LICENSE AGREEMENT

THIS LICENSE AGREEMENT (this “Agreement”) is made and entered into as of the
19th day of August, 2006, by and among Auriga Laboratories, Inc., a Delaware
corporation (“LICENSEE”), and ATHLON Pharmaceuticals, Inc., a Mississippi
corporation (“ATHLON”).

RECITALS

WHEREAS, ATHLON has developed and marketed certain pharmaceutical products that
are more particularly described and defined herein as the “Products.”

WHEREAS, subject to the terms and conditions of this Agreement, ATHLON desires
to exclusively license to LICENSEE, and LICENSEE desires to acquire an exclusive
license from ATHLON for, the Products, together with certain other tangible and
intangible assets related to, or necessary for the continued development and
marketing of, the Products.

AGREEMENT

NOW, THEREFORE, in consideration of the premises and the mutual covenants and
promises contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which hereby are acknowledged, the Parties hereby
agree as follows:

ARTICLE I
DEFINITIONS

Section 1.1  Defined Terms. As used in this Agreement, the following defined
terms have the meanings described below:

(a) “Action or Proceeding” means any action, suit, proceeding, arbitration,
Order, inquiry, hearing, assessment with respect to fines or penalties, or
litigation (whether civil, criminal, administrative, investigative or informal)
commenced, brought, conducted or heard by or before, or otherwise involving, any
Governmental or Regulatory Authority.

(b) “Affiliate” means, with respect to any Person, another Person that directly,
or indirectly through one or more intermediaries, controls, is controlled by or
is under common control with such Person. “Control” and, with correlative
meanings, the terms “controlled by” and “under common control with” means the
power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract,
resolution, regulation or otherwise.

(c) “Books and Records” means all files, documents, instruments, papers, books
and records (including scientific and financial) of ATHLON to the extent
relating to the Licensed Assets or the Products, including any pricing lists,
quotations, proposals, customer lists (to the extent owned and/or contractually
permissible by ATHLON), information pertaining to sales of the Products, vendor
lists, financial data, regulatory information or files, sales training
materials, trademark registration certificates, trademark renewal certificates,
and other documentation to the extent relating to the Products or the Licensed
Assets.
 
 
 

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(d) “Breach” means any breach of, or any inaccuracy in, any representation or
warranty or any breach of, or failure to perform or comply with, any covenant or
obligation, in or of this Agreement or any other Contract, or any event which
with the passing of time or the giving of notice, or both, would constitute such
a breach, inaccuracy or failure.

(e) “Business Day” means a day other than Saturday, Sunday or any day on which
banks located in Atlanta, Georgia are authorized or obligated to close.

(f) “Calendar Month” shall mean the period of time beginning on the first (1st)
day of a month and ending on the last day of the month.

(g) “Calendar Quarter” shall mean the following three (3) month periods: January
to March, April to June, July to September, October to December.

(h) “Closing” has the meaning set forth in Section 2.4.

(i) “Closing Date” means the date on which the Closing actually takes place.

(j) “Consent” means any approval, consent, ratification, waiver or other
authorization.

(k) “Contemplated Transactions” means all of the transactions contemplated by
this Agreement.

(l) “Contract” means any and all legally binding commitments, contracts, leases,
indentures, purchase orders, leases, or other agreements, whether written or
oral, including all amendments thereto.

(m) “Damages” has the meaning set forth in Section 7.5(a).

(n) “DEA” means the United States Drug Enforcement Agency, and any successor
agency or entity thereto that may be established hereafter, and any comparable
agencies or entities of a Foreign Jurisdiction.

(o) “Encumbrance” means any mortgage, pledge, security interest, deed of trust,
lease, lien, Liability, adverse claim, levy, charge, easement, right of way,
covenant, restriction, or other encumbrance, third-party right or retained right
of any kind whatsoever, or any conditional sale or title retention agreement or
other agreement to give any of the foregoing in the future.

(p) “FDA” means the United States Food and Drug Administration or any comparable
agency of a Foreign Jurisdiction.
 
 
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(q) “Foreign Jurisdiction” means any Governmental or Regulatory Authority other
than those in the United States.

(r) “Governmental or Regulatory Authority” means any court, tribunal,
arbitrator, authority, agency, commission, official or other instrumentality of
any country, state, county, city or other political subdivision.

(s) “Inventory” means ATHLON’s inventory of the Products with expiration dates
exceeding twelve (12) months after the Closing Date and any raw materials owned
by ATHLON used in the manufacture of the Products.

(t) “Know-How” means all the Products specifications; manufacturing, physical
chemistry and formulation know-how; analytical testing methods and validations;
technical knowledge; expertise; skill; practices and procedures; formulae; trade
secrets; inventions; confidential information; analytical methodology;
processes; methods; preclinical, clinical, stability and other data and results;
market studies; and all other experience and know-how, in each case in tangible
form and only to the extent related to the Products, whether or not patentable.
Know-How shall also include all drug master files and other documents/files
relating to the Products, and reports and manuals relating to standard operating
procedures in the manufacture of the Products

(u) “Law” means any national, supranational, federal, state or local law,
statute or ordinance, or any rule, regulation, or published guidelines
promulgated by any Governmental or Regulatory Authority, including all
regulations and guidance of the FDA (including its current good manufacturing
practices, or cGMP) or the DEA.

(v) “Levall Trademark” means the trademark of the “Levall” name, which trademark
is owned by ATHLON and is registered with the United States Patent and Trademark
Office as Registration Number 2693565 and Serial Number 78135487.

(w) “Liability” means any obligations, debts or liability (whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or unaccrued,
liquidated or unliquidated, matured or unmatured, determinable or
undeterminable, and due or to become due), including any of the foregoing
arising under any Contract, Law or Order or in or as a result of any Action or
Proceeding, and any liability for Taxes (whether arising under Treasury
Regulation §1.1502-6 or otherwise).

(x) “Licensed Assets” means all assets and rights owned or licensed by ATHLON
related to the Products in the Territory, including all Product Intellectual
Property, Product Trademarks and Product Trade Dress.

(y) “Marketing Materials” means all marketing and promotional materials useable
with respect to the marketing and sale of the Products to the extent such
materials are within the possession of ATHLON.
 
 
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(z) “Net Sales” means with respect to any Products, the gross amount invoiced by
LICENSEE, its licensee or sub-licensee for the Products sold in bona fide,
arms-length transactions, less (i) quantity and/or cash discounts from the gross
invoice price which are actually taken; (ii) freight, postage and insurance
included in the invoice price; (iii) amounts repaid or credited by reasons of
rejections or return of goods, (iv) third-party rebates and chargebacks actually
repaid or credited (v) invoiced customer duties and sales taxes (excluding
income, value-added and similar taxes), if any, actually paid and directly
related to the sale that are not reimbursed by LICENSEE; but in no event shall
the cumulative amount of all adjustments, deductions and allowances referred to
in (i) through (v) above exceed fifteen percent (15%) of the gross amount
invoiced by LICENSEE, its licensee or sub-licensee for the Products.

(aa) “Nondisclosure Agreement” has the meaning set forth in Section 11.1.

(bb) “Order” means any writ, judgment, decree, injunction or similar order of
any Governmental or Regulatory Authority (in each such case whether preliminary
or final).

(cc) “Party” means each of LICENSEE and ATHLON and “Parties” means LICENSEE and
ATHLON collectively.

(dd) “Person” means any natural person, corporation, general partnership,
limited partnership, limited liability company, joint venture, proprietorship,
other business organization, trust, union, association, or other entity, or any
Governmental or Regulatory Authority.

(ee) “Product Intellectual Property” means any and all of the following
intellectual property rights owned or licensed by ATHLON that are used or useful
in the manufacture, sale, use, marketing and distribution of the Products: (i)
Know-How; (ii) copyrights; (iii) patents, if any, (iv) the Product Trademarks;
and (v) the Product Trade Dress.

(ff) “Product Trade Dress” means any trade dress related to the Products.

(gg) “Product Trademarks” means any trademarks related to the Products,
including the Levall Trademark.

