Exhibit 10.12

 
STOCK PURCHASE AGREEMENT

BY AND AMONG

PERNIX THERAPEUTICS, LLC

PERNIX THERAPEUTICS HOLDINGS, INC.

AND

JEFFREY S. KIEL,

PAUL H. KREUTZER,

KERRY L. MORTENSEN,

H. GREG THOMAS,

AND

GREG A. JONES

 
DATED:  June 18, 2010

 
 
 

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TABLE OF CONTENTS
 

      Page I. DEFINITIONS  1   1.1 DEFINITIONS  1 II. SALE AND PURCHASE OF
SHARES  3   2.1 SALE AND PURCHASE OF SHARES  3   2.2 CLOSING  5 III.
REPRESENTATIONS AND WARRANTIES OF THE SELLER  5   3.1 ORGANIZATION AND GOOD
STANDING  6   3.2 AUTHORITY; NO CONFLICT; NOTICES AND CONSENTS  6   3.3
CAPITALIZATION   6   3.4 SUBSIDIARIES   6   3.5 TITLE TO SHARES   6   3.6 REAL
PROPERTY   6   3.7 ASSETS AND LIABILITIES   7   3.8 NO UNDISCLOSED LIABILITIES 
 7   3.9 TAXES   7   3.10 EMPLOYEE BENEFITS   8   3.11 COMPLIANCE WITH LEGAL
REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS   8   3.12 ENVIRONMENTAL MATTERS   9  
3.13 LEGAL PROCEEDINGS; ORDERS   9   3.14 ABSENCE OF CERTAIN CHANGES AND EVENTS 
 9   3.15 CONTRACTS; NO DEFAULTS   9   3.16 INSURANCE   9   3.17 INTELLECTUAL
PROPERTY   10   3.18 ACQUISITION OF PARENT COMMON STOCK   11   3.19 BROKERS   11
  3.20 BOOKS AND RECORDS   11 IV. REPRESENTATIONS AND WARRANTIES OF THE
PURCHASER AND THE PARENT  11   4.1 LIMITED LIABILITY COMPANY STATUS AND
AUTHORITY OF PURCHASER   11   4.2 CORPORATE STATUS AND AUTHORITY OF PARENT   11
  4.3 NO CONFLICTS   11   4.4
 CONSENTS AND APPROVALS 
 11   4.5
SHARES TO BE DELIVERED 
 11   4.6
BROKERS FEES AND EXPENSES 
 11   4.7
DISCLOSURE 
 12 V. TAX MATTERS/COVENANTS  12   5.1
TAX BENEFIT 
 12   5.2 POST-CLOSING TAX RETURNS   12   5.3
COOPERATION 
 12

 
 
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  5.4
TAX SHARING AGREEMENTS 
 12 VI. INDEMNIFICATION  12   6.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES 
 12   6.2 INDEMNIFICATION AND LIABILITY   13 VII. POST CLOSING COVENANTS  15  
7.1
GENERAL
 15   7.2
NON-INFRINGEMENT
 15   7.3
COVENANT NOT TO COMPETE
 15   7.4
NON-SOLICITATION
 16   7.5
CONFIDENTIAL INFORMATION
 16   7.6
LISTING AND REGISTRATION
 16 VIII. GENERAL PROVISIONS  16   8.1
PRESS RELEASES
 16   8.2
FURTHER ACTIONS
 16   8.3
NTIRE AGREEMENT
 16   8.4
NOTICES
 17   8.5
ASSIGNMENT
 18   8.6
MODIFICATION; WAIVER
 18   8.7
SEVERABILITY
 18   8.8
HEADINGS 
 18   8.9
COUNTERPARTS
 18   8.10
GOVERNING LAW
 18   8.11
REMEDIES
 19

 
SCHEDULES AND EXHIBITS
 

Schedule A Sellers’ Disclosure Letter Exhibit 2.1(h)     Adjustment Amount
Exhibit 2.2(c)      Form of Intellectual Property Transfer Agreement Exhibit
3.15     Agreements Exhibit 3.18     Accredited Investor Questionnaire Exhibit
7.4     Territories

 
 
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STOCK PURCHASE AGREEMENT

This STOCK PURCHASE AGREEMENT (this “Agreement”), effective as of June 18, 2010
(the “Effective Date”), is by and among Pernix Therapeutics, LLC, a Louisiana
limited liability company (“Purchaser”), and Pernix Therapeutics Holdings, Inc.,
a Maryland corporation and the sole member and manager of Purchaser (“Parent”)
on the one hand, and Jeffrey S. Kiel, Paul H. Kreutzer, Kerry L. Mortensen, H.
Greg Thomas and Greg A. Jones (together with Messrs. Kiel, Kreutzer, Mortensen
and Thomas, the “Sellers” and each a “Seller”), on the other.
 
RECITALS:
 
A.           The Sellers collectively own 50% of the issued and outstanding
capital stock of Gaine, Inc., a Delaware corporation (“Gaine”), consisting of
300,000 common shares, $0.001 par value per share (the “Shares”); and

B.           The Sellers wish to sell the Shares to the Purchaser, and the
Purchaser wishes to purchase the Shares from the Sellers, on the terms and
conditions and for the consideration set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises, covenants,
representations and warranties contained herein, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto (each, a “Party”, and
collectively, the “Parties”) agree as follows:
 
I. 
DEFINITIONS
 
1.1 Definitions.  As used in this Agreement, the following terms have the
following meanings:
 
(a) “Affiliate” means, with respect to any Person, any other Person that
directly or indirectly controls, is controlled by, or is under common control
with, the first Person, where the term “control” means the possession, directly
or indirectly, of the power to direct the management and policies of a Person
whether through the ownership of voting securities, contract or otherwise.
 
(b) “Code” means the Internal Revenue Code of 1986, as amended.
 
(c) “Employee Benefit Plan” means each “employee benefit plan” (as defined in
Section 3(3) of ERISA), “employee pension benefit plan” (as defined in Section
3(2) of ERISA), “employee welfare benefit plan” (as defined in Section 3(1) of
ERISA) and any bonus, deferred compensation, stock option, severance,
unemployment, insurance, disability, death benefit, medical or other benefit
plan maintained or administered by Gaine.
 
 
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(d) “Environmental Law” means any legal requirement that requires or relates to:
 
(i) Advising appropriate authorities, employees and the public of intended or
actual release of pollutants or hazardous materials, violations of discharge
limits or other prohibitions and of the commencements of activities, such as
resource extraction or construction, that could have a significant impact on the
environment;
 
(ii) Preventing or reducing the acceptable levels the release of pollutants or
hazardous materials into the environment;
 
(iii) Reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
 
(iv) Reducing to acceptable levels the risks inherent in the transportation of
hazardous substances, pollunts, oil or other potentially harmful substances;
 
(v) Cleaning up pollutants that have been released, preventing the threat of
release or paying the costs of such clean up or prevention; or
 
(vi) Making responsible parties pay private parties or groups of them, for
damages done to their health or the environment or permitting self-appointed
representatives of the public interest to recover for injuries done to public
assets.
 
