect to
involuntary proceedings, that such proceedings are not dismissed within sixty
(60) days; (ii) upon the other Party’s making an assignment for the benefit of
creditors; or (iii) upon the other Party’s dissolution or ceasing to do
business.

 

Section 9.03        Termination for Material Breach. Either Party may terminate
this Transition and Resupply Agreement upon sixty (60) days prior written notice
to the other Party upon a material breach by the other Party of any of its
obligations under this Transition and Resupply Agreement (and such obligations
specifically include a failure by a Party to pay any amount owing under this
Transition and Resupply Agreement); provided, however, that such termination
shall become effective only if the breaching Party shall fail to: (i) remedy or
cure the breach within such sixty (60) day period, or initiate a remedy or cure
within such period if it is not practicable to complete the cure in such period;
or (ii) within sixty (60) days after the date of the non-breaching Party’s
written notice of material breach, provide written notice of the breaching
Party’s dispute of the alleged breach or failure to cure and its invocation of
the dispute resolution provisions set forth in the IP Asset Acquisition
Agreement. If the non-breaching Party elects not to terminate this Transition
and Resupply Agreement pursuant to this Section 9.03, then the non-breaching
Party shall be entitled to seek, any equitable remedies and damages permitted by
law, except to the extent otherwise limited by this Transition and Resupply
Agreement or the Agreement.

 

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Article X.

Product Liability, Indemnification and Insurance

 

Section 10.01    Responsibility and Control. Xenetic and Kevelt and/or
Pharmsynthez shall each be solely responsible for the safety of its own
employees, agents, Affiliates or independent contractors with respect to its
performance under this Transition and Resupply Agreement, and each shall hold
the other Party harmless with regard to any liability for damages or personal
injuries resulting from acts of its respective employees, agents, Affiliates or
independent contractors.

 

Section 10.02    Xenetic Right to Indemnification. Kevelt and/or Pharmsynthez
shall defend, indemnify, and hold harmless Xenetic, its Affiliates, successors,
and assigns and their respective directors, officers, employees, agents, and
independent contractors (collectively the "Xenetic Indemnitees") from and
against any and all liabilities, damages, losses, settlements, claims, actions,
suits, judgments, interest, penalties, fines, costs, or expenses (including,
without limitation reasonable attorneys' fees) (any of the foregoing, "Section
10.02 Damages") incurred or asserted against any Xenetic Indemnitee of whatever
kind or nature including, without limitation, any claim or liability based upon
negligence, warranty, strict liability, or violation of governmental regulation,
or otherwise arising from or occurring as a result of a claim or demand made by
a Third Party against any Xenetic Indemnitee (a "Xenetic Third Party Claim")
because of (i) the material breach by Kevelt and/or Pharmsynthez, its employees,
other agents, independent contractors, sublicensees or Affiliates of their
representations, warranties, or obligations under this Transition and Resupply
Agreement; (ii) the material violation of any applicable law by Kevelt and/or
Pharmsynthez; or, (iii) the negligence or willful misconduct of Kevelt and/or
Pharmsynthez, its employees, other agents, independent contractors, sublicensees
or Affiliates in connection with this Transition and Resupply Agreement;
provided, however, that Kevelt and/or Pharmsynthez shall have no such obligation
to defend, indemnify, or hold harmless the Xenetic Indemnitees against a Xenetic
Third Party Claim to the extent any Section 10.02 Damages are based upon, or are
the result of, or arise from, Xenetic activity and in any event shall not be
liable for Section 10.02 Damages in excess of twenty five million Euros
(€25,000,000) in the aggregate for all Xenetic Third Party Claims collectively.
The indemnification provided under clause (a) of this Section 10.02, shall apply
only to Virexxa manufactured by Kevelt and/or Pharmsynthez. The indemnification
provided under clauses (i) through (iii) of this Section 10.02, shall be
applicable during the term of this Transition and Resupply Agreement.