(hh) “Products” shall mean the following:

(i) Levall 5.0 - Phenylephrine HCl 15mg, Guaifenesin 100mg, Hydrocodone
Bitartrate 5mg;

(ii) Levall G - Pseudoephedrine HCl/90mg, Guaifenesin 400mg;

(iii) Levall 12 - Carbetapentane Tannate 30mg, Phenylephrine Tannate 30 mg;
 
 
 
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(iv) Levall Liquid - Phenylephrine HCl 15mg, Carbetapentane Citrate 25 mg,
Guaifenesin 100mg;

(v) Lev/Pse/GG - Pseudoephedrine HCl/90mg, Guaifenesin 400mg (Levall G Generic);

(vi) Carb/Phenyl-12 - Carbetapentane Tannate 30 mg, Phenylephrine Tannate 30mg
(Levall 12 Generic); and

(vii) Any future product using the Product Intellectual Property, including, but
not limited to, NDAs, product line extensions, ANDAs, 505(b)(2) applications or
the like.

 
(ii)
“Purchase Price” has the meaning set forth in Section 3.1.

(jj) “Tax” means all of the following taxes in connection with the transactions
contemplated hereby: (i) any net income, alternative or add-on minimum tax,
gross income, gross receipts, sales, use, ad valorem, transfer, franchise,
profits, license, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment imposed by an governmental, regulatory or
administrative entity or agency responsible for the imposition of any such tax;
(ii) any Liability for the payment of any amounts of the type described in (i)
above as a result of being a member of any affiliated, consolidated, combined,
unitary or other group for any taxable period; and (iii) any Liability for the
payment of any amounts of the type described in (i) or (ii) above as a result of
any express or implied obligation to indemnify any other Person.

(kk) “Territory” means all countries and territories of the world.

(ll) “Trademarks” means all U. S. and other trademarks, trade names, brand
names, logotypes, symbols, service marks, designs and trade names.

Section 1.2  Construction of Certain Terms and Phrases. Unless the context of
this Agreement otherwise requires, when used in this Agreement: (a) words of any
gender include each other gender; (b) the terms “hereof,” “herein,” “hereto,”
“hereby” and derivative or similar words refer to this entire Agreement; (c) the
terms “including,” “include” or “includes” shall be deemed to be followed by
“without limitation”; and (d) references to currency means U.S. Dollars.
Whenever this Agreement refers to a number of days, such number shall refer to
calendar days unless Business Days are specified. This Agreement shall be deemed
to be drafted jointly by all the Parties and shall not be specifically construed
against any Party hereto based on any claim that such Party or its counsel
drafted this Agreement.

ARTICLE II
EXCLUSIVE LICENSE OF LEVALL PRODUCTS
Section 2.1  Grant of Exclusive License to Licensed Assets. Subject to the
limitations and exceptions contained in this Agreement, effective as of the
Closing Date, ATHLON hereby
grants to LICENSEE an exclusive, even as to ATHLON, license under the Licensed
Assets to make, have made, sell, offer to sell, have sold, market, promote,
distribute, import and otherwise transfer, dispose, provide and place the
Products in the Territory.
 
 
 
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Section 2.2  Retention of Records. Notwithstanding anything contained in this
Agreement to the contrary, ATHLON may retain a copy of all Books and Records,
Marketing Materials and other documents or materials conveyed hereunder for
archival purposes, and for the purpose of fulfilling its obligations under
applicable Law but for no other uses or purposes.

Section 2.3  Liabilities Not Assumed. LICENSEE is assuming no Liabilities of
ATHLON with respect to the Products or Licensed Assets arising prior to the
Closing Date.

Section 2.4  Closing.  The licensing provided for in this Agreement (the
“Closing”) will take place at 5:00 p.m. on or before August 31, 2006, at the
offices of LICENSEE at 5555 Triangle Parkway, Suite 300, Norcross, Georgia, or
at such other location as the parties may agree upon. Subject to the provisions
of Article 10, failure to consummate the license provided for in this Agreement
on the date and time and at the place determined pursuant to this Section 2.4
will not result in the termination of this Agreement and will not relieve any
party of any obligation under this Agreement. In such a situation, the Closing
will occur as soon as practicable, subject to Article 10.

Section 2.5  Closing Obligations. In addition to any other documents to be
delivered under other provisions of this Agreement, at the Closing:
 
(a)   ATHLON shall deliver to LICENSEE:
 
(i) a bill of sale executed by ATHLON for all of the Inventory in the form
attached as Exhibit 2.5(a)(i). Delivery, transfer of title and risk of loss
shall occur at the locations where such Inventory items are currently stored;
 
(ii) subject to Section 2.5(b)(iii), an executed assignment and assumption
agreement in the form as set forth on Exhibit 2.3(b) of that certain
Manufacturing and Supply Agreement with Great Southern Labs (“Great Southern
Labs”) dated December 29, 2000 (the “Great Southern Labs Assignment and
Assumption Agreement”);
 
(iii) Annual Product sales as presented in the Supplementary Data Section of
ATHLON’s financial audit for 2004 and 2005 and Product sales from ATHLON’s
internal records from January 2006 to July 2006;
 
(iv) all information currently in a presentable format in ATHLON’s possession
with respect to ATHLON’s marketing and distribution of the Products to trade
level customers (i.e., mass merchandisers, wholesalers and warehousing chains)
and the names and gross sales revenues attributable to such customers.
 
(v) such other assignments, certificates of title, documents and other
instruments of transfer and conveyance as may reasonably be requested by
LICENSEE, each in form and substance satisfactory to LICENSEE and its legal
counsel and executed by ATHLON;
 
 
 
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(vi) a certificate executed on behalf of ATHLON as to the accuracy of their
representations and warranties as of the date of this Agreement and as of the
Closing in accordance with Section 8.1 and as to their compliance with and
performance of their covenants and obligations to be performed or complied with
at or before the Closing in accordance with Section 8.2;
 
(vii) an executed copy of a mutually agreed upon operational agreement between
ATHLON and LICENSEE regarding the management of the generic product line by
ATHLON on behalf of LICENSEE (the “Operational Agreement”);
 
(viii) written certification that there is no, and that ATHLON has no knowledge
of any bases for any, Action or Proceeding by the FDA pending or threatened
against the Product; and
 
(ix) the most recent wholesaler inventory reports from Cardinal, McKesson and
Amerisource Bergen detailing the Inventory at each company, and certified by an
officer of ATHLON as being, to the best of its knowledge, true and correct (the
“Wholesale Reports”).
 
(b)   LICENSEE shall deliver to ATHLON:
 
(i) One Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00) ;
 
(ii) the Shares of LICENSEE common stock comprising the portion of the Purchase
Price described in Section 3.1(b);
 
(iii) either, the Great Southern Labs Assignment and Assumption Agreement
executed by LICENSEE or notice that LICENSEE has entered into separate
negotiations with Great Southern Labs with respect to a mutually agreed upon
manufacturing agreement;
 
(iv) a certificate executed by LICENSEE as to the accuracy of its
representations and warranties as of the date of this Agreement and as of the
Closing in accordance with Section 9.1 and as to its compliance with and
performance of its covenants and obligations to be performed or complied with at
or before the Closing in accordance with Section 9.2; and
 
(v) an executed copy of the Operational Agreement.
 
 
 
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ARTICLE III
CONSIDERATION
 
Section 3.1  Purchase Price. The purchase price for the Licensed Assets shall be
the sum of the following (the “Purchase Price”):

(a) One Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00);
 
(b) Two Million Five Hundred Thousand (2,500,000) shares of restricted common
stock of LICENSEE (the “Shares”);
 
(c) Fifty percent (50%) of Net Sales up to Ten Million and No/100 Dollars
($10,000,000.00) commencing forty-five (45) days after the Closing Date through
the end of the first (1st) year following the Closing Date;

(d) Twenty percent (20%) of Net Sales in excess of Ten Million and No/100
Dollars ($10,000,000.00) commencing forty-five (45) days after the Closing Date
through the end of the first (1st) year following the Closing Date;

(e) Thirty-five percent (35%) of Net Sales for the second year following the
Closing Date

(f) Twenty-five percent (25%) of Net Sales for the third year following the
Closing Date;

(g) Eight percent (8%) of Net Sales for each year following the third year after
the Closing Date until such time as the amounts paid pursuant to Sections 3.1(a)
and 3.1(c)-(g) total Twenty Million and No/100 Dollars ($20,000,000.00) (such
$20,000,000 amount hereinafter referred to as the “Royalty Payment Ceiling”);

(h) One percent (1%) of Net Sales for each year after such time as the amounts
paid pursuant to Sections 3.1(a) and 3.1(c)-(g) meet the Royalty Payment
Ceiling; and

(i) Notwithstanding the foregoing, in the event any Action or Proceeding is
commenced by the FDA against any Product which impairs Net Sales, beginning
ninety (90) days after such Action or Proceeding, all royalty obligations set
forth in subsections (c) through (h) above, will be automatically reduced by a
percentage equal to the applicable Products’ percentage of revenue (as
determined by IMS or NDC data adjusted to wholesale equivalent dollars) of the
Levall product line during the twelve (12) months prior to the applicable Action
or Proceeding.