(e) “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended.
 
(f) “Governmental Authority” means any federal, state, local, municipal, parish
or county, foreign or other government, or political subdivision thereof, and
any entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government, including, without
limitation, any government authority, agency, department, board, commission or
instrumentality or any political subdivisions thereof.
 
(g) “Knowledge” with respect to a Person is the actual awareness of a fact or
other matter by the Person or an Affilaite of such Person.
 
(h) “Lien” means any mortgage, deed of trust, lien, assignment, pledge,
hypothecation, security interest, right of first refusal, or other charge or
encumbrance of any kind, adverse claim, other defect or encumbrance on title to
property, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attribute of ownership,
other than (i) liens for Taxes not yet due and payable arising out of operation
of law, and (ii) restrictions on transfer arising under applicable securities
laws.
 
(i) “Ordinary Course of Business” means Gaine’s ordinary course of business
consistent with its past custom and practice.
 
(j) “Parent Common Stock” means the capital stock of Parent.
 
(k) “Person” means an individual, a corporation, a partnership, an association,
a trust or other entity or organization, including a government or political
subdivision or an agency or instrumentality thereof.
 
 
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(l) “Post-Closing Tax Period” shall mean any Tax period ending after the
Effective Date.
 
(m) “Pre-Closing Tax Period” shall mean any Tax period ending on or before the
Effective Date.
 
(n) “Tax”or “Taxes” means any federal, state, local, or non-U.S. income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Code §59A),
customs duties, capital stock, franchise, profits, withholding, social security
(or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax, governmental fee or other like assessment or charge of
any kind whatsoever, including any interest, penalty, or addition thereto,
whether disputed or not, imposed by any Governmental Authority responsible for
the imposition of any such tax, including any obligations to indemnify or
otherwise assume or succeed to the Tax liability of any other Person.
 
(o) “Tax Return” means any return, declaration, report, claim for refunds, or
information return or stated filed or required to be files wiha Government
Authority relating to Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
 
II. 
SALE AND PURCHASE OF SHARES
 
2.1 Sale and Purchase of Shares.  Subject to the terms and conditions of this
Agreement, at the Closing, the Sellers shall sell, transfer, convey and assign
to the Purchaser, and the Purchaser shall purchase from the Sellers, the Shares
for the following purchase price (the “Purchase Price”):
 
(a) At the Closing (as hereinafter defined), Purchaser will pay the Sellers an
aggregate amount of $500,000 in cash, plus fifty percent (50%) of the Adjustment
Amount (as hereinafter defined).
 
(b) On October 31, 2010, Purchaser will pay Sellers an aggregate amount of
$500,000 in cash, plus fifty percent (50%) of the Adjustment Amount.
 
(c) On January 31, 2011, Purchaser will pay the Sellers an aggregate amount of
$1,000,000 in cash or Parent Common Stock, or any combination thereof, as may be
determined by Purchaser in its sole and absolute discretion.
 
(d) At the approval of a new drug application (an “NDA”) by the United States
Food and Drug Administration (“USFDA”) for an antitussive pharmaceutical product
or method (the “Theobromine Product”) containing Theobromine as an active
ingredient and incorporating the invention claimed in United States Patent No.
6,348,470 issued February 12, 2002 (the “Theobromine Patent”), Purchaser will
pay the Sellers an aggregate of $10,000,000 in cash or Parent Common Stock, or
any combination thereof, within 72 hours of such approval, as may be determined
by Purchaser in its sole and absolute discretion.
 
 
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(e) Notwithstanding anything contained in this Agreement to the contrary,
nothing in this Agreement shall limit or otherwise restrict Purchaser from
selling or otherwise transferring ownership of the Theobromine Patent and such
other assets related to the Theobromine Patent to another Party (a “Theobromine
Transfer”) prior to obtaining approval of a NDA for a pharmaceutical product
containing Theobromine as an active ingredient and incorporating the invention
claimed in the Theobromine Patent and making the payment contemplated by Section
2.1(d) above; provided that Purchaser’s transferee agrees in writing to assume
Purchaser’s payment obligations under this Agreement.  In the event Purchaser’s
transferee is unwilling or unable to assume Purchaser’s payment obligations
under this Agreement, Purchaser shall continue to be liable for the Purchase
Price obligation set forth in Section 2.1(d).  Notwithstanding the foregoing,
Purchaser, in its sole and absolute discretion, may, in the event of any arms
length Theobromine Transfer to a Person other than an Affiliate of Purchaser or
Parent and in lieu of making the payment required by Section 2.1(d), pay Sellers
within 72 hours of any Theobromine Transfer an aggregate amount equal to the
greater of (i) $5,000,000, or (ii) fifty percent (50%) of the aggregate purchase
price received by Purchaser in the Theobromine Transfer, up to a maximum
aggregate amount not to exceed $10,000,000, which may be paid in Parent Common
Stock or cash, or any combination thereof, as may be determined by Purchaser in
its sole and absolute discretion.
 
(f) Any payment made in Parent Common Stock will be based on the average closing
price of Parent Common Stock as reported on the NYSE Amex (or such other
exchange as Parent Common Stock may be listed as of the date of issuance) for
the twenty (20) business days immediately preceding the date of payment.  The
number of shares of Parent Common Stock to be issued shall be subject to
proportionate adjustment for any stock splits or similar transactions.  No
fractional shares of Parent Common Stock shall be issued to Sellers as
satisfaction of the Purchase Price, but, rather, the value of any fractional
share otherwise issuable to Sellers shall be paid to Sellers in cash.
 
(g) Any issuance of Parent Common Stock under this Section 2.1 will not be
registered under the Securities Act of 1933, as amended, in reliance upon the
exemption from registration provided by Section 4(2) thereof and Regulation D
promulgated thereunder.  Any Parent Common Stock issued to Sellers will be
subject to restrictions on transferability and resale and may not be resold
except as permitted under the Securities Act of 1933, as amended, and any
applicable state securities laws pursuant to an exemption therefrom.  No resales
of Parent Common Stock shall be made pursuant to Rule 144 of the Securities Act
of 1933 until the one year anniversary of Parent’s filing of a Current Report on
Form 8-K with the Securities and Exchange Commission containing the information
required by Form 10.  Parent represents to Sellers that the filing of a Current
Report on Form 8-K containing the information required by Form 10 occurred on
March 15, 2010.
 
