Document:

Unassociated Document

    LICENSE
      AGREEMENT

    

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

    

    RECITALS

    

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

    

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

    

    AGREEMENT

    

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

    

    ARTICLE
      I

    DEFINITIONS

    

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

    

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

    

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

    

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

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    (p) “FDA”
means
      the United States Food and Drug Administration or any comparable agency of
      a
      Foreign Jurisdiction.

     

    
      
         

      

      
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    (q) “Foreign
      Jurisdiction”
means
      any Governmental or Regulatory Authority other than those in the United
      States.

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    (y) “Marketing
      Materials”
means
      all marketing and promotional materials useable with respect to the marketing
      and sale of the Products to the extent such materials are within the possession
      of ATHLON.

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

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

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    (hh) “Products”
shall
      mean the following:

    

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

    

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

    

    (iii) Levall
      12
      -
      Carbetapentane Tannate 30mg, Phenylephrine Tannate 30 mg;

     

     

    
      
         

      

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

    

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

    

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

    

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

    

    
      	 	
              (ii)

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

            

    

    

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

    

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

    

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

    

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

    

    ARTICLE
      II

    EXCLUSIVE
      LICENSE OF LEVALL PRODUCTS

    Section
      2.1  Grant
      of Exclusive License to Licensed Assets. Subject
      to the limitations and exceptions contained in this Agreement, effective as
      of
      the Closing Date, ATHLON hereby

    grants
      to
      LICENSEE an exclusive, even as to ATHLON, license under the Licensed Assets
      to
      make, have made, sell, offer to sell, have sold, market, promote, distribute,
      import and otherwise transfer, dispose, provide and place the Products in the
      Territory.

     

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

     

    Section
      2.2  Retention
      of Records. Notwithstanding
      anything contained in this Agreement to the contrary, ATHLON may retain a copy
      of all Books and Records, Marketing Materials and other documents or materials
      conveyed hereunder for archival purposes, and for the purpose of fulfilling
      its
      obligations under applicable Law but for no other uses or purposes.

    

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

    

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

    

    Section
      2.5  Closing
      Obligations. In
      addition to any other documents to be delivered under other provisions of this
      Agreement, at the Closing:

     

    (a)   ATHLON
      shall deliver to LICENSEE:

     

    (i) a
      bill of
      sale executed by ATHLON for all of the Inventory in the form attached as Exhibit
      2.5(a)(i). Delivery, transfer of title and risk of loss shall occur at the
      locations where such Inventory items are currently stored;

     

    (ii) subject
      to Section 2.5(b)(iii), an executed assignment and assumption agreement in
      the
      form as set forth on Exhibit
      2.3(b)
      of that
      certain Manufacturing and Supply Agreement with Great Southern Labs (“Great
      Southern Labs”) dated December 29, 2000 (the “Great Southern Labs Assignment and
      Assumption Agreement”);

     

    (iii) Annual
      Product sales as presented in the Supplementary Data Section of ATHLON’s
      financial audit for 2004 and 2005 and Product sales from ATHLON’s internal
      records from January 2006 to July 2006;

     

    (iv) all
      information currently in a presentable format in ATHLON’s possession with
      respect to ATHLON’s marketing and distribution of the Products to trade level
      customers (i.e., mass merchandisers, wholesalers and warehousing chains) and
      the
      names and gross sales revenues attributable to such customers.

     

    (v) such
      other assignments, certificates of title, documents and other instruments of
      transfer and conveyance as may reasonably be requested by LICENSEE, each
      in
      form and substance satisfactory to LICENSEE and its legal counsel and executed
      by ATHLON;

     

     

    
      
         

      

      
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    (vi) a
      certificate executed on behalf of ATHLON as to the accuracy of their
      representations and warranties as of the date of this Agreement and as of the
      Closing in accordance with Section 8.1 and as to their compliance with and
      performance of their covenants and obligations to be performed or complied
      with
      at or before the Closing in accordance with Section 8.2;

     

    (vii) an
      executed copy of a mutually agreed upon operational agreement between ATHLON
      and
      LICENSEE regarding the management of the generic product line by ATHLON on
      behalf of LICENSEE (the “Operational Agreement”);

     

    (viii) written
      certification that there is no, and that ATHLON has no knowledge of any bases
      for any, Action or Proceeding by the FDA pending or threatened against the
      Product; and

     

    (ix) the
      most
      recent wholesaler inventory reports from Cardinal, McKesson and Amerisource
      Bergen detailing the Inventory at each company, and certified by an officer
      of
      ATHLON as being, to the best of its knowledge, true and correct (the “Wholesale
      Reports”).

     

    (b)   LICENSEE
      shall deliver to ATHLON:

     

    (i) One
      Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00) ;

     

    (ii) the
      Shares of LICENSEE common stock comprising the portion of the Purchase Price
      described in Section 3.1(b);

     

    (iii) either,
      the Great Southern Labs Assignment and Assumption Agreement executed by LICENSEE
      or notice that LICENSEE has entered into separate negotiations with Great
      Southern Labs with respect to a mutually agreed upon manufacturing agreement;
      

     

    (iv) a
      certificate executed by LICENSEE as to the accuracy of its representations
      and
      warranties as of the date of this Agreement and as of the Closing in accordance
      with Section 9.1 and as to its compliance with and performance of its covenants
      and obligations to be performed or complied with at or before the Closing in
      accordance with Section 9.2; and

     

    (v) an
      executed copy of the Operational Agreement.

     

     

    
      
         

      

      
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    ARTICLE
      III

    CONSIDERATION

     

    Section
      3.1  Purchase
      Price.
      The
      purchase price for the Licensed Assets shall be the sum of the following (the
      “Purchase Price”):

    

    (a) One
      Million Five Hundred Thousand and No/100 Dollars ($1,500,000.00);

     

    (b) Two
      Million Five Hundred Thousand (2,500,000) shares of restricted common stock
      of
      LICENSEE (the “Shares”);

     

    (c) Fifty
      percent (50%) of Net Sales up to Ten Million and No/100 Dollars ($10,000,000.00)
      commencing forty-five (45) days after the Closing Date through the end of the
      first (1st)
      year
      following the Closing Date;

    

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

    

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

    

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

    

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

    

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

    

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

    

    Section
      3.2  Royalty
      Reduction. Notwithstanding anything herein to the contrary, if, at any time
      after the Registration (as defined in Section 6.6 below), the thirty (30) day
      average closing price per share of LICENSEE’s common stock is equal to or
      greater than $5.00 per share, and the thirty (30) day average daily trading
      volume of LICENSEE’s common stock is equal to or greater than 75,000 shares per
      day (the “Reduction Date”), then all amounts payable after the Reduction
      Date by LICENSEE to ATHLON pursuant to Sections 3.1(c)-(h) shall be reduced
      by
      fifty percent (50%), and the Royalty Payment Ceiling shall not be reduced.
      

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    
 

    Section
      3.3  Reports.
      For purposes of determining the payments described in Sections 3.1(c)-(h),
      LICENSEE agrees to provide ATHLON with monthly reports indicating LICENSEE’s Net
      Sales for such month, and supporting documentation therefor, for each Calendar
      Month following the Closing Date until such time as payments under Sections
      3.1(a) and (c)-(h) equal or exceed Ten Million and No/100 Dollars
      ($10,000,000.00). After the payments under Sections 3.1(a) and (c)-(h) equal
      or
      exceed Ten Million and No/100 Dollars ($10,000,000.00), LICENSEE shall provide
      ATHLON with quarterly reports indicating LICENSEE’s Net Sales for such Calendar
      Quarter, and supporting documentation therefore.

    

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

    

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

    

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

     

     

    
      
         

      

      
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    ARTICLE
      IV

    REPRESENTATIONS
      AND WARRANTIES OF ATHLON

    

    ATHLON
      represents and warrants to LICENSEE, as follows:

    

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

    

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

    

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

     

    Section
      4.4  Non-Contravention.
      Except
      as set forth on Schedule 4.4, the execution and delivery by ATHLON of this
      Agreement does not, and the performance by it of its obligations under this
      Agreement and the consummation of the transactions contemplated hereby will
      not:

    

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

    

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

    

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

     

     

    
      
         

      

      
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    Section
      4.5  Intellectual
      Property Rights. 

