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ASSET PURCHASE AGREEMENT
 between
 INOVO, INC.
 and
 CHAD THERAPEUTICS, INC.
 Dated November 16, 2007




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TABLE OF CONTENTS
 1. DEFINITIONS AND USAGE
    
    
    11.1 Definitions
    
    
    11.2 Usage
    
    
    92. SALE AND TRANSFER OF ASSETS; CLOSING
    
    
    102.1 Assets to Be Sold
    
    
    102.2 Excluded Assets
    
    
    112.3 Consideration
    
    
    122.4 Liabilities
    
    
    132.5 Allocation
    
    
    152.6 Closing
    
    
    152.7 Closing Obligations
    
    
    162.8 Adjustment Amount and Payment
    
    
    172.9 Adjustment Procedure
    
    
    183. REPRESENTATIONS AND WARRANTIES OF SELLER
    
    
    193.1 Organization and Good Standing
    
    
    193.2 Enforceability; Authority; No Conflict
    
    
    193.3 Financial Statements
    
    
    203.4 Books and Records
    
    
    213.5 Sufficiency of Assets
    
    
    213.6 Title to Assets; Encumbrances
    
    
    213.7 Condition of Assets
    
    
    223.8 Accounts Receivable
    
    
    223.9 Inventories
    
    
    223.10 No Undisclosed Liabilities
    
    
    233.11 Taxes
    
    
    233.12 No Material Adverse Change
    
    
    243.13 Employee Benefits
    
    
    253.14 Compliance with Legal Requirements; Governmental Authorizations
    
    
    263.15 Legal Proceedings; Orders
    
    
    283.16 Absence of Certain Changes and Events
    
    
    293.17 Contracts; No Defaults
    
    
    293.18 Insurance
    
    
    323.19 Environmental Matters
    
    
    333.20 Employees
    
    
    333.21 Labor Disputes; Compliance
    
    
    343.22 Intellectual Property Assets
    
    
    353.23 Compliance with the Foreign Corrupt Practices Act
and Export Control and Antiboycott Laws
    
    
    383.24 Relationships with Related Persons
    
    
    383.25 Brokers or Finders
    
    
    393.26 Solvency
    
    
    393.27 Bulk Sales
    
    
    393.28 Disclosure
    
    
    40
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4. REPRESENTATIONS AND WARRANTIES OF BUYER
    