(h) The “Adjustment Amount” (which may be a positive or negative number) is set
forth on Exhibit 2.1(h) to the Agreement and is equal to: (a)(i) fifty percent
(50%) of the aggregate outstanding balance as of the Closing on that certain
promissory note executed by Gaine in favor of Purchaser dated September 18,
2007, (ii) fifty percent (50%) of all prepaid royalties on undelivered products
paid by Purchaser to Gaine as of the Closing, (iii) fifty percent (50%) of the
aggregate outstanding balance as of the Closing on all of Gaine’s accounts
payable to Kiel Laboratories, Inc. (“Kiel”) and (iv) all legal fees incurred by
Purchaser in connection with the consummation of the transactions contemplated
by this Agreement, up to an aggregate maximum amount of $25,000, minus (b) fifty
percent (50%) of the aggregate outstanding balance as of the Closing on all of
Purchaser’s royalty payments owed to Gaine.  The Adjustment Amount is final and
binding and is not subject to any post Closing adjustment.
 
 
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(i) The Purchase Price shall be allocated among the Sellers on a pro rata basis
based on the number of Shares owned by each Seller to the total number of Shares
owned by all of the Sellers, as set forth on Schedule 2.1(i) attached hereto.
 
(j) Section 2.1(j) of the Disclosure Letter contains a complete and accurate
list of all patents, patent application or other Intellectual Property (as
hereinafter defined) owned by each Seller or his Affiliates containing or
otherwise utilizing Theobromine.  For and in partial consideration for
Purchaser’s purchase of the Shares for the Purchase Price, Sellers shall, or
shall cause their respective Affiliates to, transfer, convey and assign to Gaine
any and all right, title or interest that Sellers and their respective
Affiliates may have to any of the patents, patent applications or other
Intellectual Property set forth on Section 2.1(j) of the Disclosure Letter
simultaneous with the Closing, regardless of whether such Intellectual Property
is related to or could in any way potentially compete with or infringe upon the
Theobromine Patent.
 
2.2 Closing.  The closing of the sale and purchase of the Shares (the “Closing”)
will take place contemporaneously with the execution and delivery of this
Agreement.  At the Closing:
 
(a) Purchaser will pay to the Sellers, by wire transfer of immediately available
funds to such accounts as are reflected on Schedule 2.1(i), an aggregate amount
equal to $500,000, plus fifty percent (50%) of the Adjustment Amount;
 
(b) Sellers will deliver to the Purchaser, free and clear of all Liens,
certificates representing all of the Shares, duly endorsed in blank or
accompanied by duly executed stock powers or other appropriate instruments of
transfer;
 
(c) Transfer documentation in the form set forth as Exhibit 2.2(c) transferring,
conveying and assigning to Purchaser the Intellectual Property set forth on
Section 2.1(j) of the Disclosure Letter; and
 
(d) All Ancillary Documents (as hereinafter defined) and any other documents and
agreements required to be delivered pursuant to this Agreement will be
exchanged.
 
III.
REPRESENTATIONS AND WARRANTIES OF THE SELLER
 
Other than as set forth on the Disclosure Letter, each Seller hereby represents
and warrants to Purchaser (it being agreed that the representations and
warranties set forth in this Article III are being made severally, and the
representations and warranties contained in Sections 3.1(a), 3.2-3.4, 3.6-3.16,
3.17(a), 3.17(b) and 3.20 are qualified to each of the Seller’s respective
Knowledge) effective as of the Effective Date as follows :
 
 
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3.1 Organization And Good Standing
 
(a) Gaine is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware.
 
(b) Such Seller has the power and authority to (i) own such Shares, (ii) execute
and deliver this Agreement and all of the other agreements, certificates and
documents delivered at or prior to the Closing in connection with the
transactions contemplated hereby (the “Ancillary Documents”); and (iii)
consummate the transactions contemplated hereby.  This Agreement and the
Ancillary Documents have been duly executed and delivered by such Seller and
constitute the legal, valid, and binding obligation of such Seller, enforceable
against such Seller in accordance with its terms.
 
3.2 Authority; No Conflict; Notices and Consents
 
(a) Gaine is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has the requisite corporate power to
carry on its business as currently being conducted and to own, lease and operate
its assets.  Gaine is not in default under or in violation of any provision of
its Certificate of Incorporation or By-laws.
 
(b) Neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will: (i) violate any
provision of any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any Governmental
Authority or court to which the Gaine is subject or any provision of Gaine’s
Certificate of Incorporation or By-laws; or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which Gaine is a party or by which it is bound or to which any of
its assets is subject (or result in the imposition of any Lien on its assets).
 
3.3 Capitalization. The outstanding equity securities of Gaine consist solely of
600,000 shares of common stock.  All of the outstanding equity securities of
Gaine have been duly authorized and validly issued. Other than this Agreement,
there are no contracts or agreements relating to the issuance, sale or transfer
of any securities of Gaine.
 
3.4 Subsidiaries.  Gaine does not own, hold, possess or otherwise have an
ownership interest in any securities or other interests of any other Person.
 
3.5 Title to Shares.  Each Seller is the record and beneficial owner of the
Shares set forth opposite his name in Section 3.5 of the Disclosure Letter, and
such Shares are owned by such Seller free and clear of all Liens.  Seller will
transfer the Shares to the Purchaser at the Closing free and clear of all Liens.
 
3.6 Real Property. Gaine does not, nor has it at any time since its
incorporation, owned or leased any real property.
 
 
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3.7 Assets and Liabilities. Section 3.7 of the Disclosure Letter contains a
balance sheet (the “Balance Sheet”) of Gaine as of May 30, 2010.  The Balance
Sheet fairly presents in all material respects the financial condition of Gaine
as of such date.  All recoverables and receivables of Gaine that are reflected
in the Balance Sheet (collectively, the “Accounts Receivable”) that have not
been collected by the Closing represent or will represent valid obligations
arising in the Ordinary Course of Business.  No obligor has contested the amount
or validity of, or  claimed a right of set-off against, such Accounts
Receivable.
 
3.8 No Undisclosed Liabilities.  Gaine does not have any liabilities or
obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent, or otherwise) other than those liabilities and obligations
that are either reflected on the Balance Sheet or otherwise set forth in Section
3.8 of the Disclosure Letter.
 