    

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

    

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

    

    (c) All
      trademarks included in the Product Intellectual Property, if any, are the
      subject of current registrations. There are no third-party rights in ATHLON’s
      current registrations relating to the Product Trademarks. There is not any
      prior
      use, infringement, piracy or counterfeiting of such Product Trademarks, any
      superior rights by any third party in such Product Trademarks, or any adverse
      claims pertaining to such Product Trademarks.

     

    Section
      4.6  Litigation.
      There
      are no Actions or Proceedings pending, threatened or reasonably anticipated
      against ATHLON or its Affiliates that relate to (a) the Licensed Assets or
      the
      Products; (b) this Agreement; or (c) the transactions contemplated by this
      Agreement. ATHLON is not subject to any Order that could reasonably be expected
      to materially impair or delay the ability of ATHLON to perform its obligations
      hereunder.

    

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

    

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

    

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

    

    Section
      4.10  No
      Non-Competition Agreements or Preferential Obligations.
      The
      Licensed Assets are not subject to any non-competition agreements with, or
      other
      stipulations, covenants, settlements, agreements or the like granting
      preferential rights to purchase or license the Licensed Assets to, any third
      Persons.

     

     

    
      
         

      

      
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    Section
      4.11  Products
      Not Subject of FDA Review.
      To the
      best knowledge of ATHLON, the Products are not, and have not been, either
      directly or indirectly, the subject of any FDA Form 483 inspections within
      the
      thirty-six (36) months prior to the date of this Agreement and, to the best
      knowledge of ATHLON, no FDA correspondence exists regarding adverse findings,
      warning letters, the regulatory or manufacturing status of the Products or
      other
      written correspondence.

    

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

    

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

    

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

    

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

    

    (a) Purchase
      Entirely for Own Account.
      This
      Agreement is made with ATHLON in reliance upon such ATHLON’s representation to
      LICENSEE, which by ATHLON’s execution of this Agreement ATHLON hereby confirms,
      that the Shares to be received by ATHLON will be acquired for investment for
      ATHLON’s own account, not as a nominee
      or agent, and not with a view to the resale or distribution of any part thereof,
      and that ATHLON has no present intention of selling, granting any participation
      in, or otherwise distributing the same. By executing this Agreement, ATHLON
      further represents that ATHLON does not have any contract, undertaking,
      agreement or arrangement with any Person to sell, transfer or grant
      participations to such Person or to any third person, with respect to any of
      the
      Shares.

     

     

    
      
         

      

      
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    (b) Disclosure
      of Information.
      ATHLON
      believes it has received all the information it considers necessary or
      appropriate for deciding whether to purchase the Shares. ATHLON further
      represents that it has had an opportunity to ask questions and receive answers
      from the LICENSEE regarding the terms and conditions of the offering of the
      Shares and the business, properties, prospects and financial condition of the
      Company.

     

    (c) Investment
      Experience.
      ATHLON
      has experience as an investor in securities of companies in the development
      stage and acknowledges that it is able to fend for itself, can bear the economic
      risk of its investment, and has such knowledge and experience in financial
      or
      business matters that it is capable of evaluating the merits and risks of the
      investment in the Shares. ATHLON further represents it has not been organized
      for the purpose of acquiring the Shares.

     

    (d) Accredited
      Investor.
      ATHLON
      is an “accredited investor” within the meaning of Securities and Exchange
      Commission (“SEC”) Rule 501 of Regulation D, as presently in
      effect.

     

    (e) Restricted
      Securities.
      ATHLON
      understands that the Shares it is purchasing are characterized as “restricted
      securities” under the federal securities laws inasmuch as they are being
      acquired in a transaction not involving a public offering and that under such
      laws and applicable regulations such securities may be resold without
      registration under the Act, only in certain limited circumstances. In this
      connection, ATHLON represents that it is familiar with SEC Rule 144, as
      presently in effect, and understands the resale limitations imposed thereby
      and
      by the Act.

     

    (f) Legends.
      It is
      understood that the certificates evidencing the Shares may bear one or all
      of
      the following or similar legends:

     

    “These
      securities have not been registered under the Securities Act of 1933, as
      amended. They may not be sold, offered for sale, pledged or hypothecated in
      the
      absence of a registration statement in effect with respect to the securities
      under such Act or an opinion of counsel satisfactory to the Company that such
      registration is not required or unless sold pursuant to Rule 144 of such
      Act.”

     

    Section
      4.16 Non-Competition.
      ATHLON
      shall not, and shall not assist any third party to, develop, market, sell or
      distribute any generic equivalent of any of the Products.

    

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

     

     

    
      
         

      

      
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    ARTICLE
      V

    REPRESENTATIONS
      AND WARRANTIES OF LICENSEE

    

    LICENSEE
      represents and warrants to ATHLON as follows:

     

    Section
      5.1  Organization.
      LICENSEE
      is a corporation duly organized, validly existing and in good standing under
      the
      laws of the state of its incorporation and has all requisite power and authority
      to own its assets and carry on its business as currently conducted by it.

     

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

     

    Section
      5.3  Consents
      and Approvals.
      No
      consents, waivers, approvals, Orders or authorizations of, or registrations,
      declarations or filings with, any Governmental or Regulatory Authority are
      required by LICENSEE in connection with the execution and delivery of this
      Agreement by LICENSEE or the performance of its obligations
      hereunder.

     

    Section
      5.4  Non-Contravention.
      The
      execution and delivery by LICENSEE of this Agreement does not, and the
      performance by it of its obligations under this Agreement and the consummation
      of the transactions contemplated hereby will not:

     

    (a) conflict
      with or result in a violation or breach of any of the terms, conditions or
      provisions of the articles of incorporation, bylaws or other organizational
      documents of LICENSEE;

     

    (b) conflict
      with or result in a violation or breach of any term or provision of any Law
      applicable to LICENSEE; or

     

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

     

     

    
      
         

      

      
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    Section
      5.5  Litigation.
      There
      are no Actions or Proceedings pending or, to the knowledge of LICENSEE
      threatened or reasonably anticipated against LICENSEE which if adversely
      determined would delay the ability of LICENSEE to perform its obligations
      hereunder.

     

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

     

    ARTICLE
      VI

    OTHER
      AGREEMENTS OF THE PARTIES

    

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

    

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

    

    The
      Parties shall mutually agree on the timing and method of notifying applicable
      federal agency customers and the Centers for Medicare and Medicaid Services
      of
      the license of the Licensed Assets to LICENSEE, and shall take whatever action
      is necessary to simultaneously add Products to LICENSEE’s federal supply
      schedule and Medicaid rebate agreement, if applicable, and delete Products
      from
      the federal supply schedule and Medicaid rebate agreement of ATHLON as
      applicable. ATHLON shall be responsible for the processing and payment of
      Medicaid and Medicare rebates applicable to sales of Products made by ATHLON
      and
      submitted under ATHLON’s Products NDC numbers as set forth on Schedule
      6.1
      and any
      other rebates, charge backs or similar payments owed to a third party for such
      products from the Closing Date until December 31, 2006. After such period,
      ATHLON shall process and pay Medicaid and Medicare rebates submitted under
      ATHLON’s Products NDC as set forth on Schedule 6.1 and any other rebates, charge
      backs or similar payments owed to a third party, but LICENSEE shall be
      responsible for reimbursing ATHLON for all such rebates, charge backs and
      similar payments until
      one
      (1) year after the last lot expiration date of Products labeled with ATHLON’s
      Products NDC. ATHLON will invoice LICENSEE for such rebates, charge backs,
      and
      similar payments and LICENSEE shall pay ATHLON for such rebates, charge backs,
      and similar payments within forty-five (45) days following the date of any
      such
      invoice; provided, however, that if any such amounts are disputed by LICENSEE,
      then all undisputed amounts shall be paid in such forty-five (45) day period
      and
      the parties shall use good faith efforts to resolve any such dispute. Each
      invoice will be submitted to LICENSEE with the documents supporting such
      invoices.