    
    404.1 Organization and Good Standing
    
    
    404.2 Authority; No Conflict
    
    
    414.3 Certain Proceedings
    
    
    414.4 Brokers or Finders
    
    
    414.5 Financing
    
    
    415. COVENANTS OF SELLER PRIOR TO CLOSING
    
    
    425.1 Access and Investigation
    
    
    425.2 Operation of the Business
    
    
    425.3 Negative Covenant
    
    
    435.4 Required Approvals
    
    
    435.5 Notification
    
    
    445.6 Competing Transaction
    
    
    445.7 Best Efforts
    
    
    455.8 Interim Financial Statements
    
    
    455.9 Payment of Liabilities
    
    
    455.10 Proxy Statement
    
    
    455.11 Shareholders Meeting
    
    
    465.12 WARN Act Notice
    
    
    466. COVENANTS OF BUYER PRIOR TO CLOSING
    
    
    466.1 Required Approvals
    
    
    466.2 Best Efforts
    
    
    467. CONDITIONS PRECEDENT TO BUYERS OBLIGATION TO CLOSE
    
    
    477.1 Accuracy of Representations
    
    
    477.2 Sellers Performance
    
    
    477.3 Consents
    
    
    477.4 Additional Documents
    
    
    477.5 No Proceedings
    
    
    487.6 No Conflict
    
    
    487.7 Governmental Authorizations
    
    
    498. CONDITIONS PRECEDENT TO SELLERS OBLIGATION TO CLOSE
    
    
    498.1 Accuracy of Representations
    
    
    498.2 Buyers Performance
    
    
    498.3 Consents
    
    
    498.4 Additional Documents
    
    
    498.5 No Injunction
    
    
    508.6 Shareholder Approval
    
    
    509. TERMINATION
    
    
    509.1 Termination Events
    
    
    509.2 Effect of Termination
    
    
    51
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10. ADDITIONAL COVENANTS
    
    
    5110.1 Employees and Employee Benefits
    
    
    5110.2 Payment of All Taxes and Retained Liabilities
    
    
    5410.3 Use of Sellers Name and Marks
    
    
    5410.4 Reports and Returns
    
    
    5510.5 Assistance in Proceedings
    
    
    5510.6 Noncompetition, Nonsolicitation and Nondisparagement
    
    
    5510.7 Customer and Other Business Relationships
    
    
    5610.8 Retention of and Access to Records
    
    
    5610.9 Further Assurances
    
    
    5710.10 Removal of Assets
    
    
    5711. INDEMNIFICATION; REMEDIES
    
    
    5711.1 Survival
    
    
    5711.2 Indemnification and Reimbursement by Seller
    
    
    5711.3 Indemnification and Reimbursement by Buyer
    
    
    5811.4 Time Limitations
    
    
    5811.5 Right of Setoff; Escrow
    
    
    5911.6 Third Party Claims
    
    
    5911.7 Other Claims
    
    
    6110.8 Exclusive Remedies
    
    
    6112. CONFIDENTIALITY
    
    
    6112.1 Definition of Confidential Information
    
    
    6112.2 Restricted Use of Confidential Information
    
    
    6212.3 Exceptions
    
    
    6312.4 Legal Proceedings
    
    
    6312.5 Return or Destruction of Confidential Information
    
    
    6312.6 Attorney-Client Privilege
    
    
    6413. GENERAL PROVISIONS
    
    
    6413.1 Expenses
    
    
    6413.2 Public Announcements
    
    
    6413.3 Notices
    
    
    6413.4 Jurisdiction; Service of Process
    
    
    6513.5 Enforcement of Agreement
    
    
    6613.6 Waiver; Remedies Cumulative
    
    
    6613.7 Entire Agreement and Modification
    
    
    6613.8 Disclosure Letter
    
    
    6713.9 Assignments, Successors and No Third Party Rights
    
    
    6713.10 Severability
    
    
    6713.11 Construction
    
    
    6813.12 Time of Essence
    
    
    6813.13 Governing Law
    
    
    6813.14 Execution of Agreement
    
    
    68
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ASSET PURCHASE AGREEMENT
 INOVO,
INC. CHAD THERAPEUTICS, INC
 RECITALS
   ARTICLE I
DEFINITIONS AND USAGE
 Section 1.1 Definitions




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3




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4




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5




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2 2 2 2
      Section 1.2 Usage
  (i)
    
    the singular number includes the plural number and vice versa;(ii)
    
    reference to any Person includes such Persons successors and assigns;(iii)
    
    reference to any gender includes each other gender;(iv)
    
    reference to any agreement, document, or instrument means such
agreement, document, or instrument as amended or modified and in effect from
time to time in accordance with the terms thereof;(v)
    
    reference to any Legal Requirement means such Legal Requirement
as amended, modified, codified, replaced, or reenacted, in whole or in part, and
in effect from time to time, including rules and regulations promulgated
thereunder, and reference to any section or other provision of any Legal
Requirement means that provision of such Legal Requirement from time to time in
effect and constituting the substantive amendment, modification, codification,
replacement, or reenactment of such section or other provision;(vi)
    
    hereunder, hereof, hereto, and words of similar import
shall be deemed references to this Agreement as a whole and not to any
particular Article, Section or other provision hereof;
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(vii)
    
    including (and with correlative meaning include) means
including without limiting the generality of any description preceding such
term;(viii)
    
    or is used in the inclusive sense of and/or;(ix)
    
    with respect to the determination of any period of time, from
means from and including and to means to but excluding; and(x)
    
    references to documents, instruments or agreements shall be
deemed to refer as well to all addenda, exhibits, schedules or amendments
thereto.
   ARTICLE II
SALE AND TRANSFER OF ASSETS; CLOSING
 Section 2.1 Assets to be Sold
      10




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Section 2.2 Excluded Assets
  11




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2
   Section 2.3 Consideration
  12




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Section 2.4 Liabilities
  (i)
    
    any trade account payable associated with the Business incurred
in the Ordinary Course of Business and reflected on the Interim Balance Sheet
(other than a trade account payable to any Related Person of Seller) that
remains unpaid as of the Closing Date, all of which will be listed on a
certificate to be delivered at Closing;(ii)
    
    any trade account payable associated with the Business (other
than a trade account payable to any Related Person of Seller) incurred by Seller
in the Ordinary Course of Business between the date of the Interim Balance Sheet
and the Closing Date that remains unpaid as of the Closing Date, all of which
will be listed on a certificate to be delivered at Closing;(iii)
    
    any Liability to Sellers customers incurred by Seller in the
Ordinary Course of Business for non-delinquent orders outstanding as of the
Closing Date reflected on Sellers books (other than any Liability arising out
of or relating to a Breach that occurred prior to the Closing Date), all of
which will be listed on a certificate to be delivered at Closing;(iv)
    
    any Liability arising after the Closing under the Seller
Contracts described in Part 3.17(a) (other than any Liability arising under the
Seller Contracts described on Exhibit 2.4(a)(iv) or arising out of or relating
to a Breach that occurred prior to the Closing);(v)
    
    any Liability of Seller arising after the Closing under any
Seller Contract included in the Assets that is entered into by Seller after the
date hereof in accordance with the provisions of this Agreement (other than any
Liability arising out of or relating to a Breach that occurred prior to the
Closing), all of which will be listed on a certificate to be delivered at
Closing; and(vi)
    
    any Liability of Seller arising before or after the Closing under
any warranty issued by Seller in connection with the sale of any product
actually purchased by Buyer or related service in the operation of the Business,
whether or not such warranty is accrued on the Closing Balance Sheet; provided,
however, that the aggregate of all such Liabilities under this Section
2.4(a)(vi) being assumed by Buyer shall not exceed $100,000.00 (the Warranty
Cap). In calculating the Liabilities incurred by Buyer for purposes of the
Warranty Cap, only goods and materials furnished in connection with a warranty
claim shall be counted; the cost of any labor or services or corporate overhead
shall not be included in calculating the Warranty Cap.
 13




