Unassociated Document


    

      XTL
        Biopharmaceuticals Inc.

      275
        Grove
        Street, Suite 2-400

      Newton,
        Massachusetts 02466

      


      August
        17, 2005

      


      VivoQuest,
        Inc.

      711
        Executive Boulevard

      Valley
        Cottage, New York 10989


      VivoQuest,
        Inc.

       

      Gentlemen:

       

      Reference
        is made to the Asset Purchase Agreement dated as of August 17, 2005 (the
        “Purchase
        Agreement”)
        between XTL Biopharmaceuticals Inc., a Delaware corporation (“Purchaser”)
        and
        VivoQuest, Inc. (“Seller”).
        Capitalized terms used and not otherwise defined in this letter agreement
        shall
        have the meanings assigned to them in the Purchase Agreement.

      


      Within
        one business day of the Effective Date (as defined below), Purchaser will
        make
        or cause to be made to Seller a payment in the amount of $133,333.33 (the
        “Initial
        Payment”).
        The
        Purchaser will make additional payments to Purchaser of the same amount on
        or
        prior to each of August 25, 2005 and September 5, 2005 (each, a “Subsequent
        Payment”)
        if (i)
        the Effective Date has occurred, (ii) Seller has provided Purchaser with
        executed copies of inventor assignments satisfactory to Purchaser with respect
        to all issued patents and filed patent applications of Seller, (iii) Purchaser
        has been provided with properly executed inventor declarations for each of
        Seller’s previously filed patent applications and the same have been properly
        filed with the United States Patent and Trademark Office and (iv) Purchaser
        has
        also been provided with a fully executed amendment in the form attached as
        Exhibit
        A
        to the
        Employee Non-Disclosure, Non-Competition and Assignment of Intellectual Property
        Agreement dated as of March 3, 2003 between Anthony Sandrasagra and Seller
        but
        (v) the Closing has not occurred on or prior to such date, provided that
        if the
        Purchase Agreement has been terminated prior to such date, the payment to
        be
        made on such date will not be required. If the Purchase Agreement is terminated
        by Purchaser pursuant to Section 9.4(ii) or (iii) (other than by reason of
        Seller’s inability to obtain a Closing Consent), all amounts paid to Seller
        pursuant hereto shall be immediately repaid to Purchaser. Seller may terminate
        this letter agreement, the Purchase Agreement and the License Agreement (subject
        to the proviso in the last sentence of Section 2(a) of the License Agreement)
        by
        written notice to Purchaser if (i) Purchaser does not deliver a fully executed
        Guaranty in the form attached as Exhibit
        B
        on or
        before August 25, 2005 (in which event the Initial Payment shall be
        non-refundable but there shall be no obligation to make either Subsequent
        Payment) or (ii) Purchaser does not make the Initial Payment or a Subsequent
        Payment on the applicable date set forth above (after all conditions to
        Purchaser’s obligation to make such payment set forth herein have been
        satisfied) and such nonpayment continues for three business days after receipt
        of written notice of nonpayment from Seller to Purchaser.

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      All
        payment made pursuant to the preceding paragraph shall be used solely to
        fund
        ordinary course operating expenses of Seller and shall not be applied to
        the
        repayment of the Convertible Secured Promissory Notes of Seller held by UMPC
        Health System (“UMPC”)
        and
        Highmark Health Ventures Investment Fund, L.P. (“Highmark”).
        In
        addition to any payments made pursuant to the preceding paragraph, if the
        Effective Date occurs, the conditions to Purchaser’s obligation to make the
        Subsequent Payments have been satisfied and this letter agreement has not
        been
        terminated by Seller pursuant to the last sentence of the preceding paragraph,
        but the Purchase Agreement is subsequently terminated other than by reason
        of
        Reza Fathi, Zhen Yeng or Anthony Sandrasagra ceasing to be employed by Seller
        (pursuant to clause (vi) of Section 9.4 thereof), Purchaser shall pay to
        Seller’s employees, allocated in accordance with Seller’s written instructions,
        up to $100,000 in the aggregate as severance pay.

      


      Purchaser
        shall have no obligation to make the Initial Payment or either of the Subsequent
        Payments prior to the date (the “Effective
        Date”)
        on
        which (i) the Transaction Documents and the transactions contemplated thereby
        have been approved by the Board of Directors and shareholders of Seller and
        written evidence thereof has been provided to Purchaser, and (ii) Purchaser
        has
        been provided with a letter in the form attached as Exhibit
        C
        executed
        by UPMC, Highmark and each other creditor of Seller having a security interest
        in any of Seller’s assets . If the Effective Date has not occurred on or prior
        to August 17, 2005, this letter agreement shall terminate and be of no further
        force or effect.

      


      In
        consideration for the foregoing payments, during the period from the date
        hereof
        until the earlier of (x) the Closing Date and (y) the termination of the
        Purchase Agreement, Seller shall, and shall cause its employees, directors,
        agents and Affiliates to, immediately suspend any existing negotiations or
        discussions relating to any sale, joint venture or other transfer of actual
        or
        beneficial ownership of any securities of Seller or any of its operations
        or any
        assets associated therewith (other than goods and services of such Seller
        sold
        in the ordinary course of business) (collectively, an “Acquisition
        Transaction”),
        and
        Seller shall not, and shall cause its employees, directors, agents and
        Affiliates not to, (i) solicit any proposals or offers relating to
        an
        Acquisition Transaction, or (ii) negotiate or engage in discussions
        with
        any third party concerning any proposal or offer for an Acquisition
        Transaction.