Section 3.2  Royalty Reduction. Notwithstanding anything herein to the contrary,
if, at any time after the Registration (as defined in Section 6.6 below), the
thirty (30) day average closing price per share of LICENSEE’s common stock is
equal to or greater than $5.00 per share, and the thirty (30) day average daily
trading volume of LICENSEE’s common stock is equal to or greater than 75,000
shares per day (the “Reduction Date”), then all amounts payable after the
Reduction Date by LICENSEE to ATHLON pursuant to Sections 3.1(c)-(h) shall be
reduced by fifty percent (50%), and the Royalty Payment Ceiling shall not be
reduced.
 
 
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Section 3.3  Reports. For purposes of determining the payments described in
Sections 3.1(c)-(h), LICENSEE agrees to provide ATHLON with monthly reports
indicating LICENSEE’s Net Sales for such month, and supporting documentation
therefor, for each Calendar Month following the Closing Date until such time as
payments under Sections 3.1(a) and (c)-(h) equal or exceed Ten Million and
No/100 Dollars ($10,000,000.00). After the payments under Sections 3.1(a) and
(c)-(h) equal or exceed Ten Million and No/100 Dollars ($10,000,000.00),
LICENSEE shall provide ATHLON with quarterly reports indicating LICENSEE’s Net
Sales for such Calendar Quarter, and supporting documentation therefore.

Section 3.4  Inspection Right. Upon reasonable prior written notice and at
mutually agreeable times, but in no event more than twice every twelve (12)
months, ATHLON shall have the right to appoint an independent accounting firm or
other agent reasonably acceptable to LICENSEE and ATHLON, at ATHLON’s expense to
inspect the LICENSEE’s financial records and information, solely for the purpose
of auditing the monthly and quarterly reports, as the case may be, referred to
in Section 3.2 and the payments under Sections 3.2(c)-(h) with respect to the
calculation of the payments referred to in Section 3.1(c)-(h) hereof. Such
auditor shall be bound by confidentiality terms consistent with the
Nondisclosure Agreement as described in Section 11.1 and shall share with ATHLON
information obtained or learned during such audit only to the extent that it
relates to the purpose of the audit, as specified in this Section 3.4. In the
event such audit discloses an underpayment or overpayment of amounts due
hereunder, the appropriate party will promptly remit the amounts due to the
other party and, if LICENSEE has underpaid ATHLON by more than 10%, LICENSEE
shall reimburse ATHLON the reasonable costs of the audit.

Section 3.5  Payment of Purchase Price. That portion of the Purchase Price
described in Section 3.1(a) shall be paid by LICENSEE to ATHLON in immediately
available funds by wire transfer on such dates as due, pursuant to wiring
instructions provided by ATHLON to LICENSEE not less than three (3) Business
Days prior to the Closing Date. That portion of the Purchase Price described in
Sections 3.1(c)-(h) shall be paid by LICENSEE to ATHLON not later than the
twenty-fifth (25th) day following the Calendar Month in which the respective
sale of the Products occurs until such time as payments under Sections 3.1(a)
and (c)-(h) equal or exceed Ten Million and No/100 Dollars ($10,000,000.00).
After the payments under Sections 3.1(a) and (c)-(h) equal or exceed Ten Million
and No/100 Dollars ($10,000,000.00), LICENSEE shall pay the Purchase Price
described in Sections 3.1(c)-(h) to ATHLON not later than the forty-fifth (45th)
day following the Calendar Quarter in which the respective sale of the Products
occurs.

Section 3.6  Payment of Sales, Use and Other Taxes. ATHLON shall be responsible
for all sales, use, stamp duty, transfer, value added and other related or
similar Taxes, if any, arising out of the assignment of the Inventory by ATHLON
of the Licensed Assets to LICENSEE pursuant to this Agreement or payable in
connection with the transactions contemplated hereby.
 
 
 
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ATHLON

ATHLON represents and warrants to LICENSEE, as follows:

Section 4.1  Organization. ATHLON is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation
and has all requisite power and authority to own the Licensed Assets.

Section 4.2  Authority of ATHLON. ATHLON has all necessary power and authority
to enter into this Agreement and to carry out the transactions contemplated
hereby. ATHLON has taken all action required by Law, its certificate of
incorporation, bylaws or otherwise to be taken by it to authorize the execution
and delivery of this Agreement by ATHLON and the consummation of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by ATHLON and, when duly authorized, executed and
delivered by LICENSEE, will constitute a legal, valid and binding obligation of
ATHLON enforceable against it in accordance with its terms except as limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally.  

Section 4.3  Consents and Approvals. Except as set forth on Schedule 4.3, no
consents, waivers, approvals, Orders or authorizations of, or registrations,
declarations or filings with, any Governmental or Regulatory Authority, or by
any customer, supplier or other third party, are required by or with respect to
ATHLON in connection with the execution and delivery of this Agreement by ATHLON
or the performance of its obligations hereunder, except for such consents,
waivers, approvals, Orders or authorizations the failure to obtain which, and
such registrations, declarations or filings the failure to make which, would not
have a material adverse effect or materially impair or delay ATHLON’s ability to
perform its obligations hereunder.
 
Section 4.4  Non-Contravention. Except as set forth on Schedule 4.4, the
execution and delivery by ATHLON of this Agreement does not, and the performance
by it of its obligations under this Agreement and the consummation of the
transactions contemplated hereby will not:

(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the articles of incorporation, bylaws, or other
organizational documents of ATHLON, other than such conflicts, violations or
breaches as would not have a material adverse effect;

(b) conflict with or result in a violation or breach of any term or provision of
any Law applicable to ATHLON, the Products or the Licensed Assets, other than
such conflicts, violations or breaches as would not have a material adverse
effect; or

(c) conflict with or result in a breach or default (or an event which, with
notice or lapse of time or both, would constitute a breach or default) under, or
result in the termination or cancellation of, or accelerate the performance
required by, or result in the creation or imposition of any security interest,
lien or any other Encumbrance upon any Contract to which ATHLON is a party or by
which ATHLON or any of its assets is bound.
 
 
 
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Section 4.5  Intellectual Property Rights. 

(a) ATHLON owns all right, title and interest in and to, and is legally entitled
to license to LICENSEE, all of the Product Intellectual Property free and clear
of all Encumbrances.

(b) Neither the Product Intellectual Property, the use of Product Intellectual
Property nor the Products, infringe or misappropriate the intellectual property
rights of any third party, and ATHLON has not received any written notice from
any Person of any claims of infringement or misappropriation with respect
thereto.

(c) All trademarks included in the Product Intellectual Property, if any, are
the subject of current registrations. There are no third-party rights in
ATHLON’s current registrations relating to the Product Trademarks. There is not
any prior use, infringement, piracy or counterfeiting of such Product
Trademarks, any superior rights by any third party in such Product Trademarks,
or any adverse claims pertaining to such Product Trademarks.
 
Section 4.6  Litigation. There are no Actions or Proceedings pending, threatened
or reasonably anticipated against ATHLON or its Affiliates that relate to (a)
the Licensed Assets or the Products; (b) this Agreement; or (c) the transactions
contemplated by this Agreement. ATHLON is not subject to any Order that could
reasonably be expected to materially impair or delay the ability of ATHLON to
perform its obligations hereunder.

Section 4.7  Compliance with Law. To the best knowledge of ATHLON, ATHLON has
been in compliance with all applicable Laws with respect to the Products, and
ATHLON has not received any written notice alleging any violation of such Laws,
and is unaware of any bases for the foregoing.