     

     

    
      
         

      

      
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    Section
      6.2 Termination
      Upon Bankruptcy.
      Until
      such time as ATHLON has received Ten Million and No/100 Dollars ($10,000,000.00)
      in Consideration under this Agreement, in the event that LICENSEE files for
      or
      is forced into any receivership or bankruptcy proceeding at any time prior
      to
      the third anniversary of this Agreement, and such proceeding is not dismissed
      within ninety (90) days of its commencement, the license granted hereunder
      related to the Licensed Assets shall automatically be revoked and all
      obligations of ATHLON shall immediately terminate. For purposes of this Section
      6.2, “Consideration” shall mean the payments set forth in Article III. herein,
      except that LICENSEE stock shall only be included in the $10,000,000 figure
      (i)
      to the extent such stock is freely tradable (at the value on the date such
      stock
      is freely tradable), or (ii) at the liquidation value to the extent such stock
      is liquidated by ATHLON prior to the time that the LICENSEE stock is freely
      tradable, whichever occurs first.

    

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

    

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

     

     

    
      
         

      

      
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    Section
      6.5 Manufacturing.
      LICENSEE shall use commercially reasonable efforts to cause the manufacturing
      of
      the Products to comply with all GMP requirements. LICENSEE shall notify ATHLON
      of any citations from discussions with a regulatory body where such discussions
      and citations relate to a material aspect of GMP compliance.

    

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

    

    Section
      6.7 Inventory.
      ATHLON
      shall
      assign, at no cost to LICENSEE,
      all
      existing Inventory.

     

    ARTICLE
      VII

    COVENANTS
      OF THE PARTIES

     

    Section
      7.1  Cooperation.
      Each
      Party shall reasonably cooperate with the other in preparing and filing all
      notices, applications, submissions, reports and other instruments and documents
      that are necessary, proper or advisable under applicable Laws to consummate
      and
      make effective the transactions contemplated by this Agreement, including
      ATHLON’s reasonable cooperation in the efforts of LICENSEE to obtain any
      consents and approvals of any Governmental or Regulatory Authority required
      for
      LICENSEE to be able to sell the Products.

    

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

    

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

    

    Section
      7.3  Use
      of
      Sales Representatives.
      Upon
      the
      first (1st)
      anniversary of the Closing Date, LICENSEE shall have employed at least fifty
      (50) sales representatives assigned to actively detail the Products to
      physicians in the Territory (the “Minimum Promotion Commitment”).  The
      Minimum Promotion Commitment, for each of the three (3) twelve (12) month
      periods following the first (1st)
      anniversary of the Closing Date, will be calculated by adding the total number
      of sales representatives assigned to actively detail the Products to physicians
      in the
      Territory at the end of each month during each twelve (12) month period and
      then
      dividing that sum by twelve (12).

     

     

    
      
         

      

      
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    Section
      7.4  Further
      Assurances.
      On and
      after the Closing Date, ATHLON shall from time to time, at the request of
      LICENSEE, execute and deliver, or cause to be executed and delivered, such
      other
      instruments of conveyance and transfer and take such other actions as LICENSEE
      may reasonably request, in order to more effectively consummate the transactions
      contemplated hereby and to vest in LICENSEE good and marketable title to the
      Licensed Assets (including assistance in the collection or reduction to
      possession of any of the Licensed Assets).

    

    Section
      7.5  Indemnification.

    

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

    

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

    

    (c) Damages
      Net of Insurance; Limitations on Liability.
      The
      amount of any Damages for which indemnification is provided under this Section
      7.5 shall be net of any amounts recovered by the indemnified party under
      insurance policies with respect to such Damages except to the extent such
      recovered amounts are from such Party’s or its Affiliates’ self insurance
      programs. IN
      NO
      EVENT SHALL ANY PARTY BE LIABLE FOR INCIDENTAL, INDIRECT, SPECIAL, PUNITIVE,
      EXEMPLARY OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), NO MATTER HOW
      SUCH
      DAMAGES OR LOST PROFITS ARE INCURRED INCLUDING A PARTY’S, OR ITS EMPLOYEES’,
      AGENTS’ OR CONTRACTORS’ NEGLIGENCE, EXCEPT TO THE EXTENT THAT ANY SUCH DAMAGES
      OR LOST PROFITS ARE INCURRED BY ANY THIRD PARTY FOR WHICH SUCH PARTY HAS AN
      OBLIGATION TO INDEMNIFY HEREUNDER.

     

     

    
      
         

      

      
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    (d) Time
      Limitations.
      Neither
      Party will have Liability (for indemnification or otherwise) with respect to
      claims of breach of any representation, warranty or covenant, contained in
      this
      Agreement unless on or before the first (1st)
      anniversary of the Closing Date (with respect to breaches of representations
      or
      warranties) or of the breach of the relevant covenant (with respect to breaches
      of covenant), the otherwise liable Party is notified by the other Party of
      a
      claim specifying the factual basis of that claim in reasonable detail to the
      extent then known. Any time limitations herein do not apply to payments due
      to
      ATHLON pursuant to Article III of this Agreement.

    

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

    

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

     

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    
 

    (g) Procedure
      for Indemnification - Other Claims.
      A claim
      for indemnification for any matter not involving a third-party claim may be
      asserted by notice to the Party from whom indemnification is sought.

    

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

    

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

    

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

    

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

    

    (d)
      ATHLON'S
      Use Of Proceeds.
      All
      amounts of every kind and nature recovered from an Action or Proceeding of
      infringement brought by ATHLON shall first be used to
      reimburse ATHLON and LICENSEE for their documented and actual costs of
      prosecution, and the balance shall belong to LICENSEE and be considered Net
      Sales under this Agreement and subject to payments under Article 3.

     

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

    
 

    Section
      7.7 Patent
      Prosecution.
      LICENSEE shall be solely responsible for prosecuting and/or defending any and
      all patents related to the Licensed Assets after the Closing.

    

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

    

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

    

    ARTICLE
      VIII

    CONDITIONS
      PRECEDENT TO LICENSEE’S OBLIGATION TO CLOSE

    

    LICENSEE’s
      obligation to license the Licensed Assets and to take the other actions required
      to be taken by LICENSEE at the Closing is subject to the satisfaction, at or
      prior to the Closing, of each of the following conditions (any of which may
      be
      waived by LICENSEE, in whole or in part):

     

    Section
      8.1  Accuracy
      of Representations.
      All of
      ATHLON’s representations and warranties in this Agreement (considered
      collectively), and each of these representations and warranties (considered
      individually), shall have been accurate in all material respects as of the
      date
      of this Agreement, and shall be accurate in all material respects as of the
      time
      of the Closing as if then made.

     

    Section
      8.2  ATHLON’s
      Performance.
      All of
      the covenants and obligations that ATHLON is required to perform or to comply
      with pursuant to this Agreement at or prior to the Closing (considered
      collectively), and each of these covenants and obligations (considered
      individually), shall have been duly performed and complied with in all material
      respects.

     

    Section
      8.3  Consents.
      Each of
      the Consents identified on Schedule
      8.3
      shall
      have been obtained and shall be in full force and effect.

     

    Section
      8.4  Additional
      Documents.
      ATHLON
      shall have caused the documents and instruments required by Section 2.5(a)
      and
      the following documents to be delivered (or tendered subject only to Closing)
      to
      LICENSEE: 

     

    (a) Releases
      of all Encumbrances on the Licensed Assets, if any;

     

    (b) Such
      other documents as LICENSEE may reasonably request for the purpose
      of:

     

    (i) evidencing
      the accuracy of any of ATHLON’s representations and warranties;

     

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

     

    (ii) evidencing
      the performance by ATHLON, or the compliance by ATHLON with, any covenant or
      obligation required to be performed or complied with by ATHLON;

     

    (iii) evidencing
      the satisfaction of any condition referred to in this Article 8; 

     

    (iv) describing
      any issues or concerns to the knowledge of ATHLON regarding any ATHLON
      manufacturer of the Products with respect to any Regulatory Agency;
      or

     

    (v) otherwise
      facilitating the consummation or performance of any of the Contemplated
      Transactions. 