      


      Purchaser
        shall have no liability under or in connection with this letter agreement
        in
        excess of any defaulted payment hereunder. In no event shall Seller be entitled
        to claim any special, punitive or consequential damages as a consequence
        of any
        breach of this letter agreement.

       

      
        
          
          

        

        
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      This
        letter agreement shall be governed by and constructed in accordance with
        the
        laws of the State of New York without regard to conflicts of law principles
        of
        such State.

      


      


      Very
        truly yours,

      
        	 	 	 
	 	XTL
                BIOPHARMACEUTICALS, INC.
	 
 	 
 	 
 
	 	By:  	/s/ 
	 	
                
Name:
	 	Title: 


      

      
        	 	 	 	 
	 ACCEPTED: 	 	 	 
	 	 	 
	 VIVOQUEST,
                INC. 	 	 
	 	 	 	 	 
	By: 	/s/ 	 	 	 
	 	
                

              	 	 	
              
	 	Name:
Title:	 	 	 


      

      
 

      
        
          
          

        

        
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      EXHIBIT
        C

      


      [form
        of standstill letter]

      


      [ ],
        2005

      


      XTL
        Biopharmaceuticals Ltd.

      Kiryat
        Weitzmann Science Park

      3
        Hasapir
        Street, Building 3

      P.O.
        370

      Rehovot
        76100, Israel 

      


      XTL
        Biopharmaceuticals Inc.

      275
        Grove
        Street, Suite 2-400

      Newton,
        Massachusetts 02466

      


      Gentlemen:

      


      Reference
        is made to the Asset Purchase Agreement dated as of August 11, 2005 (the
        “Purchase
        Agreement”)
        between XTL Biopharmaceuticals, Inc., a Delaware corporation (“Purchaser”),
        and
        VivoQuest, Inc. (“Seller”),
        the
        License Agreement dated as of August 11, 2005 (the “License
        Agreement”)
        between XTL Biopharmaceuticals Ltd., an Israeli corporation (“Parent”),
        and
        Seller and the letter agreement dated August 11, 2005 (together with the
        Asset
        Purchase Agreement and the License Agreement, the “Transaction
        Documents”)
        between Purchaser and Seller. 

      


      In
        order
        to induce Purchaser and Parent to enter into the Transaction Documents, the
        undersigned agrees (i) that if the closing under the Purchase Agreement occurs
        on or prior to September 22, 2005, the undersigned will release any and all
        liens or security interests held by the undersigned in any of Seller’s assets
        simultaneously with such closing, (ii) that prior to September 22, 2005,
        unless
        the Purchase Agreement has been terminated, the undersigned will not (a)
        take
        any action to collect or enforce the [name
        debt instrument]
        (the
“Seller
        Indebtedness”)
        or the
        [name
        instruments creating security interests or liens]
        or (b)
        transfer any of the Seller Indebtedness or any interest therein unless the
        transferee agrees in writing to be bound by this letter and (iii) that the
        undersigned shall, upon the consummation of the closing under the Asset Purchase
        Agreement, be deemed to have irrevocably waived any and all claims the
        undersigned might otherwise have against Purchaser and Parent and any of
        their
        officers, directors, employees or agents based upon, arising from, or related
        to
        the Seller Indebtedness, including without limitation any such claim based
        on
        fraudulent conveyance, fraudulent transfer or any similar theory of recovery.
        The undersigned covenants not to bring or attempt to bring any claim described
        in clause (iii) of the preceding sentence.

      


      This
        letter shall be governed by and construed in accordance with the laws of
        the
        State of New York.

      


      
        
          
          

        

        
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       Very
        truly yours,

       

      
        	 	 	 
	 	 
	 	By:  	/s/ 
	 	
                
Name:
	 	Title 


      


      
        
          
          

        

        
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      EXHIBIT
        A

      


      [form
        of
        Sandrasagra amendment]

      


      Amendment
        dated as of August 12, 2005 (this “Amendment”)
        to the
        Employee Non-Disclosure, Non-Competition and Assignment of Intellectual Property
        Agreement dated as of March 3, 2003 (the “Agreement”)
        between Anthony Sandrasagra and VivoQuest, Inc.

       

      For
        mutual consideration, the receipt and adequacy of which are hereby acknowledged,
        the parties agree as follows:

       

      1.
        The
        fifth sentence of the first paragraph of Section 6 is hereby amended and
        restated in its entirety to read as follows:

       

      Employee,
        however, shall not be prohibited from seeking and/or obtaining employment
        with
        any entity which engages in the aforementioned research (the development
        of
        small molecule therapeutics from natural products or natural product-derived
        compounds) as long as such employment does not directly compete with the
        Company’s major areas of business and/or research. 

       

      and
        the
        following is hereby added as the sixth sentence of the first paragraph of
        Section 6:

       

      The
        Employee’s subsequent employment will be considered directly competitive if it
        would give the subsequent employer a significant competitive advantage in
        one of
        the Company’s major areas of business and/or research that the subsequent
        employer would not otherwise have.

       

      2. Except
        as
        set forth herein, the Agreement shall remain unmodified and in full force
        and
        effect.

       

      3. This
        Amendment may be executed in one or more counterparts, each of which shall
        be
        deemed an original but all of which together will constitute one and the
        same
        instrument.

       

      
        	 	 	 
	 	VIVOQUEST,
                INC.
	 
 	 
 	 
 
	 	By:  	/s/ 
	 	
                
Name:

	 	Title: 
	 	 
	 	 
	 	
                
                  
 Name:
                  Anthony Sandrasagra 

              


      

       

      
        
          
          

        

        
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