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(i)
    
    any Liability, including royalty payments accrued or accruable to
the Closing Date, arising out of or relating to products of Seller to the extent
manufactured or sold prior to the Closing other than to the extent assumed under
Section 2.4(a)(iii), (iv), or (v);(ii)
    
    any Liability under any Contract assumed by Buyer pursuant to
Section 2.4(a) that arises after the Closing but that arises out of or relates
to any Breach that occurred prior to the Closing;(iii)
    
    any Liability for Taxes, including (A) any Taxes arising as a
result of Sellers operation of its business or ownership of the Assets prior to
the Closing, (B) except as provided in Section 2.4(c), any Taxes that will arise
as a result of the sale of the Assets pursuant to this Agreement, and (C) any
deferred Taxes of any nature;(iv)
    
    any Liability under any Contract not assumed by Buyer under
Section 2.4(a), including any Liability arising out of or relating to Sellers
credit facilities or any security interest related thereto;(v)
    
    any Environmental, Health, and Safety Liabilities;(vi)
    
    any Liability under the Employee Plans or relating to payroll,
vacation, sick leave, workers compensation, unemployment benefits, pension
benefits, employee stock option or profit-sharing plans, health care plans or
benefits, or any other employee plans or benefits of any kind for Sellers
employees or former employees or both;(vii)
    
    any Liability under any employment, severance, retention, or
termination agreement with any employee of Seller or any of its Related Persons;(viii)
    
    any Liability arising out of or relating to any employee grievance whether or
not the affected employees are hired by Buyer;(ix)
    
    any Liability of Seller to any of its shareholders or Related
Person of Seller;(x)
    
    any Liability to indemnify, reimburse, or advance amounts to any
officer, director, employee, or agent of Seller;(xi)
    
    any Liability to distribute to any of Sellers shareholders or
otherwise apply all or any part of the consideration received pursuant to this
Agreement;
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(xii)
    
    any Liability arising out of any Proceeding pending as of the
Closing, unless expressly assumed by Buyer;(xiii)
    
    any Liability arising out of any Proceeding commenced after the Closing and
arising out of or relating to any occurrence or event happening prior to the
Closing, including any warranty claims related to products sold by Seller prior
to the Closing to the extent such warranty claims exceed the Warranty Cap;(xiv)
    
    any Liability arising out of or resulting from Sellers
compliance or noncompliance with any Legal Requirement or Order of any
Governmental Body;(xv)
    
    any Liability of Seller under this Agreement or any other
document executed in connection with the Contemplated Transactions; and(xvi)
    
    any Liability of Seller based upon Sellers acts or omissions
occurring after the Closing.
  Section 2.5 Allocation
  Section 2.6 Closing
  15




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Section 2.7 Closing Obligations
   (i)
    
    a bill of sale for all of the Assets that are Tangible Personal
Property in the form of Exhibit 2.7(a)(i) (the Bill of Sale) executed by
Seller;(ii)
    
    an assignment of all of the Assets that are intangible personal
property in the form of Exhibit 2.7(a)(ii), which assignment shall also contain
Buyers undertaking and assumption of the Assumed Liabilities (the Assignment
and Assumption Agreement) executed by Seller;(iii)
    
    assignments of all Intellectual Property Assets and separate
assignments of all registered Marks and Patents, in the form of Exhibit
2.7(a)(iii) executed by Seller;(iv)
    
    such other deeds, bills of sale, assignments, certificates of
title, documents, and other instruments of transfer and conveyance as may
reasonably be requested by Buyer, each in form and substance satisfactory to
Buyer and its legal counsel and executed by Seller;(v)
    
    an escrow agreement in the form of Exhibit 2.7(a)(v), executed by
Seller and the escrow agent (the Escrow Agreement);(vi)
    
    a certificate executed by Seller as to the accuracy of the
Sellers representations and warranties as of the date of this Agreement and as
of the Closing in accordance with Section 7.1 and as to Sellers compliance with
and performance of its covenants and obligations to be performed or complied
with at or before the Closing in accordance with Section 7.2;(vii)
    
    a certificate of the Secretary of Seller certifying, as complete
and accurate as of the Closing, attached copies of the Governing Documents of
Seller, certifying and attaching all requisite resolutions or actions of
Sellers board of directors and shareholders approving the execution and
delivery of this Agreement and the consummation of the Contemplated Transactions
and certifying to the incumbency and signatures of the officers of Seller
executing this Agreement, and any other document relating to the Contemplated
Transactions; and,(viii)
    
    a transition services agreement in the form of Exhibit 2.7(a)(viii) executed
by Seller (the Transition Services Agreement).
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(i)
    
    four million nine hundred thousand dollars ($4,900,000.00) by
wire transfer to an account specified by Seller in a writing delivered to Buyer
on the Closing Date;(ii)
    
    the Escrow Agreement, executed by Buyer and the escrow agent,
together with the delivery of three hundred fifty thousand dollars ($350,000.00)
to the escrow agent thereunder, by wire transfer to an account specified by the
escrow agent;(iii)
    
    the Assignment and Assumption Agreement executed by Buyer;(iv)
    
    a certificate executed by Buyer 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 8.1 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 8.2;(v)
    
    a certificate of the Secretary of Buyer certifying, as complete
and accurate as of the Closing, attached copies of the Governing Documents of
Buyer, and certifying and attaching all requisite resolutions or actions of
Buyers board of directors approving the execution and delivery of this
Agreement and the consummation of the Contemplated Transactions, and certifying
to the incumbency and signatures of the officers of Buyer executing this
Agreement, and any other document relating to the Contemplated Transactions;(vi)
    
    the Transition Services Agreement executed by Buyer;(vii)
    
    a license agreement as described in Section 10.3
executed by Buyer; and(vii)
    
    a resale certificate for sales tax purposes.
 Section 2.8 Adjustment Amount and Payment
  17




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Section 2.9 Adjustment Procedure
     18




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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
  Section 3.1 Organization and Good Standing
    Section 3.2 Enforceability; Authority; No Conflict
   19




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(i)
    
    Breach (A) any provision of any of the Governing Documents of
Seller or (B) any resolution adopted by the board of directors or the
shareholders of Seller;(ii)
    