     

    Section
      8.5  No
      Proceedings.
      Since
      the date of this Agreement, there shall not have been commenced or threatened
      against ATHLON, or against any Affiliate of ATHLON, any Action or Proceeding
      (a)
      involving any challenge to, or seeking Damages or other relief in connection
      with, any of the Contemplated Transactions, or (b) that may have the effect
      of
      preventing, delaying, making illegal, imposing limitations or conditions on
      or
      otherwise interfering with any of the Contemplated Transactions, or (c) by
      the
      FDA, pending or threatened, against the Product, and ATHLON has no knowledge
      of
      any bases for any such Action or Proceeding.

     

    Section
      8.6  No
      Conflict.
      Neither
      the consummation nor the performance of any of the Contemplated Transactions
      will, directly or indirectly (with or without notice or lapse of time),
      contravene or conflict with or result in a violation of or cause LICENSEE or
      any
      Affiliate of LICENSEE to suffer any adverse consequence under (a) any applicable
      Law or Order or (b) any Law or Order that has been published, introduced or
      otherwise proposed by or before any Governmental or Regulatory
      Authority.

     

    Section
      8.7  Governmental
      Authorizations.
      LICENSEE shall have received such authorizations from any Governmental or
      Regulatory Authority as are necessary or desirable to allow LICENSEE to continue
      in the business of selling the Licensed Assets from and after the
      Closing.

    

    ARTICLE
      IX

    CONDITIONS
      PRECEDENT TO ATHLON’S OBLIGATION TO CLOSE

     

    ATHLON’s
      obligation to sell the Licensed Assets and to take the other actions required
      to
      be taken by ATHLON at the Closing is subject to the satisfaction, at or prior
      to
      the Closing, of each of the following conditions (any of which may be waived
      by
      ATHLON in whole or in part):

     

    Section
      9.1 Accuracy
      of Representations.
      All of
      LICENSEE’s representations and warranties in this Agreement (considered
      collectively), and each of these representations and warranties
      (considered individually), shall have been accurate in all material respects
      as
      of the date of this Agreement and shall be accurate in all material respects
      as
      of the time of the Closing as if then made.

     

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

     

    Section
      9.2 LICENSEE’s
      Performance.
      All of
      the covenants and obligations that LICENSEE is required to perform or to comply
      with pursuant to this Agreement at or prior to the Closing (considered
      collectively), and each of these covenants and obligations (considered
      individually), shall have been performed and complied with in all material
      respects.

     

    Section
      9.3 Consents.
      Each of
      the Consents identified in Schedule
      9.3
      shall
      have been obtained and shall be in full force and effect.

     

    Section
      9.4  Additional
      Documents.
      LICENSEE shall have caused the documents and instruments required by Section
      2.5(b) to be delivered (or tendered subject only to Closing) to ATHLON and
      such
      other documents as LICENSEE may reasonably request for the purpose
      of:

     

    (a) evidencing
      the accuracy of any representation or warranty of LICENSEE;

     

    (b) evidencing
      the performance by LICENSEE of, or the compliance by LICENSEE with, any covenant
      or obligation required to be performed or complied with by LICENSEE;
      or

     

    (c) evidencing
      the satisfaction of any condition referred to in this
      Article 8.

     

    Section
      9.5  No
      Injunction.
      There
      shall not be in effect any Law or any injunction or other Order that (a)
      prohibits the consummation of the Contemplated Transactions and (b) has been
      adopted or issued, or has otherwise become effective, since the date of this
      Agreement.

    

    

    ARTICLE
      X

    TERMINATION

     

    Section
      10.1  Termination
      Events.
      Subject
      to Section 10.2, this Agreement may be terminated as follows:

     

    (a) by
      LICENSEE if a material Breach of any material provision of this Agreement has
      been committed by ATHLON and such Breach has not been cured within thirty (30)
      days of notice (as provided for in Section 11.2) of such Breach or has not
      been
      waived by LICENSEE;

     

    (b) by
      ATHLON
      if a material Breach of any material provision of this Agreement has been
      committed by LICENSEE and such Breach has not been cured within thirty (30)
      days
      of notice (as provided for in Section 11.2) of such Breach or has not has not
      been waived by ATHLON;

     

    (c)   by
      LICENSEE if any condition in Article 8 has not been satisfied as of the date
      specified for Closing in Section 2.4 or if satisfaction of such a condition
      by
      such date is or becomes
      impossible (other than through the failure of LICENSEE to comply with its
      obligations under this Agreement), and LICENSEE has not waived such condition
      on
      or before such date;

     

    (d)   by
      ATHLON
      if any condition in Article 9 has not been satisfied as of the date specified
      for Closing Section 2.4 or if satisfaction of such a condition by such date
      is
      or becomes impossible (other than through the failure of ATHLON to comply with
      its obligations under this Agreement), and ATHLON has not waived such condition
      on or before such date; and

     

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

     

    (e)   by
      mutual
      consent of LICENSEE and ATHLON.

     

    Section
      10.2  Effect
      of Termination.
      Each
      Party’s right of termination under Section 10.1 is in addition to any other
      rights it may have under this Agreement or otherwise, and the exercise of such
      right of termination will not be an election of remedies. If this Agreement
      is
      terminated pursuant to Section 10.1, all obligations of the parties under this
      Agreement will terminate, except that the obligations of the parties in this
      Section 10.2 and Sections 10.3, 11.1 and 11.11 will survive, provided, however,
      that, if this Agreement is terminated because of a Breach of this Agreement
      by
      the non-terminating party or because one or more of the conditions to the
      terminating party’s obligations under this Agreement is not satisfied as a
      result of the party’s failure to comply with its obligations under this
      Agreement, the terminating party’s right to pursue all legal remedies will
      survive such termination unimpaired.

     

    Section
      10.3 Remedy
      For Breach By LICENSEE.
      Notwithstanding any of the foregoing, upon
      the
      termination of this Agreement by ATHLON due to a breach of this Agreement by
      LICENSEE which is not cured within the applicable cure period, the Licensed
      Assets and all rights associated therewith shall revert to ATHLON. Furthermore,
      ATHLON shall have the right to pursue any and all other remedies that it may
      have pursuant to this Agreement.

    

    ARTICLE
      XI

    MISCELLANEOUS

    

    Section
      11.1  Nondisclosure
      Agreement.
      The
      Nondisclosure Agreement between the Parties, dated July 17, 2006 (the
“Nondisclosure Agreement”), is hereby incorporated herein by reference and shall
      continue in full force and between the date of this Agreement and the Closing
      Date. LICENSEE and ATHLON will maintain in confidence, and will cause the
      directors, officers, employees, agents, and advisors of LICENSEE and the ATHLON
      to maintain in confidence, any written, oral, or other information obtained
      in
      confidence from one another in connection with this the Products, the Licensed
      Assets, this Agreement or the Contemplated Transactions, unless (a) such
      information is already known to such party or to others not bound by a duty
      of
      confidentiality or such information becomes publicly available through no fault
      of such party, (b) the use of such information is necessary or appropriate
      in
      making any filing or obtaining any consent or approval required for the
      consummation of the Contemplated Transactions, or (c) the furnishing or use
      of
      such information is required by legal proceedings. If the Contemplated
      Transactions are not consummated, each party will return or destroy as much
      of
      such written information as the other party may reasonably request.