 

Section 10.03    Indemnification Procedures. Promptly after receipt by a Xenetic
Indemnitee of notice of any pending or threatened claim against it (an
“Action”), such Xenetic Indemnitee shall give written notice to Kevelt and/or
Pharmsynthez to look for indemnification pursuant to this ArticleX (the
“Indemnifying Party”) of the commencement thereof. The failure to so notify the
Indemnifying Party shall not relieve it of any liability that it may have to any
Indemnitee hereunder, except to the extent the Indemnifying Party demonstrates
that it is prejudiced thereby. In case any Action that is subject to
indemnification under Section 10.02 shall be brought against an Xenetic
Indemnitee and it shall give written notice to Kevelt and/or Pharmsynthez of the
commencement thereof, Kevelt and/or Pharmsynthez shall be entitled to
participate therein and, if it so desires, to assume the defense thereof with
counsel reasonably satisfactory to such Xenetic Indemnitee and, after notice
from Kevelt and/or Pharmsynthez to the Xenetic Indemnitee of its election to
assume the defense thereof, Kevelt and/or Pharmsynthez shall not be liable to
such Xenetic Indemnitee under this ArticleX for any fees of other counsel or any
other expenses, in each case subsequently incurred by such Xenetic Indemnitee in
connection with the defense thereof. Notwithstanding Kevelt’s and/or
Pharmsynthez’s election to assume the defense of any such Action that is subject
to indemnification under Section 10.02, the Xenetic Indemnitee shall have the
right to employ separate counsel and to participate in the defense of such
Action at its own expense. If a Kevelt and/or Pharmsynthez assumes the defense
of such Action, no compromise or settlement thereof may be effected by Kevelt
and/or Pharmsynthez without the Xenetic Indemnitee’s written consent, which
consent shall not be unreasonably withheld or delayed, unless (i) there is no
finding or admission of any violation of law or any violation of the rights of
any Third Party and no effect on any other claims that may be made against the
Xenetic Indemnitee and (ii) the sole relief provided is monetary damages that
are paid in full by Kevelt and/or Pharmsynthez.

 

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Section 10.04    Compliance. The Parties shall comply fully with all applicable
laws and regulations in connection with their respective activities under this
Transition and Resupply Agreement.

 

Section 10.05    Kevelt and Pharmsynthez Insurance.

 

(a) Kevelt and Pharmsynthez shall, until expiration of the last batch of Virexxa
manufactured hereunder, by Kevelt and/or Pharmsynthez, obtain and maintain at
their own cost and expense, any combination of insurance, for its commercial
liability, including, but not limited to, product liability and contractual
liability insurance, with respect to its activities hereunder.

 

(b) Such insurance or self-insurance shall be in such amounts and subject to
such deductibles as the Parties may agree based upon standards prevailing in the
industry at the time, but under no circumstances shall be less than: (i) Four
Million Dollars ($4,000,000) per occurrence for damage, injury and/or death to
persons prior to regulatory authority approval of Virexxa; (ii) Ten Million
Dollars ($10,000,000) per occurrence for damage, injury and/or death to persons
after regulatory authority approval of Virexxa; or One Million Dollars
($1,000,000) per occurrence for damage/or injury to property. Such insurance
shall be written to cover claims incurred, discovered, manifested, or made in
connection with clinical development and commercial sale of Virexxa. Upon
written request of Xenetic, Kevelt and/or Pharmsynthez shall provide to Xenetic
copies of its Certificates of Insurance.

 

(c) All insurance required of Kevelt and/or Pharmsynthez under this Transition
and Resupply Agreement shall, be through a commercially based insurance company,
such insurance shall (i) be issued by reputable, financially sound companies;
(ii) provide that the insurance company will endeavor to provide at least
thirty (30) days' notice of cancellation of coverage, non-renewal or material
change of coverage to both Xenetic and Kevelt and/or Pharmsynthez, but its
failure to do so shall impose no penalty or additional obligations under this
Transition and Resupply Agreement; and (iii) contain a severability of interest
or separation of the insureds provision, affording defense and coverage for an
insured in the event of a claim brought by another insured.