Section 4.8  Title to Licensed Assets. Except as set forth on Schedule 4.8,
ATHLON has good and marketable title to the Licensed Assets free and clear of
any Encumbrances. ATHLON has the legal right and ability to license the Licensed
Assets to LICENSEE.

Section 4.9  Brokers. ATHLON has not retained any broker in connection with the
transactions contemplated hereunder. LICENSEE has no, and will have no,
obligation to pay any brokers, finders, investment bankers, financial advisors
or similar fees in connection with this Agreement or the transactions
contemplated hereby by reason of any action taken by or on behalf of ATHLON.

Section 4.10  No Non-Competition Agreements or Preferential Obligations. The
Licensed Assets are not subject to any non-competition agreements with, or other
stipulations, covenants, settlements, agreements or the like granting
preferential rights to purchase or license the Licensed Assets to, any third
Persons.
 
 
 
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Section 4.11  Products Not Subject of FDA Review. To the best knowledge of
ATHLON, the Products are not, and have not been, either directly or indirectly,
the subject of any FDA Form 483 inspections within the thirty-six (36) months
prior to the date of this Agreement and, to the best knowledge of ATHLON, no FDA
correspondence exists regarding adverse findings, warning letters, the
regulatory or manufacturing status of the Products or other written
correspondence.

Section 4.12  Inventory. All Inventory assigned to LICENSEE pursuant to Section
6.7 hereto was manufactured, packaged, labeled, tested, stored and handled, at
all times, in compliance with the written specifications for the Product and in
compliance with all current Good Manufacturing Practices as defined under 21
U.S.C. 351(a)(2)(B) as in effect from time to time, and is undamaged,
merchantable and fit for its intended purpose and at the Closing or such other
delivery date such Inventory will be of saleable quality and will not be
adulterated or misbranded within the meaning of any Law. LICENSEE shall receive
good and marketable title, and certificates of analysis, to all raw materials
and Inventory acquired by LICENSEE hereunder, if any.

Section 4.13 Trade Inventories. To the best of ATHLON’s knowledge, the Wholesale
Reports are true, complete and accurate.  Any trade and trade customer inventory
for any Product, other than Levall 12 Trade and Levall G Trade, represents no
more than forty-five (45) days of inventory.  Trade and trade customer inventory
for any Levall 12 Trade and Levall G Trade represents no more than one hundred
twenty (120) days of inventory and sixty (60) days of inventory, respectively. 
ATHLON represents and warrants that McKesson, Cardinal and Amerisource Bergen
account for over ninety percent (90%) of the Products’ revenues for the last
twelve (12) months.  ATHLON further represents and warrants that its sales or
load in the trade and trade customer channels over the sixty (60) days prior the
date hereof have been in the ordinary course of business in that ATHLON’s
Products’ sales during this sixty (60) days period shall not significantly
impact revenues for LICENSEE, in the ordinary course of business, during the
period sixty (60) days after the day of this agreement.  ATHLON further
represents and warrants that ATHLON shall not sell or load any Product into the
wholesale trade or trade customer channels, or fill any purchase orders from any
customers, after date hereof without LICENSEE’s written consent; provided
however, LICENSEE shall not unreasonably withhold such consent.

Section 4.14 Sufficiency Of Assets. The Licensed Assets and the licenses granted
hereunder, together with the services to be provided under the Operations
Agreement for the generic business, are sufficient in all material respects on
the date hereof and at the time of the Closing to sell and distribute the
Products in the Territory in the manner sold and distributed by ATHLON and its
Affiliates on the date hereof and immediately prior to the time of the Closing.

Section 4.15 Representations with respect to the acquisition of LICENSEE’s
shares:

(a) Purchase Entirely for Own Account. This Agreement is made with ATHLON in
reliance upon such ATHLON’s representation to LICENSEE, which by ATHLON’s
execution of this Agreement ATHLON hereby confirms, that the Shares to be
received by ATHLON will be acquired for investment for ATHLON’s own account, not
as a nominee or agent, and not with a view to the resale or distribution of any
part thereof, and that ATHLON has no present intention of selling, granting any
participation in, or otherwise distributing the same. By executing this
Agreement, ATHLON further represents that ATHLON does not have any contract,
undertaking, agreement or arrangement with any Person to sell, transfer or grant
participations to such Person or to any third person, with respect to any of the
Shares.
 
 
 
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(b) Disclosure of Information. ATHLON believes it has received all the
information it considers necessary or appropriate for deciding whether to
purchase the Shares. ATHLON further represents that it has had an opportunity to
ask questions and receive answers from the LICENSEE regarding the terms and
conditions of the offering of the Shares and the business, properties, prospects
and financial condition of the Company.
 
(c) Investment Experience. ATHLON has experience as an investor in securities of
companies in the development stage and acknowledges that it is able to fend for
itself, can bear the economic risk of its investment, and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Shares. ATHLON further represents it
has not been organized for the purpose of acquiring the Shares.
 
(d) Accredited Investor. ATHLON is an “accredited investor” within the meaning
of Securities and Exchange Commission (“SEC”) Rule 501 of Regulation D, as
presently in effect.
 
(e) Restricted Securities. ATHLON understands that the Shares it is purchasing
are characterized as “restricted securities” under the federal securities laws
inasmuch as they are being acquired in a transaction not involving a public
offering and that under such laws and applicable regulations such securities may
be resold without registration under the Act, only in certain limited
circumstances. In this connection, ATHLON represents that it is familiar with
SEC Rule 144, as presently in effect, and understands the resale limitations
imposed thereby and by the Act.
 
(f) Legends. It is understood that the certificates evidencing the Shares may
bear one or all of the following or similar legends:
 
“These securities have not been registered under the Securities Act of 1933, as
amended. They may not be sold, offered for sale, pledged or hypothecated in the
absence of a registration statement in effect with respect to the securities
under such Act or an opinion of counsel satisfactory to the Company that such
registration is not required or unless sold pursuant to Rule 144 of such Act.”
 
Section 4.16 Non-Competition. ATHLON shall not, and shall not assist any third
party to, develop, market, sell or distribute any generic equivalent of any of
the Products.

Section 4.17 Exclusive Representations and Warranties. EXCEPT AS EXPRESSLY
PROVIDED IN THIS AGREEMENT, ATHLON MAKES NO REPRESENTATION OR WARRANTY WITH
RESPECT TO THIS AGREEMENT, THE LICENSED ASSETS OR THE PRODUCTS, EXPRESS OR
IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND
ATHLON SPECIFICALLY DISCLAIMS ANY AND ALL IMPLIED OR STATUTORY WARRANTIES,
INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY, WARRANTY OF FITNESS FOR A
PARTICULAR PURPOSE AND WARRANTY OF NON-INFRINGEMENT.
 
 
 
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF LICENSEE

LICENSEE represents and warrants to ATHLON as follows:
 
Section 5.1  Organization. LICENSEE is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation
and has all requisite power and authority to own its assets and carry on its
business as currently conducted by it.
 
Section 5.2  Authority of LICENSEE. LICENSEE has all necessary power and
authority to enter into this Agreement and to carry out the transactions
contemplated hereby. LICENSEE has taken all action required by Law, its
organizational documents, or otherwise to be taken by it to authorize the
execution and delivery of this Agreement by LICENSEE and the consummation of the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by LICENSEE and, when duly authorized, executed and
delivered by ATHLON, will constitute a legal, valid and binding obligation of
LICENSEE enforceable against it in accordance with its terms except as limited
by applicable bankruptcy, insolvency, reorganization, fraudulent conveyance,
moratorium and other laws of general application affecting enforcement of
creditors’ rights generally.
 
Section 5.3  Consents and Approvals. No consents, waivers, approvals, Orders or
authorizations of, or registrations, declarations or filings with, any
Governmental or Regulatory Authority are required by LICENSEE in connection with
the execution and delivery of this Agreement by LICENSEE or the performance of
its obligations hereunder.
 
Section 5.4  Non-Contravention. The execution and delivery by LICENSEE of this
Agreement does not, and the performance by it of its obligations under this
Agreement and the consummation of the transactions contemplated hereby will not:
 
(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the articles of incorporation, bylaws or other
organizational documents of LICENSEE;
 
(b) conflict with or result in a violation or breach of any term or provision of
any Law applicable to LICENSEE; or
 
(c) conflict with or result in a breach or default (or an event which, with
notice or lapse of time or both, would constitute a breach or default) under, or
result in the termination or cancellation of, or accelerate the performance
required by, or result in the creation or imposition of any security interest,
lien or any other Encumbrance upon any Contract to which LICENSEE is a party or
by which LICENSEE or any of its assets is bound.
 