    Breach or give any Governmental Body or other Person the right to
challenge any of the Contemplated Transactions or to exercise any remedy or
obtain any relief under any Legal Requirement or any Order to which Seller, or
any of the Assets, may be subject;(iii)
    
    contravene, conflict with, or result in a violation or breach of
any of the terms or requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental
Authorization that is held by Seller or that otherwise relates to the Assets or
to the Business;(iv)
    
    cause Buyer to become subject to, or to become liable for the
payment of, any Tax;(v)
    
    Breach any provision of, or give any Person the right to declare
a default or exercise any remedy under, or to accelerate the maturity or
performance of, or payment under, or to cancel, terminate or modify, any Seller
Contract;(vi)
    
    result in the imposition or creation of any Encumbrance upon or
with respect to any of the Assets; or(vii)
    
    result in any shareholder of the Seller having the right to
exercise dissenters appraisal rights.
  Section 3.3 Financial Statements
  20




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Section 3.4 Books and Records
  Section 3.5 Sufficiency of Assets
 2
 Section 3.6 Title To Assets; Encumbrances
  21




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Section 3.7 Condition of Assets
  Section 3.8 Accounts Receivable
  Section 3.9 Inventories
  22




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Section 3.10 No Undisclosed Liabilities
  Section 3.11 Taxes
    23




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(i)
    
    Withholding. All Taxes that Seller is or was required by Legal
Requirements to withhold, deduct, or collect have been duly withheld, deducted,
and collected and, to the extent required, have been paid to the proper
Governmental Body or other Person.(ii)
    
    Tax Sharing or Similar Agreements. There is no tax sharing
agreement, tax allocation agreement, tax indemnity obligation, or similar
written or unwritten agreement, arrangement, understanding, or practice with
respect to Taxes (including any advance pricing agreement, closing agreement, or
other arrangement relating to Taxes) that will require any payment by Seller.(iii)
    
    Consolidated Group. Seller (A) has not been a member of an
affiliated group within the meaning of Code Section 1504(a) (or any similar
group defined under a similar provision of state, local, or foreign law) and (B)
has no liability for Taxes of any person (other than Seller) under Treasury
Regulations Section 1.1502-6 (or any similar provision of state, local, or
foreign law), as a transferee or successor by contract or otherwise.(iv)
    
    S Corporation. Seller is not an S corporation as defined in Code
Section 1361.(v)
    
    Substantial Understatement Penalty. Seller has disclosed on its
federal income Tax Returns all positions taken therein that could give rise to a
substantial understatement of federal income Tax within the meaning of Code
Section 6662.
 Section 3.12 No Material Adverse Change
  24




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Section 3.13 Employee Benefits
    25




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IRS
  Section 3.14 Compliance With Legal Requirements; Governmental Authorizations
  (i)
    
    Seller has operated the Business at all times since January 1,
2004, in material compliance with each Legal Requirement that is or was
applicable to the conduct or operation of the Business or the ownership or use
of any of the Assets;(ii)
    
    no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a violation by
Seller of, or a failure on the part of Seller to comply with, any Legal
Requirement applicable to the Business or the Assets, or (B) may give rise to
any obligation on the part of Seller to undertake, or to bear all or any portion
of the cost of, any remedial action of any nature with respect to the Business
or affecting the Assets; and(iii)
    
    Seller has not received, at any time since January 1, 2004, any
notice or other communication (whether oral or written) from any Governmental
Body or
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any other Person regarding (A) any actual, alleged, possible, or potential
violation of, or failure to comply with, any Legal Requirement affecting the
Business or the Assets, or (B) any actual, alleged, possible, or potential
obligation on the part of Seller to undertake, or to bear all or any portion
of the cost of, any remedial action of any nature with respect to the
Business or affecting the Assets.
  (i)
    
    Seller is, and at all times since January 1, 2004, has been, in
full compliance with all of the terms and requirements of each Governmental
Authorization identified or required to be identified in Part 3.14(b);(ii)
    
    no event has occurred or circumstance exists that may (with or
without notice or lapse of time) (A) constitute or result directly or indirectly
in a violation of or a failure to comply with any term or requirement of any
Governmental Authorization listed or required to be listed in Part 3.14(b) or
(B) result directly or indirectly in the revocation, withdrawal, suspension,
cancellation, or termination of, or any modification to, any Governmental
Authorization listed or required to be listed in Part 3.14(b);(iii)
    
    Seller has not received, at any time since January 1, 2004, any
notice or other communication (whether oral or written) from any Governmental
Body or any other Person regarding (A) any actual, alleged, possible, or
potential violation of or failure to comply with any term or requirement of any
Governmental Authorization listed or required to be listed in Part 3.14(b), or
(B) any actual, proposed, possible, or potential revocation, withdrawal,
suspension, cancellation, termination of, or modification to any Governmental
Authorization listed or required to be listed in Part 3.14(b); and(iv)
    
    all applications required to have been filed for the renewal of
the Governmental Authorizations listed or required to be listed in Part 3.14(b)
have been duly filed on a timely basis with the appropriate Governmental Bodies,
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 Bodies.
  27




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Section 3.15 Legal Proceedings; Orders
  (i)
    
    by or against Seller or that otherwise relates to or may affect
the Business, or any of the Assets; or(ii)
    
    that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the Contemplated
Transactions.
   (i)
    
    there is no Order to which Seller, the Business, or any of the
Assets is subject; and(ii)
    
    to the Knowledge of Seller, no officer, director, agent, or
employee of Seller is subject to any Order that prohibits such officer,
director, agent, or employee from engaging in or continuing any conduct,
activity, or practice relating to the Business.
  (i)
    