3.9 Taxes.
 
(a) Gaine has filed all Tax Returns that it was required to file under
applicable laws and regulations. None of the foregoing Tax Returns contain any
position which is or would be subject to penalties under Section 6662 of the
Code (or any corresponding provision of state, local or foreign Tax laws).  All
such Tax Returns were correct and complete in all material respects and were
prepared in compliance with all applicable laws and regulations.  All Taxes due
and owing by Gaine (whether or not shown on any Tax Return) have been paid.  No
claim has ever been made by an authority in a jurisdiction where Gaine does not
file Tax Returns that Gaine is or may be subject to taxation by that
jurisdiction.  There are no Liens for Taxes upon any of the assets of Gaine.
 
(b) Gaine has withheld and paid all Taxes required to have been withheld and
paid in connection with any amounts paid or owing to any Person.
 
(c) Seller does not expect any authority to assess any additional Taxes for any
period for which Tax Returns have been filed.  No foreign, federal, state or
local tax audits or administrative or judicial Tax proceedings are pending or
being conducted with respect to Gaine.  Gaine has not, at any time, received
from any foreign, federal, state, or local taxing authority (including
jurisdictions where Gaine has not filed Tax Returns) any: (i) notice indicating
an intent to open an audit or other review; (ii) request for information related
to Tax matters; or (iii) notice of deficiency or proposed adjustment for any
amount of Tax proposed, asserted, or assessed by any taxing authority against
Gaine.  Sellers have delivered to Purchaser correct copies of all federal income
Tax Returns, examination reports, and statements of deficiencies assessed
against or agreed to by Gaine.
 
(d) Gaine has not waived any statute of limitations in respect of Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency.
 
(e) The representations and warranties of Seller contained in this Section 3.9
with respect to any Tax shall survive until the later to occur of (i) the lapse
of the statute of limitations for the assessment of such Tax, including any
extensions thereof, or (ii) sixty days after the final administrative
determination of such Tax by the appropriate Governmental Authority.
 
 
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(f) Gaine will not be required to include any item of income in, or exclude any
item of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing as a result of any:
 
(i) change in method of accounting for a taxable period ending on or prior to
the Closing;
 
(ii) “closing agreement” as described in Code §7121 (or any corresponding or
similar provision of state, local, or non-U.S. income Tax law) executed on or
prior to the Closing;
 
(iii) installment sale or open transaction made on or prior to the Closing; or
 
(iv) prepaid amount received on or prior to the Closing.
 
(g) Gaine is not or has not been a party to any “reportable transaction,” as
defined in Code Section 6707A(c)(1) and Treasury Regulation Section 1,6011-4(b).
 
3.10 Employee Benefits.  Gaine does not, nor has it at any time since its
incorporation, employed any Persons in either a full or part-time capacity or
maintained any Employee Benefit Plan.
 
3.11 Compliance With Legal Requirements; Governmental Authorizations.
 
(a) Gaine is in compliance in all material respects with all applicable federal,
state, local, municipal, foreign, international, multinational or other
administrative orders, constitutions, laws, ordinances, principles of common
law, regulations, statutes or treaties (“Legal Requirements”) that are
applicable to Gaine or to the conduct or operation of its business or the
ownership or use of any of its assets.  Gaine has not, at any time since its
incorporation, received any written notice or communication from any
Governmental Authority or any other Person regarding (A) an actual or alleged
violation of, or failure to comply with, any Legal Requirement, or (B) an actual
or alleged obligation on the part of Gaine to undertake, or to bear all or any
portion of the cost of, any remedial action of any nature.
 
(b) Section 3.11 of the Disclosure Letter contains a complete and accurate list
of each license, permit, authorization or right granted by a Governmental
Authority (each, a “Governmental Authorization”) that is held by Gaine or that
otherwise relates to the business of, or to any of the assets owned or used by
Gaine.  Each Governmental Authorization is valid and in full force and effect,
and Gaine is in compliance in all material respects with all of the terms and
requirements of each Governmental Authorization.  No consent or approval of any
Governmental Authority is necessary to preserve the validity and effectiveness
of any Governmental Authorization as a result of the consummation of the
transactions contemplated by this Agreement.
 
(c) All applications required to have been filed for the renewal of the
Governmental Authorizations have been duly filed on a timely basis with the
appropriate Governmental Authorities, and all other filings required to have
been made with respect to such Governmental Authorizations have been duly made
on a timely basis with the appropriate Governmental Authority.
 
 
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(d) The Governmental Authorizations listed in Section 3.11 of the Disclosure
Letter collectively constitute all of the Governmental Authorizations necessary
to permit Gaine to lawfully conduct and operate its business in the manner
currently conducted.
 
3.12 Environmental Matters.  Gaine has, at all times, been in full compliance in
all material respects with, and has not been and is not in material violation of
or liable under, any Environmental Law.  Seller has no basis to expect any
actual or threatened order, notice or other communication from any Governmental
Authority or other Person of any actual or potential violation or failure to
comply with any Environmental Law, or any actual or threatened obligation to
undertake or bear the cost of any environmental, health or safety liability with
respect to any property or assets of Gaine.
 
3.13 Legal Proceedings; Orders.  There is no pending action, claim, lawsuit,
proceeding, investigation or other claim (each, a “Proceeding”) that has been
commenced by or against Gaine, or that otherwise relates to or may affect the
business of, or any of the assets owned or used by, Gaine.  Gaine is not subject
to any order that prohibits it from engaging in or continuing any conduct,
activity, or practice.
 
3.14 Absence Of Certain Changes And Events.  Except as set forth in Section 3.14
of the Disclosure Letter, Gaine has not, since December 31, 2009:
 
(a) sold, leased, transferred, or assigned any assets, tangible or intangible;
 
(b) entered into any agreement;
 
(c) accelerated, terminated, made material modifications to, or cancelled any
agreement;
 
(d) made any capital investment in, or any loan to, any other Person; and
 
(e) changed its normal business practices or taken any other action outside the
Ordinary Course of Business in order to generate cash.
 
3.15 Contracts; No Defaults.  Section 3.15 of the Disclosure Letter contains a
complete and accurate list, and attached as Exhibit 3.15 are true and complete
copies of, or in the case of any verbal arrangements that would impact the
business of Gaine, written descriptions of, each agreement and contract that is
in full force and effect and is valid and enforceable against Gaine in
accordance with its terms as of the date hereof.
 
3.16 Insurance.
 
(a) Section 3.16 of the Disclosure Letter sets forth the following information
with respect to each insurance policy of Gaine currently in effect:
 
(i) the name, address and telephone number of the agent;
 
 
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(ii) the name of the insurer, the name of the policyholder and the name of each
covered insured;
 
(iii) the policy number and the period of coverage;
 
(iv) the scope (including an indication of whether the coverage was on a claim
made, occurrence or other basis) and amount (including a description of how
deductibles and ceilings are calculated and operate) of coverage; and
 
(v) a description of any retroactive premium adjustments or other loss-sharing
arrangements.
 