     

    Section
      11.2  Notices.
      All
      notices, requests and other communications hereunder must be in writing and
      will
      be deemed to have been duly given only if delivered personally against written
      receipt or by facsimile transmission with answer back confirmation or mailed
      (postage prepaid by certified or registered mail, return receipt requested)
      or
      by nationally recognized overnight courier that maintains records of delivery
      to
      the Parties at the following addresses or facsimile numbers:

     

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

    
 

    If
      to
      LICENSEE to:

    

    Auriga
      Laboratories, Inc.

    5555
      Triangle Parkway, Suite 300

    Norcross,
      GA 30092

    Attn:
      Phillip S. Pesin

    Telephone:
      (678) 282-1600

    Facsimile:
      (678) 282-1700

    

    With
      a
      copy to:

    

    Larry
      J.
      Webster

    Webster
      & Associates

    2206
      Portwood Bend

    Cedar
      Park, TX 78613

    Telephone:
      (512) 415-0461

    Facsimile:
      (512) 857-0278

    

    If
      to
      ATHLON to:

    

    ATHLON
      Pharmaceuticals, Inc.

    6311
      Ridgewood Road

    Suite
      401
      West

    Jackson,
      Mississippi 39211

    Attn:
      Bobby Joe King, Jr.

    Telephone:
      205-986-1111

    Facsimile:
      205-942-3074

    

    With
      a
      copy to:

    

    Joseph
      E.
      Varner, III

    Brunini,
      Grantham, Grower & Hewes, PLLC

    P.
      O.
      Drawer 119 (39205)

    248
      East
      Capitol Street, Suite 1400

    Jackson,
      Mississippi 39201

    Telephone:
      601-948-3101

    Facsimile:
      601-960-6902

    

    All
      such
      notices, requests and other communications will (a) if delivered personally
      to
      the address as provided in this Section, be deemed given upon receipt, (b)
      if
      delivered by facsimile to
      the
      facsimile number as provided in this Section, be deemed given upon receipt
      by
      the sender of the answer back confirmation and (c) if delivered by mail in
      the
      manner described above or by overnight courier to the address as provided in
      this Section, be deemed given upon receipt (in each case regardless of whether
      such notice, request or other communication is received by any other Person
      to
      whom a copy of such notice, request or other communication is to be delivered
      pursuant to this Section). Any Party from time to time may change its address,
      facsimile number or other information for the purpose of notices to that Party
      by giving notice specifying such change to the other Party hereto in accordance
      with the terms of this Section.

     

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

    
 

    Section
      11.3  Entire
      Agreement.
      This
      Agreement (and all Exhibits and Schedules attached hereto and all other
      documents delivered in connection herewith) and the Confidentiality Agreement
      supersede all prior discussions and agreements, both written and oral, among
      the
      Parties with respect to the subject matter hereof and contain the sole and
      entire agreement among the Parties with respect to the subject matter
      hereof.

    

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

    

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

    

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

    

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

    

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

    

    Section
      11.9 Severability.
      If any
      provision of this Agreement is held to be illegal, invalid, or unenforceable
      under present or future laws effective while this Agreement remains in
effect,
      the legality, validity and enforceability of the remaining provisions will
      not
      be affected thereby.

     

    Section
      11.10 Governing
      Law and Jurisdiction.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of Georgia applicable to contracts executed and performed in such state,
      without giving effect to the conflicts of laws principles. Any Action or
      Proceeding seeking to enforce any provision of, or based on any right arising
      out of, this Agreement may be brought against any of the Parties in the Courts
      of the State of Georgia, or, if it has or can acquire jurisdiction, in a United
      States District Court located in Georgia, and each of the Parties consents
      to
      the jurisdiction of such Courts (and of the appropriate appellate courts) in
      any
      such Action or Proceeding and waives to any objection to venue. 

     

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

    
 

    Section
      11.11  Expenses.
      Except
      as otherwise provided in this Agreement, each Party shall pay its own expenses
      and costs incidental to the preparation of this Agreement and to the
      consummation of the transactions contemplated hereby.

    

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

    

    

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

    

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

     

    
 

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

    

    ATHLON

    

    

    ATHLON
      Pharmaceuticals, Inc.

    

    

    By:/s/
      Bobby King, Jr.

    Name:
      Bobby
      King, Jr.

    Title:
      __President/CEO______________

    

    

    LICENSEE

    

    Auriga
      Laboratories, Inc.

    

    

    By:/s/
      Philip S. Pesin

    Name:
      Philip
      S. Pesin

    Title:
      Chairman
      & CEO

    

     

     

    
      
         

      

      
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    Schedule
      List

    

    Schedule
      4.3  Consents
      and Approvals

    Schedule
      4.4   Non-Contravention

    Schedule
      4.8  Encumbrances

    Schedule
      6.1  Product
      NDC Numbers

    Schedule
      8.3  Material
      Consents

    Schedule
      9.3   Consents

    

    Exhibits

    

    Exhibit
      2.3(b)  Great
      Southern Labs Assumption and Assignment Agreement

    Exhibit
      2.5(a)(i) Bill
      of
      SaleEMPLOYMENT
        CONTRACT

       

      This
        Employment Contract (“Agreement”) is executed and delivered as of August 21,
        2006, by and between Mace Security International, Inc., a Delaware corporation
        (“Company”), and Louis D. Paolino, Jr., an individual (“Employee”).

       

      RECITALS

       

      The
        Company and Employee are parties to an Employment Contract dated August 12,
        2003, as amended by an Amendment to Employment Contract dated October 25,
        2003.
        This Agreement replaces in its entirety the Employment Contract dated August
        12,
        2003, as amended. The Company conducts diversified businesses, including,
        without limitation, a security business segment and a car wash business segment
        (“Business”). The Employee is an executive with extensive experience in
        corporate management. The Employee is currently the Chief Executive Officer
        and
        Chairman of the Board of Directors of the Company. The Company desires to
        retain
        Employee as Chairman and Chief Executive Officer and the Employee desires
        to
        accept the position offered.

       

      Employee
        has been and will be employed by Company in a confidential relationship wherein
        Employee is familiar with and aware of information as to the specific manner
        of
        doing business and the customers of Company and its affiliates and the Company’s
        future plans. The information Employee has and will have knowledge of is
        trade
        secrets and constitutes valuable goodwill of Company. Employee recognizes
        that
        the Business of Company is dependent upon a number of trade secrets and
        confidential business information, including customer lists, customer data
        vendor information and design information. The protection of these trade
        secrets
        is of critical importance to Company. Company will sustain great loss and
        damage
        if, for whatever reason, during the term of this Agreement or Employee’s
        employment with Company and for a period following the termination of this
        Agreement or Employee’s employment, Employee should violate the provisions of
        paragraph 4 of this Agreement. Further, Employee acknowledges that any such
        violation would cause irreparable harm to Company and that Company would
        be
        entitled, without limitation, to injunctive relief to remedy such
        violation.

       

      NOW,
        THEREFORE,
        in
        consideration of the mutual promises, terms and conditions set forth herein
        and
        the performance of each, the parties hereby agree as follows:

      

      

      
        
          
          

        

        
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            1.
        Services.

       

      (a)
        Company hereby employs Employee as its Chief Executive Officer, and the material
        duties of Employee and Employee’s titles and duties may not be changed without
        the Employee’s consent. Employee shall be appointed the Chairman of the
        Company’s Board of Directors. Employee shall be provided an office from where he
        shall work. 

       

      (b)
        Employee hereby accepts employment upon the terms and conditions contained
        in
        this Agreement. Employee shall faithfully adhere to, execute and fulfill
        all
        directions and policies established by the Board of Directors of the
        Company.

       

      
        2.
          Compensation.

         

        (a)
          For
          all services to be rendered by Employee to Company, Company shall pay Employee
          an initial salary computed and earned ratably over twelve months at the
          rate of
          Four Hundred Fifty Thousand Dollars ($450,000) per year, commencing on
          the date
          hereof, payable in accordance with Company’s normal payroll procedures. The rate
          of Employee’s salary may be adjusted from time to time during the term of this
          Agreement, upon the consent of Employee and the Board of Directors of the
          Company or the compensation committee thereof.