 
 
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Section 5.5  Litigation. There are no Actions or Proceedings pending or, to the
knowledge of LICENSEE threatened or reasonably anticipated against LICENSEE
which if adversely determined would delay the ability of LICENSEE to perform its
obligations hereunder.
 
Section 5.6  Brokers. LICENSEE has not retained any broker in connection with
the transactions contemplated hereunder. ATHLON has no, and will have no,
obligation to pay any brokers, finders, investment bankers, financial advisors
or similar fees in connection with this Agreement or the transactions
contemplated hereby by reason of any action taken by or on behalf of LICENSEE.
 
ARTICLE VI
OTHER AGREEMENTS OF THE PARTIES

Section 6.1  Returns, Chargebacks, Rebates. The Parties agree that from the
Closing Date until December 31, 2006, ATHLON shall be responsible for any and
all returns, chargeback claims and rebate claims made in connection with
Products which were sold by ATHLON prior to the Closing Date and that LICENSEE
shall be responsible for any and all other returns, chargeback claims and rebate
claims made in connection with Products.

To the extent that LICENSEE issues credits following the Closing Date relating
to returns, chargebacks or rebates for Products which were sold by ATHLON prior
to the Closing Date and for which ATHLON is responsible, LICENSEE will deliver
to ATHLON on a quarterly basis an invoice for the same, together with
documentation evidencing such returns, chargebacks or rebates, and the credits
issued by LICENSEE in connection with the same, and such amounts shall reduce
the amount of the Purchase Price to be delivered to ATHLON pursuant to Section
3.1(c)-(h). ATHLON agrees to accept a reduction in Purchase Price payable from
LICENSEE for any such credits based on the lesser of (x) the price which would
be paid or credited for such Products pursuant to LICENSEE’s return policy, or
(y) in the event that LICENSEE has made discretionary increases in the prices of
such Products following the Closing Date, such increased prices, provided that
LICENSEE provides ATHLON with sufficient documentation to reflect that the
credits issued by LICENSEE were issued at such increased prices.

The Parties shall mutually agree on the timing and method of notifying
applicable federal agency customers and the Centers for Medicare and Medicaid
Services of the license of the Licensed Assets to LICENSEE, and shall take
whatever action is necessary to simultaneously add Products to LICENSEE’s
federal supply schedule and Medicaid rebate agreement, if applicable, and delete
Products from the federal supply schedule and Medicaid rebate agreement of
ATHLON as applicable. ATHLON shall be responsible for the processing and payment
of Medicaid and Medicare rebates applicable to sales of Products made by ATHLON
and submitted under ATHLON’s Products NDC numbers as set forth on Schedule 6.1
and any other rebates, charge backs or similar payments owed to a third party
for such products from the Closing Date until December 31, 2006. After such
period, ATHLON shall process and pay Medicaid and Medicare rebates submitted
under ATHLON’s Products NDC as set forth on Schedule 6.1 and any other rebates,
charge backs or similar payments owed to a third party, but LICENSEE shall be
responsible for reimbursing ATHLON for all such rebates, charge backs and
similar payments until one (1) year after the last lot expiration date of
Products labeled with ATHLON’s Products NDC. ATHLON will invoice LICENSEE for
such rebates, charge backs, and similar payments and LICENSEE shall pay ATHLON
for such rebates, charge backs, and similar payments within forty-five (45) days
following the date of any such invoice; provided, however, that if any such
amounts are disputed by LICENSEE, then all undisputed amounts shall be paid in
such forty-five (45) day period and the parties shall use good faith efforts to
resolve any such dispute. Each invoice will be submitted to LICENSEE with the
documents supporting such invoices.
 
 
 
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Section 6.2 Termination Upon Bankruptcy. Until such time as ATHLON has received
Ten Million and No/100 Dollars ($10,000,000.00) in Consideration under this
Agreement, in the event that LICENSEE files for or is forced into any
receivership or bankruptcy proceeding at any time prior to the third anniversary
of this Agreement, and such proceeding is not dismissed within ninety (90) days
of its commencement, the license granted hereunder related to the Licensed
Assets shall automatically be revoked and all obligations of ATHLON shall
immediately terminate. For purposes of this Section 6.2, “Consideration” shall
mean the payments set forth in Article III. herein, except that LICENSEE stock
shall only be included in the $10,000,000 figure (i) to the extent such stock is
freely tradable (at the value on the date such stock is freely tradable), or
(ii) at the liquidation value to the extent such stock is liquidated by ATHLON
prior to the time that the LICENSEE stock is freely tradable, whichever occurs
first.

Section 6.3 License for Use of Levall Trademark. The Parties agree and
acknowledge that the Levall Trademark shall not be conveyed by ATHLON to
LICENSEE in connection with this Agreement or the Contemplated Transactions but,
rather, ATHLON shall continue to own the Levall Trademark and all other Product
Intellectual Property following the Closing Date. ATHLON acknowledges that use
of the Levall Trademark is necessary for the marketing and sale of the Products
licensed to LICENSEE hereunder and, therefore, ATHLON agrees to grant to
LICENSEE on the Closing Date an exclusive, even as to ATHLON, license to use the
Levall Trademark in connection with LICENSEE’s marketing and sales of the
Products following the Closing Date, and for use in connection with any
reformulation of the Products or further expansion of the Levall product line
which LICENSEE may develop or undertake following the Closing Date.

Section 6.4 Complaints, Adverse Events and Recalls. LICENSEE shall maintain, or
cause to be maintained, all complaint files and other records required to be
maintained by the FDA and other regulatory agencies with respect to Product.
ATHLON shall promptly provide to LICENSEE copies of all complaints received or
other information regarding a Product which it would be required under
applicable Law to disclose to a Regulatory Agency with respect to the Product
that it may receive, if any. LICENSEE shall promptly provide ATHLON with copies
of any complaints relating to the Product received by LICENSEE or other
information regarding a Product which it would be required under applicable Law
to disclose to a Regulatory Agency. In addition, the Parties shall promptly
communicate to the other any serious adverse event related to the Products as
specified in Title 21 Code of Federal Regulations Part 314.80 relating to the
Products within one (1) Business Day. LICENSEE, except where its required by law
to submit directly to the FDA, shall submit in a timely manner to ATHLON for
submission to the FDA, all information about the Product required to be
submitted to the FDA including but not limited to, reports of complaints,
malfunctions, failures or deterioration in the characteristics or performance or
instructions for use or inadequacy in labeling which may cause or caused death,
injury or other event which could reasonably lead to legal action against
LICENSEE. Each Party shall provide to the other Party all available follow-up
information related to any such complaint, information or incident (including
any information in such Party’s possession as may be reasonably required by the
other Party to satisfy its regulatory filing obligations).  LICENSEE shall
coordinate any recalls of Products which occur within the Territory after the
Closing Date.
 
 
 
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Section 6.5 Manufacturing. LICENSEE shall use commercially reasonable efforts to
cause the manufacturing of the Products to comply with all GMP requirements.
LICENSEE shall notify ATHLON of any citations from discussions with a regulatory
body where such discussions and citations relate to a material aspect of GMP
compliance.

Section 6.6 Registration Rights. Within one hundred twenty (120) days after the
Closing Date, LICENSEE agrees to file a Form SB-2 registration statement with
the SEC which shall include the Shares issued to ATHLON pursuant to Section 3
hereof (the “Registration”). The Shares shall be included in the first Form SB-2
filed by LICENSEE within the above-referenced one hundred twenty (120) day
period.

Section 6.7 Inventory. ATHLON shall assign, at no cost to LICENSEE, all existing
Inventory.
 
ARTICLE VII
COVENANTS OF THE PARTIES
 
Section 7.1  Cooperation. Each Party shall reasonably cooperate with the other
in preparing and filing all notices, applications, submissions, reports and
other instruments and documents that are necessary, proper or advisable under
applicable Laws to consummate and make effective the transactions contemplated
by this Agreement, including ATHLON’s reasonable cooperation in the efforts of
LICENSEE to obtain any consents and approvals of any Governmental or Regulatory
Authority required for LICENSEE to be able to sell the Products.