 

(d) Additional Requirements. All of the foregoing liability policies shall be
primary and non-contributory and contain a waiver of subrogation in favor of the
other Party or the other Party’s designee.

 

(e) No Limitation. Nothing in this Article 9 regarding insurance coverage
amounts shall be deemed or interpreted as a limitation on the indemnities set
forth in this Transition and Resupply Agreement.

 

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Article XI.

Miscellaneous Provisions

 

Section 11.01    Governing Law. This Transition and Resupply Agreement shall be
governed, interpreted and construed in accordance with the laws of the United
States and the State of Massachusetts, without regard to conflict of laws
principles thereof.

 

Section 11.02    Waiver. The failure on the part of Kevelt and/or Pharmsynthez
or Xenetic to exercise or enforce any rights conferred upon it hereunder shall
not be deemed to be a waiver of any such rights and shall not operate to bar the
exercise or enforcement thereof at any time or times thereafter. The observance
of any term of this Transition and Resupply Agreement may be waived (either
generally or in a particular instance, and either retroactively or
prospectively) by the Party entitled to enforce such term, but any such waiver
shall be effective only if set forth in a writing signed by the Party against
whom such waiver is to be asserted.

 

Section 11.03    Force Majeure. Neither Party shall be held liable or
responsible to the other Party, nor be deemed to have defaulted under or
breached this Transition and Resupply Agreement, for failure or delay in
fulfilling or performing any term of this Transition and Resupply Agreement,
other than an obligation to make a payment, when such failure or delay is caused
by or results from fire, floods, earthquakes, embargoes, prohibitions or
interventions, war, acts of war (whether war be declared or not), acts of
terrorism, insurrections, riots, civil commotions, strikes, lockouts, acts of
God, or any other cause beyond the reasonable control of the affected Party
(hereinafter a “Force Majeure”). Nothing in this provision shall be interpreted
to restrict either Party from exercising its rights to terminate this Transition
and Resupply Agreement pursuant to its terms during such periods of Force
Majeure.

 

Section 11.04    Severability. It is the intention of the Parties to comply with
all applicable laws, domestic or foreign, in connection with the performance of
its obligations hereunder. In the event that any provision of this Transition
and Resupply Agreement, or any part hereof, is found invalid or unenforceable,
the remainder of this Transition and Resupply Agreement will be binding on the
Parties hereto, and will be construed as if the invalid or unenforceable
provision or part thereof had been deleted, and this Transition and Resupply
Agreement shall be deemed modified to the extent necessary to render the
surviving provisions enforceable to the fullest extent permitted by law.

 

Section 11.05    Survival. The following Articles and Sections shall survive
termination or expiration of this Transition and Resupply Agreement, with such
limitations as are noted: Article 1, to the extent definitions are embodied in
the following listed Articles and Sections of this Transition and Resupply
Agreement; Articles 4, 7 and 8; Sections 9.01(b),; and Articles 10 and 11.

 

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Section 11.06    Government Acts. In the event that any act, regulation,
directive, or law of a government, including its departments, agencies or
courts, (a “Government Act”) should make impossible or prohibit, restrain,
modify or limit any material act or obligation of Kevelt and/or Pharmsynthez or
Xenetic under this Transition and Resupply Agreement, the Party, not so affected
shall have the right, at its option, to suspend or terminate this Transition and
Resupply Agreement. Such right of suspension or termination may be exercised as
to the country which committed the Government Act only if after thirty (30) days
of good faith negotiations between the Parties, the Parties cannot agree to make
such modifications to this Transition and Resupply Agreement as may be necessary
to fairly address the Government Act.

 

Section 11.07    Government Approvals. Each Party will use commercially
reasonable efforts to obtain any government approval required to enable this
Transition and Resupply Agreement to become effective, or to enable any payment
hereunder to be made, or enable any other obligation hereunder to be observed or
performed. Each Party will keep the other Party informed of its progress in
obtaining any such governmental approvals.