         

        (b)
          Employee shall be awarded three separation option grants for common stock
          under
          the Corporation’s Stock Option Plan at an exercise price equal to the close of
          market on the date of grant. The first grant shall be an option exercisable
          into
          450,000 shares of common stock to be awarded by the Compensation Committee
          within two days of the date of this Agreement, the second option grant
          (“Second
          Grant”) shall be awarded within five days of the first yearly anniversary date
          of this Agreement’s execution and the third option grant (“Third Grant”) shall
          be awarded within five days of the second yearly anniversary date of this
          Agreement’s execution. The amount of shares (“Option Shares”) the Second Grant
          and Third Grant shall be exercisable into shall be determined by the Company’s
          Compensation Committee. When determining the amount of the Option Shares,
          for
          the Second Grant and Third Grant, the Compensation Committee shall commission
          a
          compensation study of the Chief Executive Officer position to be prepared
          on the
          same basis as the Chief Executive Officer Market Analysis Study prepared
          by
          Compensation Resources, Inc dated August 2006. The Compensation Committee
          shall
          award an amount of Option Shares for the Second Grant and Third Grant so
          that
          the Black-Scholes Value of the Option Shares, at time of grant, when added
          to
          the $450,000 compensation being paid under Paragraph 2(a) of this Agreement
          equals no less then the “market consensus total direct compensation” amount paid
          by the comparable companies to their chief executive officers, as set forth
          in
          the compensation study obtained by the Compensation Committee. The Compensation
          Committee shall obtain two separate studies, the first study to be used
          for the
          Second Grant, shall be no older then one month prior to the date of the
          Second
          Grant and the second study, to be used for the Third Grant, shall be no
          older
          then one month prior to the date of the Third Grant. The options with respect
          to
          each of the grants shall be fully vested on the date of the grant. Employee
          and
          the Company acknowledge that the Company does not have a restricted stock
          plan.
          If in the future the Company develops a restricted stock plan that is approved
          by the Company’s shareholders, at Employee’s option, the Second Grant and Third
          Grant will be made in restricted stock and not in options. If restricted
          stock
          is used, the amount of restricted stock to be given Employee shall be determined
          in the same manner as the amount of options was to be determined. 

         

         

        
          
            
            

          

          
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        (c)
          Employee shall be paid a bonus equal the following percentages of the purchase
          price or sales price, as applicable, of any business sold or purchased
          by the
          Company (“M&A Bonus”): (i) one percent (1%) of the sales price of any car
          washes sold, except for the sale transactions currently under contract
          for the
          car wash located at 6559 E. Northwest Highway, Dallas, Texas and 10 E.
          Germantown Pike, Norristown, Pennsylvania for which no M&A Bonus will be
          due; and (ii) three (3) percent of the purchase or sales price of any other
          business sold or purchased, the three (3) percent amount shall be reduced
          by the
          amount of any fee paid to an investment banker hired by the Company where
          the
          investment banker located the transaction and conducted all negotiations,
          no
          deduction will be made for a fee paid to any investment banker for a fairness
          opinion or other valuation. For purposes of this Paragraph 2(b) a business
          shall
          be any collection of personal or real property that earned revenue as a
          going
          concern or is projected to earn revenue as a going concern, whether sold
          or
          purchased in the form of an asset acquisition or the sale or purchase of
          a
          business entity. The M&A Bonus shall be payable in cash at the time that the
          business sale or business purchase is consummated. If a purchase or sale
          transaction triggers a Change of Control Event, as defined in Paragraph
          2(f)
          below, the M&A Bonus and the Change of Control Bonus under Paragraph 2(f)
          shall not be both paid, only the larger of M&A Bonus or the Change of
          Control Bonus would be due from the Company to the Employee. 

         

         

        
          
            
            

          

          
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        (d)
          To
          the extent that Company, from time to time in its sole discretion, offers
          or
          provides any of the following to its employees, then Employee, on an equal
          basis
          with such other employees, shall be entitled to: (i) participation in all,
          if
          any, life, health, medical, hospital, accident and disability insurance
          programs
          of Company in existence for the benefit of its employees and for which
          Employee
          qualifies; (ii) participation in all, if any, pension, retirement, profit
          sharing or stock purchase plans for which Employee qualifies; and (iii)
          participation in any other employee benefits which Company accords to its
          employees and for which Employee qualifies.

         

        (e)
          During the term of Employee’s employment with Company, Employee shall be
          entitled to reimbursement for reasonable business expenses, including gasoline,
          incurred on behalf of Company. Reimbursement for business expenses will
          be
          provided to Employee on the same basis and under the same guidelines as
          are
          applicable to all of Company’s employees. The Company shall lease a vehicle for
          Employee’s personal use. The leased vehicle shall be a premium car of Employee’s
          choice but will not be a super premium vehicle such as a Rolls Royce or
          Bentley.
          The expense of the leased vehicle may not exceed $1,500 per month. 

         

        (f)
          Upon
          the occurrence of a Change of Control Event, as hereafter defined, Employee
          shall be paid a lump sum cash bonus of 2.99 times the Employee’s average total
          compensation (base salary plus any bonuses plus the value of any option
          award,
          valued using the Black Scholes formulae) over the past five years (“Change of
          Control Bonus”). It is the intent of both the Company and the Employee that the
          amount of the Change of Control Bonus to be paid to Employee under this
          Paragraph 2(f) shall be calculated so that the amount is .01 % less then
          the
          amount that would be considered to be a “parachute payment” within the meaning
          of Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended
          (the
“Code”), or any comparable successor provisions that would result in the payment
          being subject to the excise tax imposed by Section 4999 of the Code, or
          any
          comparable successor provisions. The Change of Control Bonus shall be paid
          to
          Employee within ten (10) business days of the Change of Control Event that
          trigged the Change of Control Bonus. For purposes of this Agreement a Change
          of
          Control Event shall be any of the events set forth in items (i) through
          and
          including (iii) below: 

         

        (i)
          the
          acquisition in one or more transactions by any “Person”, excepting Employee, as
          the term “Person” is used for purposes of Sections 13(d) or 14(d) of the
          Securities Exchange Act of 1934, as amended (the “1934 Act”), of “Beneficial
          Ownership” (as the term beneficial ownership is used for purposes or Rule 13d-3
          promulgated under the 1934 Act) of the fifty percent (50%) or more of the
          combined voting power of the Company’s then outstanding voting securities (the
“Voting Securities”). For purposes of this Paragraph 2(f)(i), Voting Securities
          acquired directly from the Company and from third parties by any Person
          shall be
          included in the determination of such Person’s Beneficial Ownership of Voting
          Securities.

         

         

        
          
            
            

          

          
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        (ii)
          the
          approval by the shareholders of the Company of: (A) a merger, reorganization
          or
          consolidation involving the Company, if the shareholders of the Company
          immediately before such merger, reorganization or consolidation do not
          or will
          not own directly or indirectly immediately following such merger, reorganization
          or consolidation, more than fifty percent (50%) of the combined voting
          power of
          the outstanding Voting Securities of the corporation resulting from or
          surviving
          such merger, reorganization or consolidation in substantially the same
          proportion as their ownership of the Voting Securities immediately before
          such
          merger, reorganization or consolidation, or (B) a complete liquidation
          or
          dissolution of the Company, or (C) an agreement for the sale or other
          disposition of 50% or more of the assets of the Company and a distribution
          of
          the proceeds of the sale to the shareholders.

         

        (iii)
          the
          acceptance by shareholders of the Company of shares in a share exchange,
          if the
          shareholders of the Company immediately before such share exchange do not
          or
          will not own directly or indirectly following such share exchange more
          than
          fifty percent (50%) of the combined voting power of the outstanding Voting
          Securities of the corporation resulting from or surviving such share exchange
          in
          substantially the same proportion as the ownership of the Voting Securities
          outstanding immediately before such share exchange.