Each Party shall reasonably cooperate with the other to continue all
manufacturer, vendor, repackager and governmental relationships and any other
relationships necessary for the sale of the Products by the LICENSEE.

Section 7.2  Regulatory Covenants. From and after the Closing Date, but
consistent with Section 7.1 hereof, LICENSEE, at its cost, shall be solely
responsible and liable for directing and controlling all regulatory and Product
development issues for the Licensed Assets.

Section 7.3  Use of Sales Representatives. Upon the first (1st) anniversary of
the Closing Date, LICENSEE shall have employed at least fifty (50) sales
representatives assigned to actively detail the Products to physicians in the
Territory (the “Minimum Promotion Commitment”).  The Minimum Promotion
Commitment, for each of the three (3) twelve (12) month periods following the
first (1st) anniversary of the Closing Date, will be calculated by adding the
total number of sales representatives assigned to actively detail the Products
to physicians in the Territory at the end of each month during each twelve (12)
month period and then dividing that sum by twelve (12).
 
 
 
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Section 7.4  Further Assurances. On and after the Closing Date, ATHLON shall
from time to time, at the request of LICENSEE, execute and deliver, or cause to
be executed and delivered, such other instruments of conveyance and transfer and
take such other actions as LICENSEE may reasonably request, in order to more
effectively consummate the transactions contemplated hereby and to vest in
LICENSEE good and marketable title to the Licensed Assets (including assistance
in the collection or reduction to possession of any of the Licensed Assets).

Section 7.5  Indemnification.

(a) By ATHLON. ATHLON shall indemnify, reimburse, and hold harmless LICENSEE,
its Affiliates, and their respective officers, directors, employees, agents,
successors and assigns from and against any and all costs, losses, Liabilities,
Damages, pending, threatened or concluded lawsuits, deficiencies, claims and
expenses (including reasonable fees and disbursements of attorneys)
(collectively, the “Damages”) to the extent such Damages are incurred in
connection with or arise out of (i) any breach of any covenant or agreement of
ATHLON herein; (ii) the breach of any representation or warranty made by ATHLON
in this Agreement (without regard to materiality qualifiers contained in such
representations or warranties); (iii) the negligence or willful misconduct of
ATHLON, its employees, agents or contractors; and (iv) Liabilities related to
the Products or Licensed Assets incurred prior to the Closing Date.

(b) By LICENSEE. LICENSEE shall indemnify, reimburse, and hold harmless ATHLON,
its Affiliates and their respective officers, directors, employees, agents,
successors and assigns from and against any and all Damages to the extent such
Damages are incurred in connection with or arise out of (i) any breach of any
covenant or agreement of LICENSEE herein; (ii) the negligence or willful
misconduct of LICENSEE, its employees, agents or contractors (other than
ATHLON); (iii) the breach of any representation or warranty made by LICENSEE in
this Agreement (without regard to materiality qualifiers contained in such
representations or warranties); and (iv) Liabilities related to the Products or
Licensed Assets incurred after the Closing Date.

(c) Damages Net of Insurance; Limitations on Liability. The amount of any
Damages for which indemnification is provided under this Section 7.5 shall be
net of any amounts recovered by the indemnified party under insurance policies
with respect to such Damages except to the extent such recovered amounts are
from such Party’s or its Affiliates’ self insurance programs. IN NO EVENT SHALL
ANY PARTY BE LIABLE FOR INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), NO MATTER HOW SUCH DAMAGES OR
LOST PROFITS ARE INCURRED INCLUDING A PARTY’S, OR ITS EMPLOYEES’, AGENTS’ OR
CONTRACTORS’ NEGLIGENCE, EXCEPT TO THE EXTENT THAT ANY SUCH DAMAGES OR LOST
PROFITS ARE INCURRED BY ANY THIRD PARTY FOR WHICH SUCH PARTY HAS AN OBLIGATION
TO INDEMNIFY HEREUNDER.
 
 
 
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(d) Time Limitations. Neither Party will have Liability (for indemnification or
otherwise) with respect to claims of breach of any representation, warranty or
covenant, contained in this Agreement unless on or before the first (1st)
anniversary of the Closing Date (with respect to breaches of representations or
warranties) or of the breach of the relevant covenant (with respect to breaches
of covenant), the otherwise liable Party is notified by the other Party of a
claim specifying the factual basis of that claim in reasonable detail to the
extent then known. Any time limitations herein do not apply to payments due to
ATHLON pursuant to Article III of this Agreement.

(e) Limitations on Amount. ATHLON will have no Liability for indemnification
pursuant to Section 7.5(a)(i), (ii), (iii) and (iv) in excess of One Million
Five Hundred Thousand and No/100 Dollars ($1,500,000.00), except to the extent
such Liability was caused by fraudulent or criminal conduct. LICENSEE will have
no Liability for indemnification pursuant to Section 7.5(b)(i), (ii), (iii) and
(iv) in excess of One Million Five Hundred Thousand and No/100 Dollars
($1,500,000.00), except to the extent such Liability was caused by fraudulent or
criminal conduct. In addition, neither Party shall have Liability for Damages
pursuant to Section 7.5(a)(i), (ii), (iii) and/or (iv) in the case of ATHLON,
and pursuant to Section 7.5(b)(i), (ii), (iii) and/or (iv) in the case of
LICENSEE, until Damages exceed Fifty Thousand and No/100 Dollars ($50,000.00) in
the aggregate, at which time such Party shall be liable only for all Damages in
excess of Fifty Thousand and No/100 Dollars ($50,000.00). Notwithstanding the
foregoing, any limitations on amount herein do not apply to (1) payments due to
ATHLON pursuant to Article III of this Agreement, (2) Liabilities related to the
Products or Licensed Assets arising as a result of acts or omissions that
occurred prior to the Closing Date, or (3) Liabilities arising as a result of a
breach of Sections 4.3, 4.5, 4.11 or 4.16.

(f) Procedure for Indemnification - Third Party Claims. Promptly after receipt
by an indemnified party under Section 7.5(a) or 7.5(b) of notice of commencement
of any proceeding against it by a third party (not a Party or Affiliate of a
Party), such indemnified party will, if a claim is to be made against an
indemnifying party under such Section, give notice to the indemnifying party of
the commencement of such claim. The failure to notify the indemnifying party
within thirty (30) days of receipt of notice of the third party claim will
relieve the indemnifying party of any liability that it may have to any
indemnified party with respect to such claim only to the extent indemnifying
party is actually prejudiced by the failure to provide such timely notice. If
such notice is timely given, the indemnifying party will be entitled to
participate in such proceeding and, to the extent that it wishes, may assume the
defense of such proceeding with counsel satisfactory to the indemnified party
and, after notice from the indemnifying party to the indemnified party of its
election to assume the defense of such proceeding, the indemnifying party will
not be liable to the indemnified party under this Article VII for any fees of
other counsel or any other expenses with respect to the defense of such
proceeding incurred after such notice. If the indemnifying party assumes the
defense of the proceeding, (1) it will be conclusively established that for
purposes of this Agreement that the claims made in that proceeding are within
the scope of and subject to indemnification; and (2) no compromise or settlement
of such claims may be effected by the indemnifying party without the indemnified
party’s Consent unless (A) there is no finding or admission of any violation of
legal requirements or any violation of the rights of any Person and no effect on
any other claims that may be made against the indemnified party, and (B) the
sole relief provided is monetary damages that are paid in full by the
indemnifying party. If notice is given to an indemnifying party of the
commencement of any proceeding and the indemnifying party does not, within
fifteen (15) days after the indemnified party’s notice is given, give notice to
the indemnified party of its election to assume the defense of such proceeding,
the indemnifying party will be bound by any determination made in such
proceeding or any compromise or settlement effected by the indemnified party,
provided, however, that the indemnifying party is otherwise obligated to
indemnify the indemnified party pursuant to this Section 7.5.
 
 
 
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(g) Procedure for Indemnification - Other Claims. A claim for indemnification
for any matter not involving a third-party claim may be asserted by notice to
the Party from whom indemnification is sought.