 

Section 11.08    Assignment. This Transition and Resupply Agreement may not be
assigned in part or in whole, or delegated in whole or in part, by either Party
without the prior written consent of the other Party; provided, however, that
either Party may assign this Transition and Resupply Agreement, without the
consent of the other Party, (a) in part or in whole to any of its Affiliates, if
the assigning Party remains liable for the full performance of its Affiliates’
obligations hereunder, or (b) in connection with the transfer or sale of all or
substantially all of its assets or business to which this Transfer and Supply
Agreement relates, or in the event of its merger or consolidation with,
acquisition by, or sale to another company. The Parties acknowledge that Xenetic
may elect to assign to one or more Third Parties, on a country-by-country or
region-by-region basis, certain of its rights and to delegate certain of its
obligations under this Transition and Resupply Agreement; provided, however,
that Xenetic may not assign such rights or delegate such obligations in the
United States, Europe or Japan to a Third Party without Kevelt’s and/or
Pharmsynthez’s prior written consent.

 

Section 11.09    Binding Agreement. This Transition and Resupply Agreement shall
be binding upon and inure to the benefit of all successors and permitted assigns
of the Parties.

 

Section 11.10    Counterparts. This Transition and Resupply Agreement may be
executed by original or facsimile signature in several counterparts, all of
which shall be deemed to be originals, and all of which shall constitute one and
the same Transition and Resupply Agreement.

 

Section 11.11    No Agency. Nothing herein contained shall be deemed to create
an agency, joint venture, amalgamation, partnership or similar relationship
between Kevelt and/or Pharmsynthez and Xenetic. Notwithstanding any of the
provisions of this Transition and Resupply Agreement, neither Party shall at any
time enter into, incur, or hold itself out to Third Parties as having authority
to enter into or incur, on behalf of the other Party, any commitment, expense,
or liability whatsoever, and all such commitments, expenses and liabilities
undertaken or incurred by one Party in connection with or relating to the
development, manufacture or sale of Virexxa shall be undertaken, incurred or
paid exclusively by that Party, and not as an agent or representative of the
other Party.

 

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Section 11.12    Notice. 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 10.13):

 

If to Kevelt and/or Pharmsynthez:

AS KEVELT

3/1, Teaduspargi Str.,

12618 Tallinn, Estonia

Facsimile: +372 670 1219

E-mail: a.ahtloo@kevelt.ee

Attention: Allan Ahtloo

 

OJSC Pharmsynthez

188663 Leningradskaya oblast, Vsevolozhsky

rayon, urban village Kuzmolovsky, station

Capitolovo, № 134 liter 1, Russian Federation

Facsimile: 7 (812) 329-8089

E-mail: pkruglyakov@pharmsynthez.com

Attention: Petr 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: mgehl@cov.com

Attention: Matthew Gehl

    If to Xenetic:

Xenetic Biosciences, Inc.

99 Hayden Avenue, Suite 230

Lexington, Mass. 02421

Facsimile: [FAX NUMBER]

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.

 

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Section 11.13    Headings. The Article, Section and subsection headings are for
convenience only and will not be deemed to affect in any way the language of the
provisions to which they refer.

 

Section 11.14    Authority. The undersigned represent that they are authorized
to sign this Transition and Resupply Agreement on behalf of the Parties hereto.

 

Section 11.15    No Implied Licenses. Nothing in this Transition and Resupply
Agreement shall be construed as granting either Party by implication, estoppel
or otherwise, any license rights.

 

Section 11.16    Entire Agreement. This Transition and Resupply Agreement
contains the entire understanding of the Parties relating to the matters
referred to herein, and may only be amended by a written document, duly executed
on behalf of the respective Parties. , Services

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first written above by their respective officers thereunto duly
authorized.

 

 

SELLER:

 

AS KEVELT

 

 

By__________________________________

Name: Allan Ahtloo

Title:

 

 

PARENT:

 

OJSC PHARMSYNTHEZ

 

 

By__________________________________

Name: Peter V. Kruglyakov

Title:

 

 

BUYER:

XENETIC BIOSCIENCES, INC.

 

 

 

 

 

 

 

 

By___________________________________

Name:

Title:

 

 

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