         

             3.
          Term.
          The
          period of Employee’s employment with the Company shall commence on the date of
          this Agreement and shall continue for three years thereafter, unless sooner
          terminated in accordance with the provisions of this Agreement (“Term”). After
          expiration of the Term, Employee’s employment shall continue thereafter on an
          at-will month-to-month basis, until terminated by either party to the Agreement.
          During the month-to-month period the provisions of this Agreement shall
          no
          longer apply but Employee shall continue to be paid the Employee’s base salary
          and any bonus earned under the provisions of Paragraph 2(c).

         

         

        
          
            
            

          

          
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        4.
          Noncompetition Covenants.

         

        (a)
          Employee agrees that the noncompetition covenants contained in this Paragraph
          4
          are a material and substantial part of this Agreement.

         

        (b)
          Employee covenants that during Employee’s employment with Company and for three
          months following the termination of Employee’s employment (regardless of the
          reason for the termination) the Employee shall not, directly or indirectly,
          without the prior express written consent of Company, do any of the things
          set
          forth in item (i) through (v) below:

         

        (i)
          engage, as an officer, director, shareholder, owner, partner, joint venturer,
          agent, or in a managerial capacity, whether as an employee, independent
          contractor, consultant, advisor or sales representative, in the security
          industry or in the car wash services industry within the United States
          (“the
          Territory”);

         

        (ii)
          call
          upon any person who is, at the time of the contact, an employee of Company
          or
          its affiliates, if the purpose and intent of the contact is to entice such
          employee away from or out of the employ of Company or its
          affiliates;

         

        (iii)
          call upon any person or entity which is, at the time of the contact, a
          customer
          of the Company or its affiliates for the purpose of soliciting or selling
          any of
          the items or services which are the items or services offered by the Company
          or
          its affiliates;

         

        (iv)
          disclose the identity of the customers of Company or its affiliates, whether
          in
          existence or proposed, to any person, firm, partnership, corporation or
          other
          entity whatsoever, for any reason or purpose whatsoever;

         

        (v)
          promote, or assist, financially or otherwise, any person, firm, partnership,
          corporation or other entity whatsoever to do any of the above;

         

              For
          the
          purposes of this Agreement, the term “affiliates” shall mean one or more of: (A)
          each subsidiary of Company, and (B) each other entity under the direct
          or
          indirect control of the Company.

         

         

        
          
            
            

          

          
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        (c)
          The
          Company will sustain significant losses and damages, if Employee breaches
          the
          covenants in this Paragraph 4. There is no adequate monetary remedy for
          the
          immediate and irreparable damage that would be caused to Company by Employee’s
          breach of its non-competition covenants. Employee agrees that, in the event
          of a
          breach by him of the foregoing covenants, such covenants may be enforced
          by
          Company by, without limitation, injunctions and restraining orders.

         

        (d)
          It is
          agreed by the parties that the covenants in this Paragraph 4 impose a reasonable
          restraint on Employee in light of the activities and business of Company
          on the
          date of the execution of this Agreement and the future plans of
          Company.

         

        (e)
          The
          covenants in this Paragraph 4 are severable and separate, and the
          unenforceability of any specific covenant shall not affect the provisions
          of any
          other covenant. If any court of competent jurisdiction shall determine
          that the
          scope, time or territorial restrictions set forth are unreasonable, then
          it is
          the intention of the parties that such restrictions be enforced to the
          fullest
          extent which the court deems reasonable, and the Agreement shall thereby
          be
          reformed.

         

        (f)
          The
          covenants in this Paragraph 4 shall be construed as independent of any
          other
          provision of this Agreement and the existence of any claim or cause of
          action of
          Employee against Company whether predicated on this Agreement, or otherwise,
          shall not constitute a defense to the enforcement by Company of such covenants.
          It is specifically agreed that the duration of the noncompetition covenants
          stated above shall be computed by excluding from such computation all time
          during which Employee is in violation of any provision of this Paragraph
          4 and
          all time during which there is pending in any court of competent jurisdiction
          any action (including any appeal from any judgment) brought by any person,
          whether or not a party to this Agreement, in which action Company seeks
          to
          enforce the agreements and covenants of Employee or in which any person
          contests
          the validity of such agreements and covenants or their enforceability or
          seeks
          to avoid their performance or enforcement. Provided that, no such exclusion
          shall include the period of time within which Employee has ceased violating
          this
          paragraph, whether or not as a result of being in compliance with Court
          injunction or doing so voluntarily, and whether or not any action is pending
          against Employee, and provided that no such exclusion shall include the
          time an
          action is pending, if the action is finally determined in Employee’s
          favor.

         

        5.
          Confidential Information.
          It is
          expressly acknowledged by the Employee that customer lists, orders, current
          and
          closed out orders, prospect lists, documents containing the names or addresses
          of existing or potential customers, information regarding the Company’s
          financial condition or business plans, the methods by which the Company
          serves
          its customers or conducts its operations, as well as other business procedures,
          are the property of the Company and constitute confidential information
          or trade
          secrets of the Company (“Confidential Information”). Employee agrees to maintain
          the confidentiality of the Confidential Information and further agrees
          that
          Employee will not, directly or indirectly, use or disclose Confidential
          Information to any natural or legal person, other than authorized employees
          or
          agents of the Company, during the Term or thereafter. All Confidential
          Information and all correspondence, reports, charts, products, records,
          designs,
          patents, plans, manuals, Afield
          guides,@
          memoranda, advertising materials, lists and other data or property collected
          by
          or delivered to Employee by or on behalf of Company, its representatives,
          customers and government entities (including, without limitation, customers
          obtained for Company by Employee), and all other materials compiled by
          Employee
          which pertain to the business of Company shall be and shall remain the
          property
          of Company, shall be subject at all times to its discretion and control
          and
          shall be delivered, together with any and all copies thereof, promptly
          to
          Company upon request at any time and without request upon completion or
          other
          termination of Employee’s employment hereunder.

         

         

        
          
            
            

          

          
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        6.
          Inventions.
          Employee shall disclose promptly to Company any and all conceptions and
          ideas
          for inventions, improvements, and valuable discoveries, whether patentable
          or
          not, which are conceived or made by Employee solely or jointly with another
          during the period of employment or within three months thereafter and which
          are
          related to the business or activities of Company. Employee hereby assigns
          and
          agrees to assign all his interests therein to Company or its nominee. Whenever
          requested to do so by Company, Employee shall execute any and all applications,
          assignments or other instruments that Company shall deem necessary to apply
          for
          and obtain Letters Patent of the United States or any foreign country or
          to
          otherwise protect Company’s interest therein. These obligations shall continue
          beyond the termination of employment with respect to inventions, improvements
          and valuable discoveries, whether patentable or not, conceived, made or
          acquired
          by Employee during the period of employment, and shall be binding upon
          Employee’s heirs, assigns, executors, administrators and other legal
          representatives.

         

         

        
          
            
            

          

          
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        7.
          Termination; Rights of Termination.

         

        (a)
          Employee’s employment under this Agreement may be terminated during the term
          hereof in any one or more of the following ways:

         

        (i)
          Employee shall be terminated automatically upon the death or resignation
          of
          Employee. The parties agree that Employee may resign as either or both
          Chief
          Executive Officer or Chairman of the Board, at any time without such resignation
          constituting a breach of this Agreement.

         

        (ii)
          By
          the Company upon Employee=s
          inability to perform his duties under this Agreement because of illness
          or
          physical or mental disability or other incapacity which continues for a
          period
          of 120 days consecutively during any one-year period;

         

        (iii)
          By
          the Company upon written notice to the Employee any time after: (i) the
          occurrence of a Change of Control Event; and (ii) the payment to Employee
          of the
          Change of Control Bonus, as provided in Paragraph 2(f) of this Agreement.
          

         

        (iv)
          By
          the Company upon written notice to Employee upon the Employee’s causing material
          harm to the Company by Employee engaging in willful misconduct, or a felony.
          For
          purposes of this Paragraph 7(a)(iv) material harm is caused to the Company,
          if
          the Company incurs expenses of Five Hundred Thousand ($500,000) Dollars
          or more.
          The written notice sent by the Company must specify the nature of the willful
          misconduct or felony.