Section 7.6  IP Enforcement. If a third party infringes any Product Intellectual
Property as such relates to the rights granted to LICENSEE under Article 2,
LICENSEE shall have the first right, but not the obligation, to institute and
prosecute an Action or Proceeding to abate such infringement and to resolve such
matter by settlement or otherwise.

(a) LICENSEE shall notify ATHLON of its intention to bring an Action or
Proceeding prior to filing the same and in sufficient time to allow ATHLON the
opportunity to discuss with LICENSEE the choice of counsel for such matter.
LICENSEE shall keep ATHLON timely informed of material developments in the
prosecution or settlement of such Action or Proceeding. LICENSEE shall be
responsible for all fees and expenses of any Action or Proceeding against
infringers which LICENSEE initiates. ATHLON shall cooperate fully at its expense
by joining as a party plaintiff if reasonably requested to do so by LICENSEE or
if required to do so by law to maintain such Action or Proceeding and by
executing and making available such documents as LICENSEE may reasonably
request. ATHLON may be represented by counsel in any such legal proceedings, at
ATHLON's own expense.

(b) If LICENSEE elects not to exercise such first right, ATHLON shall have the
right, at its discretion, to institute and prosecute an Action or Proceeding to
abate such infringement and to resolve such matter by settlement or otherwise.
LICENSEE shall cooperate fully by joining as a party plaintiff if reasonably
requested to do so by ATHLON or if required to do so by law to maintain such
action and by executing and making available such documents as ATHLON may
reasonably request. LICENSEE may be represented by counsel in any such action,
at its own expense.

(c) LICENSEE Use Of Proceeds. All amounts of every kind and nature recovered
from an Action or Proceeding of infringement brought by LICENSEE shall belong to
LICENSEE, and shall be used first to reimburse LICENSEE and, if ATHLON was
requested by LICENSEE, or required by law, to join such Action or Proceeding,
ATHLON for their respective documented and actual costs of prosecution,
including attorneys' fees, expert fees and all other related expenses, and the
balance shall thereafter be considered Net Sales under this Agreement and
subject to payments under Article 3.

(d) ATHLON'S Use Of Proceeds. All amounts of every kind and nature recovered
from an Action or Proceeding of infringement brought by ATHLON shall first be
used to reimburse ATHLON and LICENSEE for their documented and actual costs of
prosecution, and the balance shall belong to LICENSEE and be considered Net
Sales under this Agreement and subject to payments under Article 3.
 
 
 
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Section 7.7 Patent Prosecution. LICENSEE shall be solely responsible for
prosecuting and/or defending any and all patents related to the Licensed Assets
after the Closing.

Section 7.8 Governmental Filings. Each Party will prepare and file whatever
filings, requests or applications that are required to be filed with any
Governmental or Regulatory Authority in connection with the consummation of the
transactions contemplated by this Agreement.

Section 7.9  Bulk Sales. LICENSEE and ATHLON waive compliance with all bulk
sales Laws applicable to the transactions contemplated by this Agreement.

ARTICLE VIII
CONDITIONS PRECEDENT TO LICENSEE’S OBLIGATION TO CLOSE

LICENSEE’s obligation to license the Licensed Assets and to take the other
actions required to be taken by LICENSEE at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by LICENSEE, in whole or in part):
 
Section 8.1  Accuracy of Representations. All of ATHLON’s representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), shall have been
accurate in all material respects as of the date of this Agreement, and shall be
accurate in all material respects as of the time of the Closing as if then made.
 
Section 8.2  ATHLON’s Performance. All of the covenants and obligations that
ATHLON is required to perform or to comply with pursuant to this Agreement at or
prior to the Closing (considered collectively), and each of these covenants and
obligations (considered individually), shall have been duly performed and
complied with in all material respects.
 
Section 8.3  Consents. Each of the Consents identified on Schedule 8.3 shall
have been obtained and shall be in full force and effect.
 
Section 8.4  Additional Documents. ATHLON shall have caused the documents and
instruments required by Section 2.5(a) and the following documents to be
delivered (or tendered subject only to Closing) to LICENSEE:
 
(a) Releases of all Encumbrances on the Licensed Assets, if any;
 
(b) Such other documents as LICENSEE may reasonably request for the purpose of:
 
(i) evidencing the accuracy of any of ATHLON’s representations and warranties;
 
 
 
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(ii) evidencing the performance by ATHLON, or the compliance by ATHLON with, any
covenant or obligation required to be performed or complied with by ATHLON;
 
(iii) evidencing the satisfaction of any condition referred to in this Article
8;
 
(iv) describing any issues or concerns to the knowledge of ATHLON regarding any
ATHLON manufacturer of the Products with respect to any Regulatory Agency; or
 
(v) otherwise facilitating the consummation or performance of any of the
Contemplated Transactions.
 
Section 8.5  No Proceedings. Since the date of this Agreement, there shall not
have been commenced or threatened against ATHLON, or against any Affiliate of
ATHLON, any Action or Proceeding (a) involving any challenge to, or seeking
Damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing, delaying, making
illegal, imposing limitations or conditions on or otherwise interfering with any
of the Contemplated Transactions, or (c) by the FDA, pending or threatened,
against the Product, and ATHLON has no knowledge of any bases for any such
Action or Proceeding.
 
Section 8.6  No Conflict. Neither the consummation nor the performance of any of
the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), contravene or conflict with or result in a violation
of or cause LICENSEE or any Affiliate of LICENSEE to suffer any adverse
consequence under (a) any applicable Law or Order or (b) any Law or Order that
has been published, introduced or otherwise proposed by or before any
Governmental or Regulatory Authority.
 
Section 8.7  Governmental Authorizations. LICENSEE shall have received such
authorizations from any Governmental or Regulatory Authority as are necessary or
desirable to allow LICENSEE to continue in the business of selling the Licensed
Assets from and after the Closing.

ARTICLE IX
CONDITIONS PRECEDENT TO ATHLON’S OBLIGATION TO CLOSE
 
ATHLON’s obligation to sell the Licensed Assets and to take the other actions
required to be taken by ATHLON at the Closing is subject to the satisfaction, at
or prior to the Closing, of each of the following conditions (any of which may
be waived by ATHLON in whole or in part):
 
Section 9.1 Accuracy of Representations. All of LICENSEE’s representations and
warranties in this Agreement (considered collectively), and each of these
representations and warranties (considered individually), shall have been
accurate in all material respects as of the date of this Agreement and shall be
accurate in all material respects as of the time of the Closing as if then made.
 
 
 
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Section 9.2 LICENSEE’s Performance. All of the covenants and obligations that
LICENSEE is required to perform or to comply with pursuant to this Agreement at
or prior to the Closing (considered collectively), and each of these covenants
and obligations (considered individually), shall have been performed and
complied with in all material respects.
 
Section 9.3 Consents. Each of the Consents identified in Schedule 9.3 shall have
been obtained and shall be in full force and effect.
 
Section 9.4  Additional Documents. LICENSEE shall have caused the documents and
instruments required by Section 2.5(b) to be delivered (or tendered subject only
to Closing) to ATHLON and such other documents as LICENSEE may reasonably
request for the purpose of:
 
(a) evidencing the accuracy of any representation or warranty of LICENSEE;
 
(b) evidencing the performance by LICENSEE of, or the compliance by LICENSEE
with, any covenant or obligation required to be performed or complied with by
LICENSEE; or
 
(c) evidencing the satisfaction of any condition referred to in this Article 8.
 
Section 9.5  No Injunction. There shall not be in effect any Law or any
injunction or other Order that (a) prohibits the consummation of the
Contemplated Transactions and (b) has been adopted or issued, or has otherwise
become effective, since the date of this Agreement.

ARTICLE X
TERMINATION
 
Section 10.1  Termination Events. Subject to Section 10.2, this Agreement may be
terminated as follows:
 
(a) by LICENSEE if a material Breach of any material provision of this Agreement
has been committed by ATHLON and such Breach has not been cured within thirty
(30) days of notice (as provided for in Section 11.2) of such Breach or has not
been waived by LICENSEE;
 
(b) by ATHLON if a material Breach of any material provision of this Agreement
has been committed by LICENSEE and such Breach has not been cured within thirty
(30) days of notice (as provided for in Section 11.2) of such Breach or has not
has not been waived by ATHLON;
 
(c)   by LICENSEE if any condition in Article 8 has not been satisfied as of the
date specified for Closing in Section 2.4 or if satisfaction of such a condition
by such date is or becomes impossible (other than through the failure of
LICENSEE to comply with its obligations under this Agreement), and LICENSEE has
not waived such condition on or before such date;
 
(d)   by ATHLON if any condition in Article 9 has not been satisfied as of the
date specified for Closing Section 2.4 or if satisfaction of such a condition by
such date is or becomes impossible (other than through the failure of ATHLON to
comply with its obligations under this Agreement), and ATHLON has not waived
such condition on or before such date; and
 
 
 
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(e)   by mutual consent of LICENSEE and ATHLON.
 