    Seller is, and, at all times since January 1, 2004, has been in
compliance with all of the terms and requirements of each Order to which it or
any of the Assets is or has been subject;(ii)
    
    no event has occurred or circumstance exists that is reasonably
likely to constitute or result in (with or without notice or lapse of time) a
violation of or failure to comply with any term or requirement of any Order to
which Seller or any of the Assets is subject; and(iii)
    
    Seller has not received, at any time since January 1, 2004, any
notice or other communication (whether oral or written) from any Governmental
Body or any other Person regarding any actual, alleged, possible, or potential
violation of, or failure to comply with, any term or requirement of any Order to
which Seller or any of the Assets is or has been subject.
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Section 3.16 Absence of Certain Changes And Events
            Section 3.17 Contracts; No Defaults
  (i)
    
    each Seller Contract that involves performance of services or
delivery of goods or materials by Seller;(ii)
    
    each Seller Contract that involves performance of services or
delivery of goods or materials to Seller or any Related Person of Seller;
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(iii)
    
    each Seller Contract that was not entered into in the Ordinary
Course of Business;(iv)
    
    each Seller Contract affecting the ownership of, leasing of,
title to, or use of any Asset;(v)
    
    each Seller Contract (however named) involving a sharing of
profits, losses, costs, or liabilities by Seller with any other Person;(vi)
    
    each Seller Contract containing covenants that in any way purport
to restrict the Business or limit the freedom of Seller to engage in any line of
business or to compete with any Person;(vii)
    
    each Seller Contract providing for payments to or by any Person
based on sales, purchases, or profits, other than direct payments for goods;(viii)
    
    each power of attorney of Seller that is currently effective and outstanding;(ix)
    
    each Seller Contract entered into other than in the Ordinary
Course of Business that contains or provides for an express undertaking by
Seller to be responsible for consequential damages;(x)
    
    each Seller Contract for capital expenditures in excess of
$20,000;(xi)
    
    each Seller Contract not denominated in U.S. dollars;(xii)
    
    each form of written warranty, guaranty, and/or other similar
undertaking with respect to contractual performance extended by Seller other
than in the Ordinary Course of Business; and(xiii)
    
    each amendment, supplement, and modification (whether oral or written) in
respect of any of the foregoing.
    (i)
    
    each Contract identified or required to be identified in Part
3.17(a) and which is to be assigned to or assumed by Buyer under this Agreement
is in full
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force and effect and is valid and enforceable in accordance with its terms by
Seller, subject to the Bankruptcy and Equity Exception;
 (ii)
    
    each Contract identified or required to be identified in Part
3.17(a) and which is being assigned to or assumed by Buyer is assignable by
Seller to Buyer without the consent of any other Person; and(iii)
    
    to the Knowledge of Seller, no Contract identified or required
to be identified in Part 3.17(a) and which is to be assigned to or assumed by
Buyer under this Agreement will, upon completion or performance thereof, have a
material adverse affect on the Business or the Assets.
  (i)
    
    Seller is, and at all times since January 1, 2004, has been, in
material compliance with all applicable terms and requirements of each Seller
Contract which is being assumed by Buyer;(ii)
    
    to the Knowledge of Seller, each other Person that has or had any
obligation or liability under any Seller Contract which is being assigned to
Buyer is, and at all times since January 1, 2004, has been, in full compliance
with all applicable terms and requirements of such Contract;(iii)
    
    to the Knowledge of Seller, no event has occurred or
circumstance exists that (with or without notice or lapse of time) may
contravene, conflict with, or result in a Breach of, or give Seller or any other
Person the right to declare a default or exercise any remedy under, or to
accelerate the maturity or performance of, or payment under, or to cancel,
terminate, or modify, any Seller Contract that is being assigned to or assumed
by Buyer;(iv)
    
    to the Knowledge of Seller, no event has occurred or circumstance
exists under or by virtue of any Contract that (with or without notice or lapse
of time) would cause the creation of any Encumbrance, other than a Permitted
Encumbrance, affecting any of the Assets; and(v)
    
    Seller has not given to or received from any other Person, at any
time since January 1, 2007, any notice or other communication (whether oral or
written) regarding any actual, alleged, possible, or potential violation or
Breach of, or default under, any Seller Contract which is being assigned to or
assumed by Buyer.
  31




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Section 3.18 Insurance
  (i)
    
    accurate and complete copies of all policies of insurance (and
correspondence relating to coverage thereunder) to which Seller is a party or
under which Seller is or has been covered at any time since January 1, 2004, a
list of which is included in Part 3.18(a);(ii)
    
    accurate and complete copies of all pending applications by
Seller for policies of insurance; and(iii)
    
    any statement by the auditor of Sellers financial statements or
any consultant or risk management advisor with regard to the adequacy of
Sellers coverage or of the reserves for claims.
  (i)
    
    any self-insurance arrangement by or affecting Seller, including
any reserves established thereunder;(ii)
    
    any Contract or arrangement, other than a policy of insurance,
for the transfer or sharing of any risk to which Seller is a party or which
involves the Business; and(iii)
    
    all obligations of Seller to provide insurance coverage to Third
Parties (for example, under Leases or service agreements) and identifies the
policy under which such coverage is provided.
  (i)
    
    a summary of the loss experience under each policy of insurance;(ii)
    
    a statement describing each claim under a policy of insurance for
an amount in excess of $5,000.00, which sets forth: (A) the name of the
claimant; (B) a description of the policy by insurer, type of insurance, and
period of coverage; and (C) the amount and a brief description of the claim; and
 32