(b) Each insurance policy is legal, valid, binding, enforceable, and in full
force and effect.
 
3.17 Intellectual Property.
 
(a)           Section 3.17(a) of the Disclosure Letter sets forth a complete and
correct list of all United States or foreign patent applications, patents,
copyrights, software programs (other than commercially available software),
trademarks, service marks, domain names, inventions, trade secrets, know-how,
confidential information, technical information, chemical compositions,
formulations, therapeutic treatments, processes, methods, plans, drawings, data
or other intellectual property (the “Intellectual Property”) owned by Gaine and
used in connection with the operation of its business.  Except as indicated in
Section 3.17(a) of the Disclosure Letter, Gaine owns all Intellectual Property
used in the operation of its business free and clear of all Liens, licenses,
security interests, charges, encumbrances, equities or other claims, and has the
right to use all of such Intellectual Property, without payment to a third
party.
 
(b)           All of the patents owned by Gaine (the “Patents”) are currently in
compliance with formal legal requirements (including payment of filing,
examination and maintenance fees), and are valid and enforceable.  With respect
to each of the Patents, the inventors named on each Patent are the sole
inventors of the invention described in such Patent, and each inventor has
assigned to Gaine all of its rights (i) to such invention and any improvements
thereof and (ii) to the Patent and any related applications, reissues,
reexaminations, continuations, continuations-in-part or divisionals.  There is
no prior art known to Seller which is relevant to the subject matter claimed in
the Patents that has not been properly disclosed to the United States or
applicable patent office.
 
(c)           No Patent has been or is now involved in any interference,
reissue, or reexamination proceeding.  No Patent is infringed or has been
challenged or threatened in any way by any other Person.  Neither the conduct of
Gaine’s business nor the Intellectual Property of Gaine infringes or
misappropriates any of the Intellectual Property of any other Person, nor has
any such claim been threatened by any Person.
 
(d)           Neither the Seller nor any Affiliate of the Seller holds, whether
directly or indirectly, any right, title or interest in any Intellectual
Property that is material to the operation of the business of Gaine.  No other
present or former officer, director, shareholder, employee, agent or
representative has any right, title or interest in any of the Intellectual
Property that is material to the operation of the business of Gaine.  Gaine has
not, in the course of the development of any Intellectual Property, used the
facilities of, or received any funding from, any academic or research
institution, any governmental authority or non-profit foundation.
 
 
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(e)           Except as set forth in Section 2.1(j) of the Disclosure Letter,
neither Seller nor any Affiliate of Seller owns, controls, holds or otherwise
possesses any right, title or interest, whether directly or indirectly, in any
patent, patent application or other Intellectual Property containing or
otherwise utilizing Theobromine for any purposes.
 
3.18 Acquisition of Parent Common Stock.  Seller hereby represents and
acknowledges that (i)  he has accurately completed and executed the “accredited
investor” questionnaire in the form attached hereto as Exhibit 3.18 and has
furnished Purchaser with an executed copy thereof; (ii) to the extent all or a
portion of the Purchase Price is paid in Parent Common Stock, Seller is
acquiring the Parent Common Stock for its own account, not for the benefit of
any other Person and not with a view to the distribution or resale thereof,
(iii) any Parent Common Stock issued to Seller will not be registered for sale
under the Securities Act of 1933 or applicable state securities laws, may not be
resold except pursuant to an effective registration statement thereunder or an
exemption from the registration requirements thereof, and shall not be resold in
reliance on Rule 144 of the Securities Act of 1933 at any time prior to March
15, 2011 and (iv) Seller is able to bear the economic risk of its acquisition of
Parent Common Stock and has the knowledge and experience in financial and
business matters that Seller is capable of evaluating the merits and risks of
such acquisition.
 
3.19 Brokers.  No broker, investment banker, financial advisor or other Person
is entitled to any broker’s, finder’s, financial advisor’s or similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Seller.
 
3.20 Books and Records.  All minute books and stock record books of Gaine have
been delivered to the Purchaser prior to Closing, and are complete and correct
in all material respects, but Seller’s representation and warranty under this
sentence is strictly limited to the period of time during which the Seller owned
the Shares.
 
3.21 Disclosure.  No representation or warranty of Seller in this Agreement and
no statement in the Disclosure Letter omits to state a material fact necessary
to make the statements herein or therein, in light of the circumstances in which
they were made, not misleading.  The Sellers shall not be deemed to have made to
Purchaser or Parent, whether collectively or individually, any representation or
warranty other than as expressly made by the Sellers in this Agreement and
Disclosure Letter.
 
IV.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER AND THE PARENT
 
The Purchaser and Parent represent and warrant to the Sellers effective as of
the Effective Date and as of the time of any issuance of Parent Common Stock to
Sellers with respect to Sections 4.2-4.7 as follows:
 
4.1 Limited Liability Company Status and Authority of Purchaser.  The Purchaser
is a limited liability company duly formed, validly existing and in good
standing under the laws of the State of Louisiana and has the power and
authority to execute and deliver this Agreement and consummate the transactions
contemplated hereby.  The execution, delivery and performance of this Agreement
have been duly authorized by the sole member and manager of the Purchaser, which
approval constitutes all necessary entity action on the part of the Purchaser
for such authorization.  This Agreement has been duly executed and delivered by
the Purchaser and constitutes the valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms subject to the
effect of applicable bankruptcy, insolvency, moratorium or other laws of general
application relating to or affecting the enforcement of creditors’ rights and
rules or laws concerning equitable remedies.
 
4.2 Corporate Status and Authority of Parent.  The Parent is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
or Maryland and has the power and authority to execute and deliver this
Agreement and consummate the transactions contemplated hereby.  The execution,
delivery and performance of this Agreement have been duly authorized by the
Board of Directors of the Parent, which approval constitutes all necessary
corporate action on the part of Parent for such authorization.  This Agreement
has been duly executed and delivered by the Parent and constitutes the valid and
binding obligation of the Parent, enforceable against the Parent in accordance
with its terms subject to the effect of applicable bankruptcy, insolvency,
moratorium or other laws of general application relating to or affecting the
enforcement of creditors’ rights and rules or laws concerning equitable
remedies.
 
4.3 No Conflicts.  The execution, delivery and performance of this Agreement by
the Purchaser and the Parent will not result in (i) any conflict with the
organizational documents of the Purchaser or the Parent, (ii) any breach or
violation of or default under any applicable law, statute, regulation, judgment,
order or decree of any Governmental Authority, or (iii) the creation or
imposition of any Lien.
 
4.4 Consents and Approvals.  No material consent, approval or authorization of
or filing with any Governmental Authority or Person is required on the part of
the Purchaser or the Parent in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby.
 