Section 10.2  Effect of Termination. Each Party’s right of termination under
Section 10.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of such right of termination will not be an
election of remedies. If this Agreement is terminated pursuant to Section 10.1,
all obligations of the parties under this Agreement will terminate, except that
the obligations of the parties in this Section 10.2 and Sections 10.3, 11.1 and
11.11 will survive, provided, however, that, if this Agreement is terminated
because of a Breach of this Agreement by the non-terminating party or because
one or more of the conditions to the terminating party’s obligations under this
Agreement is not satisfied as a result of the party’s failure to comply with its
obligations under this Agreement, the terminating party’s right to pursue all
legal remedies will survive such termination unimpaired.
 
Section 10.3 Remedy For Breach By LICENSEE. Notwithstanding any of the
foregoing, upon the termination of this Agreement by ATHLON due to a breach of
this Agreement by LICENSEE which is not cured within the applicable cure period,
the Licensed Assets and all rights associated therewith shall revert to ATHLON.
Furthermore, ATHLON shall have the right to pursue any and all other remedies
that it may have pursuant to this Agreement.

ARTICLE XI
MISCELLANEOUS

Section 11.1  Nondisclosure Agreement. The Nondisclosure Agreement between the
Parties, dated July 17, 2006 (the “Nondisclosure Agreement”), is hereby
incorporated herein by reference and shall continue in full force and between
the date of this Agreement and the Closing Date. LICENSEE and ATHLON will
maintain in confidence, and will cause the directors, officers, employees,
agents, and advisors of LICENSEE and the ATHLON to maintain in confidence, any
written, oral, or other information obtained in confidence from one another in
connection with this the Products, the Licensed Assets, this Agreement or the
Contemplated Transactions, unless (a) such information is already known to such
party or to others not bound by a duty of confidentiality or such information
becomes publicly available through no fault of such party, (b) the use of such
information is necessary or appropriate in making any filing or obtaining any
consent or approval required for the consummation of the Contemplated
Transactions, or (c) the furnishing or use of such information is required by
legal proceedings. If the Contemplated Transactions are not consummated, each
party will return or destroy as much of such written information as the other
party may reasonably request.
 
Section 11.2  Notices. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission with answer back
confirmation or mailed (postage prepaid by certified or registered mail, return
receipt requested) or by nationally recognized overnight courier that maintains
records of delivery to the Parties at the following addresses or facsimile
numbers:
 
 
 
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If to LICENSEE to:

Auriga Laboratories, Inc.
5555 Triangle Parkway, Suite 300
Norcross, GA 30092
Attn: Phillip S. Pesin
Telephone: (678) 282-1600
Facsimile: (678) 282-1700

With a copy to:

Larry J. Webster
Webster & Associates
2206 Portwood Bend
Cedar Park, TX 78613
Telephone: (512) 415-0461
Facsimile: (512) 857-0278

If to ATHLON to:

ATHLON Pharmaceuticals, Inc.
6311 Ridgewood Road
Suite 401 West
Jackson, Mississippi 39211
Attn: Bobby Joe King, Jr.
Telephone: 205-986-1111
Facsimile: 205-942-3074

With a copy to:

Joseph E. Varner, III
Brunini, Grantham, Grower & Hewes, PLLC
P. O. Drawer 119 (39205)
248 East Capitol Street, Suite 1400
Jackson, Mississippi 39201
Telephone: 601-948-3101
Facsimile: 601-960-6902

All such notices, requests and other communications will (a) if delivered
personally to the address as provided in this Section, be deemed given upon
receipt, (b) if delivered by facsimile to the facsimile number as provided in
this Section, be deemed given upon receipt by the sender of the answer back
confirmation and (c) if delivered by mail in the manner described above or by
overnight courier to the address as provided in this Section, be deemed given
upon receipt (in each case regardless of whether such notice, request or other
communication is received by any other Person to whom a copy of such notice,
request or other communication is to be delivered pursuant to this Section). Any
Party from time to time may change its address, facsimile number or other
information for the purpose of notices to that Party by giving notice specifying
such change to the other Party hereto in accordance with the terms of this
Section.
 
 
 
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Section 11.3  Entire Agreement. This Agreement (and all Exhibits and Schedules
attached hereto and all other documents delivered in connection herewith) and
the Confidentiality Agreement supersede all prior discussions and agreements,
both written and oral, among the Parties with respect to the subject matter
hereof and contain the sole and entire agreement among the Parties with respect
to the subject matter hereof.

Section 11.4  Waiver. Any term or condition of this Agreement may be waived at
any time by the Party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly executed
by or on behalf of the Party waiving such term or condition. No waiver by any
Party of any term or condition of this Agreement, in any one or more instances,
shall be deemed to be or construed as a waiver of the same or any other term or
condition of this Agreement on any future occasion. All remedies, either under
this Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.

Section 11.5  Amendment. This Agreement may be amended, supplemented or modified
only by a written instrument duly executed by each Party.

Section 11.6  Third Party Beneficiaries. Except as otherwise expressly set forth
herein, the terms and provisions of this Agreement (and all Exhibits and
Schedules attached hereto and all other documents delivered in connection
herewith) are intended solely for the benefit of each Party and their respective
successors or permitted assigns and it is not the intention of the Parties to
confer third-party beneficiary rights or remedies hereunder or thereunder upon
any other Person.

Section 11.7  Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned by any Party without the prior
written consent of the other Party; provided, however, that either Party may
assign its rights and obligations under this Agreement, without the prior
written consent of the other Party, to an Affiliate provided that such Affiliate
agrees in writing to be bound by this Agreement. Such consent shall not be
unreasonably withheld or delayed. Any permitted assignee shall assume all
obligations of its assignor under this Agreement.

Section 11.8  Headings. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.

Section 11.9 Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective while
this Agreement remains in effect, the legality, validity and enforceability of
the remaining provisions will not be affected thereby.
 
Section 11.10 Governing Law and Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of Georgia applicable
to contracts executed and performed in such state, without giving effect to the
conflicts of laws principles. Any Action or Proceeding seeking to enforce any
provision of, or based on any right arising out of, this Agreement may be
brought against any of the Parties in the Courts of the State of Georgia, or, if
it has or can acquire jurisdiction, in a United States District Court located in
Georgia, and each of the Parties consents to the jurisdiction of such Courts
(and of the appropriate appellate courts) in any such Action or Proceeding and
waives to any objection to venue.
 
 
 
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Section 11.11  Expenses. Except as otherwise provided in this Agreement, each
Party shall pay its own expenses and costs incidental to the preparation of this
Agreement and to the consummation of the transactions contemplated hereby.

Section 11.12  Counterparts. This Agreement may be executed in any number of
counterparts and by facsimile, each of which will be deemed an original, but all
of which together will constitute one and the same instrument.

[Remainder of page intentionally left blank; signatures appear on the following
page.]

 
 
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IN WITNESS WHEREOF, this Agreement has been executed by the Parties hereto all
as of the date first above written.

ATHLON

ATHLON Pharmaceuticals, Inc.

By:/s/ Bobby King, Jr.
Name: Bobby King, Jr.
Title: __President/CEO______________

LICENSEE

Auriga Laboratories, Inc.

By:/s/ Philip S. Pesin
Name: Philip S. Pesin
Title: Chairman & CEO

 
 
 
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Schedule List

Schedule 4.3  Consents and Approvals
Schedule 4.4   Non-Contravention
Schedule 4.8  Encumbrances
Schedule 6.1  Product NDC Numbers
Schedule 8.3  Material Consents
Schedule 9.3   Consents

Exhibits

Exhibit 2.3(b)  Great Southern Labs Assumption and Assignment Agreement
Exhibit 2.5(a)(i) Bill of Sale