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(iii)
    
    a statement describing the loss experience for all claims that
were self-insured, including the number and aggregate cost of such claims.
  (i)
    
    all policies of insurance to which Seller is a party or that
provide coverage to Seller: (A) are valid, outstanding and enforceable; (B) are
issued by an insurer that is financially sound and reputable; (C) taken
together, provide adequate insurance coverage for the Assets and the Business
for all risks normally insured against by a Person carrying on the same business
as Seller in the same location; and (D) are sufficient for compliance with all
Legal Requirements and Seller Contracts;(ii)
    
    Seller has not received (A) any refusal of coverage or any notice
that a defense will be afforded with reservation of rights, or (B) any notice of
cancellation or any other indication that any policy of insurance is no longer
in full force or effect or that the issuer of any policy of insurance is not
willing or able to perform its obligations thereunder;(iii)
    
    Seller has paid all premiums due, and has otherwise performed
all of its obligations, under each policy of insurance to which it is a party or
that provides coverage to Seller; and(iv)
    
    Seller has given notice to the insurer of all claims that may be
insured thereby.
 Section 3.19 Environmental Matters
    Section 3.20 Employees
  33




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Section 3.21 Labor Disputes; Compliance
   34




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Section 3.22 Intellectual Property Assets
  (i)
    
    Sellers name, Chad Therapeutics, all assumed fictional
business names, trade names, registered and unregistered trademarks, service
marks, CE marks, and applications (collectively, Marks);(ii)
    
    all issued or pending patents and patent applications and all
inventions and discoveries that may be patentable (collectively, Patents);(iii)
    
    all registered and unregistered copyrights in both published
works and unpublished works (collectively, Copyrights);(iv)
    
    all rights in mask works;(v)
    
    all know-how, trade secrets, confidential or proprietary
information, customer lists, Software, technical information, data, process
technology, plans, drawings, and blue prints (collectively, Trade Secrets);
and(vi)
    
    all rights in internet web sites and internet domain names
presently used by Seller, including www.chadtherapeutics.com (collectively Net
Names).
   35




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36




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37




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Section 3.23 Compliance With The Foreign Corrupt Practices Act And Export Control And
Antiboycott Laws
  (i)
    
    any person who is an official, officer, agent, employee, or
representative of any Governmental Body or of any existing or prospective
customer (whether government owned or non-government owned);(ii)
    
    any political party or official thereof;(iii)
    
    any candidate for political or political party office; or(iv)
    
    any other individual or entity;
      Section 3.24 Relationships With Related Persons
  38




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Section 3.25 Brokers or Finders
  Section 3.26 Solvency
   Section 3.27 Bulk Sales
  39




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Section 3.28 Disclosure
     ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
  Section 4.1 Organization And Good Standing
  Section 4.2 Authority; No Conflict
  40




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(i)
    
    any provision of Buyers Governing Documents;(ii)
    
    any resolution adopted by the board of directors or the
shareholders of Buyer;(iii)
    
    any Legal Requirement or Order to which Buyer may be subject; or(iv)
    
    any Contract to which Buyer is a party or by which Buyer may be
bound.
  Section 4.3 Certain Proceedings
  Section 4.4 Brokers or Finders
  Section 4.5 Financing
  41




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ARTICLE V
COVENANTS OF SELLER PRIOR TO CLOSING
 Section 5.1 Access and Investigation
  Section 5.2 Operation of the Business
        42




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Section 5.3 Negative Covenant
  Section 5.4 Required Approvals
  43




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Section 5.5 Notification
  Section 5.6 Competing Transaction
   44




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2
 Section 5.7 Best Efforts
  Section 5.8 Interim Financial Statements
  Section 5.9 Payment of Liabilities
  Section 5.10 Proxy Statement
  45




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Section 5.11 Shareholders Meeting
  Section 5.12 WARN Act Notice
  ARTICLE VI
COVENANTS OF BUYER PRIOR TO CLOSING
 Section 6.1 Required Approvals
  Section 6.2 Best Efforts
  46




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ARTICLE VII
CONDITIONS PRECEDENT TO BUYERS OBLIGATION TO CLOSE
  Section 7.1 Accuracy of Representations
   Section 7.2 Sellers Performance
  Section 7.3 Consents
  Section 7.4 Additional Documents
   47




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(i)
    
    evidencing the accuracy of any of Sellers representations and
warranties;(ii)
    
    evidencing the performance by Seller of, or the compliance by
Seller with, any covenant or obligation required to be performed or complied
with by Seller;(iii)
    
    evidencing the satisfaction of any condition referred to in this
Article 7; or(iv)
    
    otherwise facilitating the consummation or performance of any of
the Contemplated Transactions.
 Section 7.5 No Proceedings
  Section 7.6 No Conflict
  48




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Section 7.7 Governmental Authorizations
  ARTICLE VIII
CONDITIONS PRECEDENT TO SELLERS OBLIGATION TO CLOSE
  Section 8.1 Accuracy Of Representations
   Section 8.2 Buyers Performance
  Section 8.3 Consents
  Section 8.4 Additional Documents
  49




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(i)
    
    evidencing the accuracy of any of Buyers representations and
warranties;(ii)
    
    evidencing the performance by Buyer of, or the compliance by
Buyer with, any covenant or obligation required to be performed or complied with
by Buyer; or(iii)
    
    evidencing the satisfaction of any condition referred to in this Article 8.
 Section 8.5 No Injunction
  Section 8.6 Shareholder Approval
  ARTICLE IX
TERMINATION
 Section 9.1 Termination Events
   50