4.5 Shares to be Delivered.  The shares of Parent Common Stock, when issued to
the Sellers pursuant to this Agreement, will be duly authorized, validly issued,
fully paid and non-assessable shares of common stock of the Parent, free of all
Liens created by Parent except as set forth in this Agreement.
 
4.6 Brokers Fees and Expenses.  No broker, investment banker, financial advisor
or any other Person is entitled to any broker’s, finder’s, financial advisor’s
or similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Purchaser or
Parent.
 
 
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4.7 Disclosure.  No representation or warranty of Purchaser in this Agreement
omits to state a material fact necessary to make the statements herein, in light
of the circumstances in which they were made, not misleading.  The Purchaser and
the Parent shall not be deemed to have made to Sellers, whether collectively or
individually, any representation or warranty other than as expressly made by the
Purchaser and/or Parent in this Agreement and the Disclosure Letter.
 
V.
TAX MATTERS/COVENANTS
 
5.1 Tax Benefit.  In the event Gaine recognizes all or a portion of the Tax
benefit currently reflected on the statement of assets and liabilities set forth
on Schedule 3.7 to the Disclosure Letter, Purchaser shall remit 50% of the tax
benefit realized to the Sellers no later than fifteen (15) days following
Gaine’s recognition of the proceeds of such Tax benefit.  The determination of
whether Gaine recognizes such a Tax benefit, the timing of the recognition of
the Tax benefit and the amount of such Tax benefit shall be within the sole
discretion of Purchaser.
 
5.2 Post-Closing Tax Returns.  Purchaser shall prepare and file all Tax Returns
required to be filed by Gaine after the Effective Date.
 
5.3 Cooperation. Sellers shall cooperate fully, and shall cause their respective
Affiliates, officers, employees, agents, auditors and representatives to
cooperate fully, as and to the extent reasonably requested by Purchaser, in
connection with the filing of Tax Returns pursuant to this Article V and any
audit litigation or other proceeding with respect to Taxes.  Such cooperation
shall include the retention and (upon the other Purchaser’s request) the
provision of records and information that are reasonably relevant to any such
audit, litigation or other proceeding and making representatives available on a
mutually convenient basis to provide additional information and explanation of
any material provided hereunder.
 
5.4 Tax Sharing Agreements.  There are no Tax sharing agreements that will
require any payments by Gaine after the Effective Date.
 
VI.
INDEMNIFICATION
 
6.1 Survival of Representations and Warranties.  Unless otherwise provided
herein, the representations and warranties of the Parties shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby for the maximum period provided by law.  The
right to indemnification, payment of damages or other remedy based on such
representations, warranties, covenants and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement, with respect to the accuracy or inaccuracy of or
compliance with, any such representation, warranty, covenant or obligation.  The
waiver of any condition based on the accuracy of a representation or warranty,
or the performance of or compliance with any covenant or obligation, will not
affect the right of indemnification, payment of damages or other remedy based on
such representations, warranties, covenants and obligations.
 
 
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6.2 Indemnification and Liability.
 
(a) General Indemnification Obligations of the Sellers.  Each Seller shall
indemnify Purchaser, its Affiliates and their respective officers, directors,
employees, agents, representatives, successors and permitted assigns
(collectively, the “Purchaser Indemnified Parties”) and save and hold each of
them harmless against and pay on behalf of or reimburse such Purchaser
Indemnified Parties as and when incurred for any loss, liability, action, cause
of action, cost, damage or expense, whether or not arising out of third party
claims (including interest, penalties, reasonable attorneys’, consultants’ and
experts’ fees and expenses and all amounts paid in investigation, defense or
settlement of any of the foregoing, including reasonable attorneys’ fees and
other costs and expenses paid with respect to the enforcement of rights
hereunder) (collectively, “Losses”), which any such Purchaser Indemnified Party
may suffer, sustain or become subject to, as a result of, in connection with,
relating or incidental to or by virtue of any of the following: (i) any facts,
conditions, circumstances, actions, omissions or events which constitute a
breach of any representation or warranty of the Seller contained in this
Agreement, or in any of the certificates or other instruments or documents
furnished by the Seller pursuant to this Agreement; or (ii) any nonfulfillment
or breach of any covenant, agreement or other provision by the Seller under this
Agreement.  Sellers’ liability under this Agreement shall be several, and not
joint, and only the Seller(s) in breach of this Agreement shall be liable for
Purchaser’s Losses.  Notwithstanding the foregoing, in the event a Loss is
attributable to the breach of a representation or warranty or any nonfulfillment
or breach of any covenant, agreement of other provision of this Agreement by
more than one Seller, liability amongst  the breaching Sellers shall be joint
and several.
 
(b) General Indemnification Obligations of Purchaser.  The Purchaser shall
indemnify the Sellers (collectively, the “Seller Indemnified Parties”) and save
and hold each of them harmless against and pay on behalf of or reimburse such
Seller Indemnified Parties as and when incurred for any Losses which any Seller
Indemnified Party may suffer, sustain or become subject to, as a result of, in
connection with, relating or incidental to or by virtue of any of the following:
(i) any facts, conditions, circumstances, actions, omissions or events which
constitute a breach of any representation or warranty of the Purchaser under
this Agreement or in any of the certificates or other instruments or documents
furnished by the Purchaser pursuant to this Agreement; or (ii) any
nonfulfillment or breach of any covenant, agreement or other provision by the
Purchaser under this Agreement.
 
(c) Manner of Payment.  Any indemnification of the Purchaser Indemnified Parties
or the Seller Indemnified Parties pursuant to this Article VI shall be effected
by wire transfer of immediately available funds from the Seller(s) or the
Purchaser, as the case may be, to an account designated in writing by the
applicable Purchaser Indemnified Party or Seller Indemnified Party, as the case
may be, within 15 days after the determination thereof.  Any indemnification
payments shall be made together with interest accruing thereon from the date
written notice of the indemnification claim is made to the date of payment at
the greater of 5% per annum or any minimum amount required by law.
 
 
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(d) Notice of Claim for Indemnification; Third Party Claims.  Any Person making
a claim for indemnification under this Article VI (an “Indemnitee”), whether
such claim for indemnification relates to a third party claim or a direct claim
by an Indemnitee, shall, with respect to third party claims, notify the
indemnifying party (an “Indemnitor”) of the claim in writing within twenty (20)
days after receiving written notice of any Proceeding against it by a third
party, or, with respect to a direct claim by and Indemnitee, within twenty (20)
days after obtaining Knowledge of the events or circumstances giving rise to
such claim, as applicable, describing the claim, the amount thereof (if known
and quantifiable) and the basis thereof and attaching the petition or other
documents initiating the Proceeding; provided, that the failure to timely notify
an Indemnitor shall not relieve the Indemnitor of its obligations
hereunder.  Any Indemnitor shall be entitled to participate in the defense of
such Proceeding giving rise to an Indemnitee’s claim for indemnification (unless
(i) the Indemnitee determines in good faith that joint representation would be
inappropriate, or (ii) the Indemnitor fails to provide reasonable assurance to
the  Indemnitee of its financial capacity to defend such Proceeding and provide
the requisite indemnification), and at its option (subject to the limitations
set forth below) shall be entitled to assume the control of the defense thereof,
in good faith, by appointing a qualified, reputable counsel to be the lead
counsel in connection with such defense; provided, that if the Indemnitor shall
assume control of the defense of any such claim, the Indemnitor, except to the
extent the Indemnitor has accepted full liability for such claim, shall obtain
the prior written consent of the Indemnitee, which consent shall not be
unreasonably withheld or delayed, before entering into any settlement of a
Proceeding or ceasing to defend such Proceeding.  Consent shall be presumed
where the Indemnitee has not responded within (10) days of written notice of a
proposed settlement.  Any such settlement of a claim shall include an
unconditional release by the third party releasing the Indemnitee and the
Indemnitor from all liability in respect of such asserted liability.  If the
Indemnitor assumes the defense of a third party claim, it will conclusively
establish for purposes of this Agreement that the claims made in the Proceeding
are within the scope of and subject to indemnification.
 
(e) If the Indemnitor fails to timely assume the defense of the third party
claim and Indemnitee is controlling the defense of any such claim, the
Indemnitee shall have full authority to conduct settlement negotiations with
such third party and may enter into any settlement or cease defending such
Proceeding, and any settlement or cessation of such defense shall in no way
relieve Indemnitor of its obligations under this Article VI.
 
(f) Notwithstanding anything contained herein to the contrary, if the Indemnitee
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its Affiliates other than as a result of
monetary damages for which it would be entitled to indemnification under this
Agreement, the Indemnitee may, by notice to the Indemnitor, assume the exclusive
right to defend, compromise or settle such Proceeding, but the Indemnitor will
not be bound by any settlement of such proceeding without its consent, which may
not be unreasonably withheld.
 
(g) A claim for indemnification for any matter not involving a third party claim
must be asserted by notice to the Indemnitor pursuant to Section 6.2(d) above.
 
 
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(h) No Party will have any liability to another Party (for indemnification or
otherwise) with respect to the matters described in this Article VI until the
aggregate Losses attributable to such Party as a result of such Party’s  (i)
breach of any representation or warranty under this Agreement or in any of the
certificates or other instruments or documents furnished by such Party pursuant
to this Agreement, and (ii) nonfulfillment or breach of any covenant, agreement
or other provision under this Agreement exceeds $20,000, and then only for the
amount by which such Losses exceed $20,000.  However, this Section 6.2(h) will
not apply to any breach of any representation or warranty by a Party of which
such Party had Knowledge at any time prior to the date on which such
representation or warranty is made or any intentional breach by such Party of
any covenant or obligation under this Agreement, and such Party will be liable
for all Losses with respect to such breaches.
 
VII.
POST CLOSING COVENANTS
 
The parties agree as follows with respect to the period following the closing:
 
7.1 General.  In case at any time after the Closing any further actions are
necessary or desirable to carry out the purposes of this Agreement, each of the
Parties will take such further actions (including the execution and delivery of
such further instruments and documents) as any other party may reasonably
request.  The Sellers and Purchaser acknowledge and agree that from and after
the Closing, Purchaser will be entitled to possession of all documents, books,
records (including tax records), agreements, financial data of any sort relating
to Gaine and data, studies, reports and any other written documentation relating
in any way to the Intellectual Property.
 
7.2 Non-Infringement. None of the Sellers or their Affiliates, whether on their
own behalf or acting on behalf of any other Person as a director, officer,
employee, agent, member, manager, consultant or agent of such Person, shall take
any action the effect of which would be to infringe on any of the Intellectual
Property owned by Gaine.
 
7.3 Covenant Not to Compete.  For a period of two years from and after the
Closing, none of the Sellers or their Affiliates, whether on their own behalf or
acting on behalf of any other Person as a director, officer, employee, agent,
member, manager, consultant or agent of such Person, will (i) engage, directly
or indirectly, in any action or conduct relating to the acquisition,
preservation, creation, development, or protection of any Intellectual Property
rights, including, without limitation, the preparation and filing of any patent
applications or the enforcement of any patents, covering, containing, utilizing
or otherwise related to any formula, product, process, technology, or invention
using or otherwise incorporating Theobromine as an ingredient, (ii) otherwise
take any action related to the manufacturing, marketing, licensing,
commercialization or distribution of any formula, product, process, technology
or invention using or otherwise incorporating Theobromine as an ingredient, or
(iii) manage, operate, control, engage, participate, or invest in (other than
passive investments aggregating three percent (3%) or less of the outstanding
stock of any publicly-held corporation), or allow the skill, reputation,
knowledge or experience of the Seller to be used in connection with any business
that competes with the business of Gaine, in each of (i), (ii) or (iii),
anywhere in the territories set forth on Exhibit 7.4 of this Agreement.
 
 
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7.4 Non-Solicitation.  For a period of two years from and after the
Closing,  none of the Sellers or their Affiliates shall solicit, induce,
influence, or attempt to influence or contact any customer, supplier, licensee
or any other person who has a business relationship with Gaine to discontinue or
otherwise disrupt the relationship existing between such customer, supplier,
licensee or other person and Gaine.
 
7.5 Confidential Information.  Following the Closing, each Seller agrees to, and
shall cause its Affiliates to, maintain the confidentiality of the Confidential
Information and not disclose any Confidential Information to any Person.  Also,
each Seller and each of its Affiliates shall not use the Confidential
Information for their own benefit or for the benefit of any other Person.  Each
Seller and its Affiliates may disclose Confidential Information to the extent
required by court order or applicable law; provided, that Seller provides notice
of such requirement to Gaine and permits Gaine to take actions to limit such
disclosure or obtain a protective order.  All documents, notes, files, data,
records, correspondence, and all other writings or materials of any type
embodying any Confidential Information are the sole and exclusive property of
Gaine, and at the Closing, each Seller shall promptly deliver all originals and
copies of such documents and materials to Gaine that are in the possession of
the Seller or any of its Affiliates embodying any Confidential Information.  For
purposes of this Agreement, the term “Confidential Information” means any and
all oral, written or electronic trade secrets, know-how, proprietary
information, technical information, and software programs included in the
Intellectual Property that relate to Gaine’s business, irrespective of the form
of communication and whether stamped or otherwise designated
“Confidential”.  “Confidential Information” does not include information
currently in, or which becomes part of, the public domain (other than as a
result of a breach of this Agreement).
 