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Section 9.2 Effect of Termination
  ARTICLE X
ADDITIONAL COVENANTS
 Section 10.1 Employees and Employee Benefits
  51




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(i)
    
    bargaining unit employees currently covered by a collective
bargaining agreement, or(ii)
    
    employed exclusively in Sellers business as currently conducted,
including employees on temporary leave of absence, including family medical
leave, military leave, temporary disability, or sick leave, but excluding
employees on long-term disability leave.
  (i)
    
    Buyer has provided Seller with a list of Active Employees to whom
Buyer intends to make an offer of employment, subject to final employment
interviews, compliance with Buyers employment criteria, and agreement on the
terms of employment between Buyer and each such Active Employee. Buyer is not
obligated to hire any Active Employee, whether or not such Active Employees
name is on the list provided to Seller. Seller shall cooperate with Buyers
efforts to assess which, if any, of Sellers employees that the Buyer wishes to
hire. No later than 20 calendar days prior to Closing, Buyer will provide Seller
with a final list of Active Employees to whom Buyer has made an offer of
employment that has been accepted, to be effective on the Closing Date (the
Hired Employees). Subject to Legal Requirements, Buyer will have reasonable
access to the personnel Records (including performance appraisals, disciplinary
actions, grievances, and medical Records) of Seller for the purpose of preparing
for and conducting final employment interviews with Active Employees and will
conduct the interviews as expeditiously as possible after the date of this
Agreement. Access will be provided by Seller upon reasonable prior notice during
normal business hours. Effective immediately before the Closing, Seller will
terminate the employment of all of its Hired Employees.(ii)
    
    Neither Seller nor Sellers Representatives shall solicit the
continued employment of any Active Employee whose name appears on the list
provided to Seller by Buyer (unless and until Buyer has informed Seller in
writing that the particular Active Employee will not receive any employment
offer from Buyer) or the employment of any Hired Employee after the Closing.
Seller shall assist Buyer in complying with the WARN Act as to those Active
Employees who will not become Hired Employees.(iii)
    
    It is understood and agreed that (A) Buyers expressed intention
to extend offers of employment as set forth in this Section 10 shall not
constitute any commitment, Contract, or understanding (expressed or implied), or
any obligation on the part of Buyer to a post-Closing employment relationship of
any fixed term or duration or upon any terms or conditions other than those that
Buyer may establish pursuant to individual offers of employment, and (B)
employment offered by Buyer is at will and may be terminated by
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Buyer or by an employee at any time for any reason (subject to any written
commitments to the contrary made by Buyer or an employee and Legal
Requirements). Nothing in this Agreement shall be deemed to prevent or
restrict in any way the right of Buyer to terminate, reassign, promote, or
demote any of the Hired Employees after the Closing or to change adversely or
favorably the title, powers, duties, responsibilities, functions, locations,
salaries, other compensation, or terms or conditions of employment of such
employees.
  (i)
    
    Seller shall be responsible for (A) the payment of all wages and
other remuneration, including pro rata bonus payments and all vacation pay
earned prior to the Closing Date, due to Active Employees with respect to their
services as employees of Seller through the close of business on the Closing
Date (or thereafter if they remain Active Employees of Seller after the Closing
Date); (B) the payment of any required termination or severance payments; and
(C) any and all payments to employees required under the WARN Act.(ii)
    
    Seller shall be liable for any claims made or incurred by Active
Employees and their beneficiaries through the Closing Date (or thereafter if
they remain Active Employees of Seller after the Closing Date) under the
Employee Plans. For purposes of the immediately preceding sentence, a charge
will be deemed incurred, in the case of hospital, medical, or dental benefits,
when the services that are the subject of the charge are performed and, in the
case of other benefits (such as disability or life insurance), when an event has
occurred or when a condition has been diagnosed that entitles the Active
Employee to the benefit.(iii)
    
    After the Closing Date, Seller shall be responsible for
providing contribution coverage required under COBRA to all former employees of
Seller who terminated employment on or before the Closing Date or who otherwise
constitute a M&A qualified beneficiary under Treasury Regulation Section
54.4980B-9.(iv)
    
    All Hired Employees who are participants in Sellers Employee
Plans shall retain their accrued benefits, if any under Sellers Employee Plans
(e.g., retirement plans), as of the Closing Date, and Seller (or Sellers
Employee Plans) shall retain sole liability for the payment of such benefits as
and when such Hired Employees become eligible therefor under such plans. All
Hired Employees shall become fully vested in their accrued benefits under
Sellers retirement plans as of the Closing Date, and Seller will so amend such
plans if necessary to achieve this result. Seller shall cause the assets of each
Employee Plan to equal or exceed the benefit liabilities of such Employee Plan
on a plan-termination basis as of the Closing Date.
 53




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(i)
    
    Seller and Buyer shall give any notices required by Legal
Requirements and take whatever other actions with respect to the plans,
programs, and policies described in this Section 10.1 as may be necessary to
carry out the arrangements described in this Section 10.1.(ii)
    
    Seller shall provide Buyer with such plan documents and summary
plan descriptions, employee data, or other information as may be reasonably
required to carry out the arrangements described in this Section 10.1.(iii)
    
    If any of the arrangements described in this Section 10.1 are
determined by the IRS or other Governmental Body to be prohibited by law, Seller
and Buyer shall modify such arrangements to as closely as possible reflect their
expressed intent and retain the allocation of economic benefits and burdens to
the parties contemplated herein in a manner that is not prohibited by law.(iv)
    