7.6 Listing and Registration.  For a period of one year following the issuance
of Parent Common Stock pursuant to the terms of this Agreement, Parent agrees to
use commercially reasonable efforts to (i) make all necessary filings pursuant
to the applicable requirements of the Securities Act of 1933 and the Securities
Exchange Act of 1934, as amended (collectively, the “Parent Public Reports”) and
(ii) maintain the listing of Parent Common Stock on NYSE Amex (or such other
equivalent exchange as Parent Common Stock may be listed at the time of
issuance).
 
VIII.
GENERAL PROVISIONS
 
8.1 Press Releases.  Purchaser may, in its sole and absolute discretion, issue
any press release or other public statements with respect to this Agreement or
the transactions contemplated hereby.  Except as may be required by applicable
law, Sellers shall not cause or permit the issuance of any such release or
otherwise make any disclosure concerning the Agreement or the transactions
contemplated thereby without the prior written consent of Purchaser.
 
8.2 Further Actions.  Each Party shall execute and deliver such certificates and
other documents and take such other actions as may reasonably be requested by
any other Party in order to consummate or implement the transactions
contemplated hereby.
 
8.3 Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the Parties hereto with respect to the subject matter hereof
and supersede all prior agreements and undertakings, both written and oral, with
respect to the subject matter hereof.
 
 
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8.4 Notices.  All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if:
(a) delivered personally, (b) sent by registered or certified mail, return
receipt requested, (c) sent by reputable overnight air courier (such as DHL or
Federal Express) or (d) sent by fax, as follows:
 
If to Purchaser:
 
Pernix Therapeutics, LLC
33219 Forest West Street
Magnolia, Texas  77354
Attn:  Cooper C. Collins
Fax:  832-934-1857

with a copy to:
 
Jones Walker, Waechter, Poitevent, Carrère & Denègre L.L.P.
201 St. Charles Avenue, Suite 5100
New Orleans, LA  70170-5100
Attn:  Allen E. Frederic, III
Fax:  504-589-8516

If to Parent:
 
Pernix Tharapeutics Holdings, Inc.
33219 Forest West Street
Magnolia, Texas  77354
Attn:  Cooper C. Collins
Fax:  832-934-1857

with a copy to:
 
Jones Walker, Waechter, Poitevent, Carrère & Denègre L.L.P.
201 St. Charles Avenue, Suite 5100
New Orleans, LA  70170-5100
Attn:  Allen E. Frederic, III
Fax:  504-589-8516

 
If to Jeffrey S. Kiel:
 
[omitted]
 
If to Paul H. Kreutzer:
 
[omitted]
 
 
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If to Kerry L. Mortensen:
 
[omitted]
 
If to H. Greg Thomas
 
[omitted]
 
If to Greg A. Jones
 
[omitted]
 
or to such other address or to such other Person as any Party hereto shall have
last designated by notice to the other Parties.
 
8.5 Assignment.  This Agreement shall be binding upon and inure to the benefit
of the Parties and their respective successors and permitted assigns, but shall
not be assignable, by operation of law or otherwise, by any Party without the
prior written consent of the other Parties and any purported assignment or other
transfer without such consent shall be void and unenforceable.
 
8.6 Modification; Waiver.  This Agreement may be amended or modified only by a
written instrument executed by each of the Parties.  Any of the terms and
conditions of this Agreement may be waived in writing at any time by the Party
entitled to the benefits thereof.  Any such waiver shall constitute a waiver
only with respect to the specific matter described in such writing and shall in
no way impair the rights of the Party granting such waiver in any other respect
or at any other time.  The waiver by any of the Parties hereto of a breach of or
a default under any of the provisions of this Agreement or a failure to or delay
in exercising any right or privilege hereunder, shall not be construed as a
waiver of any other breach or default of a similar nature, or as a waiver of any
of such provisions, rights or privileges hereunder.
 
8.7 Severability.  If any provision, including any phrase, sentence, clause,
section or subsection, of this Agreement is invalid, inoperative or
unenforceable for any reason, such circumstances shall not have the effect of
rendering such provision invalid, inoperative or unenforceable in any other case
or circumstance, or of rendering any other provision herein contained invalid,
inoperative or unenforceable to any extent whatsoever.
 
8.8 Headings.  The Section headings in this Agreement are for convenience of
reference only and shall not be deemed to alter or affect the meaning or
interpretation of any provision hereof.
 
8.9 Counterparts.  This Agreement may be executed in counterparts (including by
facsimile), both of which shall constitute one and the same instrument.
 
8.10 Governing Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas, without giving effect to its
conflict 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 by or against any of the Parties in the courts of the State of Texas,
County of Harris, or, if it has or can acquire jurisdiction, the United States
District Court for the Southern District of Texas, and each of the Parties
consents to the jurisdiction of such courts in any action or proceeding and
waiver any objection to venue laid therein
 
 
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8.11 Remedies.  Each Seller acknowledges that a breach of this Agreement by the
Seller would cause immediate and irreparable harm to the Purchaser for which an
adequate monetary remedy may not exist; hence, in the event of a breach or
threatened breach by Seller of this Agreement, the Purchaser shall be entitled
to seek injunctive relief to restrain Seller from such violation, without proof
of damages or the posting of a bond.  Purchaser’s remedies under this Agreement
shall not be deemed the exclusive remedies for a breach of this Agreement, but
shall be in addition to all remedies available at law or in equity available to
the Purchaser.
 

(Signature page(s) follows)
 
 
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IN WITNESS WHEREOF, the Parties have duly executed this Agreement as of the date
first above written.
 
 

  PURCHASER:                 PERNIX THERAPEUTICS, LLC                
By: PERNIX THERAPEUTICS HOLDINGS, INC.
               
 
By:
/s/ Cooper C. Collins     Name: Cooper C. Collins     Title: President & Chief
Executive Officer                     

 
PERNIX THERAPEUTICS HOLDINGS, INC.
               
 
By:
/s/ Cooper C. Collins     Name: Cooper C. Collins     Title: President & Chief
Executive Officer                       
SELLERS:
          /s/ Jeffrey S. Kiel    
Jeffrey S. Kiel
         
/s/ Paul H. Kreutzer
   
Paul H. Kreutzer
         
/s/ Kerry L. Mortensen
   
Kerry L. Mortensen
         
/s/ H. Greg Thomas
   
H. Greg Thomas
         
/s/ Greg A. Jones
   
Greg A. Jones
 

 
 
 
 
 
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