    Seller shall provide Buyer with completed I-9 forms and
attachments with respect to all Hired Employees, except for such employees as
Seller certifies in writing to Buyer are exempt from such requirement.(v)
    
    Buyer shall not have any responsibility, liability, or
obligation, whether to Hired Employees, Active Employees, former employees,
their beneficiaries, or to any other Person, with respect to any compensation,
benefits, employee benefit plans, practices, programs, arrangements, or
agreements (including the establishment, operation, or termination thereof and
the notification and provision of COBRA coverage extension) paid, payable, or
maintained by Seller.
 Section 10.2 Payment of All Taxes and Retained Liabilities
   Section 10.3 Use of Sellers Name and Marks
  54




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2 2
 Section 10.4 Reports and Returns
  Section 10.5 Assistance In Proceedings
  Section 10.6 Noncompetition, Non-solicitation, and Non-disparagement
 2
  (i)
    
    cause, induce, or attempt to cause or induce any customer,
supplier, licensee, licensor, franchisee, employee, consultant, or other
business relation of Buyer to cease doing business with Buyer, to deal with any
competitor of Buyer, or in any way interfere with its relationship with Buyer;(ii)
    
    cause, induce, or attempt to cause or induce any customer,
supplier, licensee, licensor, franchisee, employee, consultant, or other
business relation of Seller on the Closing Date or within the year preceding the
Closing Date to
 55




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cease doing business with Buyer, to deal with any competitor of Buyer, or in
any way interfere with its relationship with Buyer; or
 (iii)
    
    hire, retain, or attempt to hire or retain any employee of Buyer
or in any way interfere with the relationship between Buyer and any of its
employees or independent contractors.
   Section 10.7 Customer and Other Business Relationships
  Section 10.8 Retention of and Access to Records
  56




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Section 10.9 Further Assurances
  Section 10.10 Removal of Assets
  ARTICLE XI
INDEMNIFICATION; REMEDIES
 Section 11.1 Survival
  Section 11.2 Indemnification and Reimbursement By Seller
     57




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Section 11.3 Indemnification and Reimbursement by Buyer
       Section 11.4 Time Limitations
  58




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Section 11.5 Right of Setoff; Escrow
  Section 11.6 Third Party Claims
   59




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60




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Section 11.7 Other Claims
  Section 11.8 Exclusive Remedies
  ARTICLE XII
CONFIDENTIALITY
 Section 12.1 Definition of Confidential Information
  (i)
    
    all information that is a trade secret under applicable trade
secret or other law;(ii)
    
    all information concerning product specifications, data,
know-how, formulae, compositions, processes, designs, sketches, photographs,
graphs, drawings, samples, inventions, and ideas, past, current, and planned
research and development, current and planned manufacturing or distribution
methods and processes, customer lists, current and anticipated customer
requirements, price lists, market studies, business plans, computer hardware,
Software, and database technologies, systems, structures, and architectures;(iii)
    
    all information concerning the business and affairs of the
Disclosing Party (which includes historical and current financial statements,
financial projections and budgets, tax returns and accountants materials,
historical, current, and projected sales, capital spending budgets and plans,
business plans, strategic plans, marketing and advertising plans, publications,
client and customer lists and files, contracts, the names and backgrounds of key
personnel, personnel training techniques and materials, however
 61




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documented), and all information obtained from review of the Disclosing
Partys documents or property or discussions with the Disclosing Party
regardless of the form of the communication; and
 (iv)
    
    all notes, analyses, compilations, studies, summaries, and other
material prepared by the Receiving Party to the extent containing or based, in
whole or in part, upon any information included in the foregoing.
  Section 12.2 Restricted Use of Confidential Information
    62




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Section 12.3 Exceptions
  Section 12.4 Legal Proceedings
  Section 12.5 Return or Destruction of Confidential Information
  63




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Section 12.6 Attorney-Client Privilege
  ARTICLE XIII
GENERAL PROVISIONS
 Section 13.1 Expenses
  Section 13.2 Public Announcements
  Section 13.3 Notices
  64




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Section 13.4 Jurisdiction; Service of Process
  65




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##### 



Section 13.5 Enforcement of Agreement
  Section 13.6 Waiver; Remedies Cumulative
  Section 13.7 Entire Agreement and Modification
  66




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Section 13.8 Disclosure Letter
     Section 13.9 Assignments, Successors, and No Third Party Rights
  Section 13.10 Severability
  67




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Section 13.11 Construction
  Section 13.12 Time of Essence
  Section 13.13 Governing Law
  Section 13.14 Execution of Agreement
   Buyer:
    
    Seller:INOVO, INC.
    
    CHAD THERAPEUTICS, INC.By:
    
    /s/ George A. Harris
    
    By:
    
    /s/ Earl L. YagerGeorge A. Harris, President
    
    
    
    Earl L. Yager, Chief ExecutiveOfficer and President
 68




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Exhibit 2.7(a)(i)  Bill of Sale
 69




---



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Exhibit 2.7(a)(ii)  Assignment and Assumption
 70




---



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Exhibit 2.7(a)(iii)  Part I  Patent Assignment
 71




---



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Exhibit 2.7(a)(iii)  Part II  Trademark Assignment
 72




---



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Exhibit 2.7(a)(iii)  Part III  Domain Name Assignment
 73




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Exhibit 2.5  Purchase Price Allocation
 74




---



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Exhibit 2.7(a)(v)  Escrow Agreement
 75




---



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Exhibit 2.7(a)(viii)  Transition Services Agreement
 76