         

        (v)
          By
          Company upon written notice to Employee any time after: (i) a majority
          vote of
          the Board of Directors that Employee no longer be employed by the Company;
          and
          (ii) payment to Employee of a lump sum cash payment of 2.99 times the Employee’s
          average total compensation (base salary plus any bonuses plus the value
          of any
          option award, valued using the Black Scholes formulae) over the past five
          years
          (“Severance Payment”). It is the intent of both the Company and the Employee
          that the amount of the Severance Payment to be paid to Employee under this
          Paragraph 7(a)(v) shall be calculated so that the amount is .01 % less
          then the
          amount that would be considered to be a “parachute payment” within the meaning
          of Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended
          (the
“Code”), or any comparable successor provisions that would result in the payment
          being subject to the excise tax imposed by Section 4999 of the Code, or
          any
          comparable successor provisions. 

         

        (vi)
          By
          Employee upon written notice to the Company, if the Company (i) requires
          Employee to perform his duties from an office that is located more then
          a fifty
          mile radius from Fort Lauderdale, Florida or (ii) changes Employee’s duties and
          authority as the Company’s Chief Executive Officer. The Company shall pay to
          Employee the Severance Payment in cash within ten days of Employee’s resignation
          under this Paragraph 7(a)(vi). 

         

         

        
          
            
            

          

          
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        (b)
          Upon
          termination of Employee’s employment under Paragraph 7(a) for any reason,
          Employee shall be entitled to receive Employee’s salary accrued through the date
          of termination, plus any employee benefits which by their terms and provisions
          continue after such termination.

         

        (c)
          In the event of termination of Employee’s
          employment under this Agreement for any reason provided in this paragraph
          7, or
          if Employee resigns prior to the expiration of the term of this Agreement,
          all
          rights and obligations of Company and Employee under this Agreement shall
          cease
          immediately, except that Employee’s and the Company’s obligations under
          Paragraphs 4, 5, 6, 7 and 15 herein shall survive such termination. After
          such
          termination Employee shall have no right to receive any compensation hereunder
          except as set forth this Paragraph 7.

         

        8.
          Complete Agreement.
          This
          Agreement is the final, complete and exclusive statement and expression
          of the
          agreement between Company and employee, it being understood that there
          are no
          oral representations, understandings or agreements covering the same subject
          matter as this Agreement. This Agreement supersedes, and cannot be varied,
          contradicted or supplemented by evidence of any prior or contemporaneous
          discussions, correspondence, or oral or written agreements of any kind.
          This
          Agreement may be modified, altered or otherwise amended only by a written
          instrument executed by both Company and Employee.

         

        9.
          No Waiver; Remedies Cumulative.
          No
          waiver by the parties hereto of any default or breach of any term, condition
          or
          covenant of this Agreement shall be deemed to be a waiver of any subsequent
          default or breach of the same or any other term, condition or covenant
          contained
          herein. No right, remedy or election given by any term of this Agreement
          shall
          be deemed exclusive but each shall be cumulative with all other rights,
          remedies
          and elections available at law or in equity.

         

        10.
          Assignment; Binding Effect.
          Employee understands that Employee has been selected by Company on the
          basis of
          Employee’s personal qualifications, experience and skills. Employee agrees,
          therefore, that he cannot assign all or any portion of this Agreement.
          This
          Agreement shall be binding upon and inure to the benefit of the parties
          hereto
          and Company’s successors and assigns. It is further understood and agreed that
          Company may be merged or consolidated with another entity and that any
          such
          entity shall automatically succeed to the rights, powers and duties of
          Company
          hereunder.

         

         

        
          
            
            

          

          
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        11.
          Notice.
          All
          notices or other communications required or permitted hereunder shall be
          in
          writing and may be given by depositing the same in the United States mail,
          addressed to the party to be notified, postage prepaid and registered or
          certified with return receipt requested, by overnight courier or by delivering
          the same in person to such party.

         

        
          

          
            	 	
                    To
                      Company:

                  	
                    Chief
                      Executive Officer

                    1000
                      Crawford Place

                    Mount
                      Laurel, New Jersey 08054

                  	 
	 	 	 	 
	 	
                    To
                      Employee:

                  	
                    Louis
                      D. Paolino, Jr.

                    401
                      Las Olas Blvd., Suite 1570

                    Fort
                      Lauderdale, Florida 33301

                  	 

          

          
 

        

        Notice
          shall be deemed given and effective the day personally delivered, the day
          after
          being sent by overnight courier and three days after the deposit in the
          U. S.
          mail of a writing addressed as above and sent first class mail, certified,
          return receipt requested, or when actually received, if earlier. Either
          party
          may change the address for notice by notifying the other party of such
          change in
          accordance with this paragraph 11.

         

        12.
          Severability; Headings.
          If any
          portion of this Agreement is held invalid or inoperative, the other portions
          of
          this Agreement shall be deemed valid and operative and, so far as is reasonable
          and possible, effect shall be given to the intent manifested by the portion
          held
          invalid or inoperative. The paragraph headings herein are for reference
          purposes
          only and are not intended in nay way to describe, interpret, define or
          limit the
          extent or intent of this Agreement or of any part hereof.

         

        13.
          Gender.
          The use
          of the masculine pronoun in this Agreement has been used for convenience
          and
          shall apply to the Employee even where the Employee is a female. 

         

        14.
          Governing Law.
          This
          Agreement shall in all respects be construed in accordance with the laws
          of the
          State of New Jersey.

         

              
           15.
          Insurance and Indemnification.

         

        (a)
          Subject to applicable law, for a period of six (6) years following completion
          of
          the Term, the Company will: (i) indemnify Employee and his heirs and
          representatives to the extent provided in the Company’s By-Laws in effect on the
          date of this Agreement and will not amend, reduce or limit rights of indemnity
          afforded to them or the ability of the Company to indemnify them, not hinder,
          delay or make more difficult the exercise of such rights of indemnity and
          (ii)
          maintain director and officer liability insurance coverage providing Employee
          with coverage (1) at least as favorable as the policies in effect immediately
          prior to the date hereof covering the Company’s directors and officers or (2) as
          favorable as is available at a cost to the Company of up to 125% of the
          premiums
          currently being paid by the Company.

         

         

        
          
            
            

          

          
            11

            
              

            

          

          
            
            

          

        

         

         

        (b)
          If
          any claim is (or claims are) made against Employee and his heirs and
          representatives, including legal counsel, arising from Employee=s
          services as a director, officer and employee of the Company, within six
          (6)
          years from the expiration of the Term, the provisions of this Paragraph
          15
          respecting the Company’s By-Laws shall continue in effect until the final
          disposition of all such claims.

         

        (c)
          The
          Company agrees to provide written notice to Employee immediately upon learning
          of any claim or threatened claim against Employee by any third party relating
          to
          or arising out of the business of the Company or Employee’s prior service as a
          director, officer, employee or controlling shareholder of the Company.
          The
          Company further agrees to provide to Employee any complaints and other
          relevant
          documentation related to such claims immediately upon receipt of such
          documentation.

         

        (d)
          Employee agrees that he will cooperate with and assist the Company, as
          is
          reasonably requested by the Company, in its defense of any action or proceeding
          against the Company, its directors, officers, employees or affiliates arising
          out of or in any way related to any transactions, events or other matters
          which
          occurred during the period of his employment with the Company, to the extent
          that such cooperation and assistance will not impair Employee’s legal rights or
          remedies or increase the likelihood that Employee will incur any liabilities
          as
          a result thereof. This Agreement shall not preclude Employee from testifying
          in
          such action or proceeding. In the event that Employee does cooperate with
          and
          assist the Company in its defenses of such an action or proceeding, the
          Company
          agrees to reimburse Employee for all reasonable expenses incurred by Employee
          in
          providing such assistance.

         

         

        
          
            
            

          

          
            12

            
              

            

          

          
            
            

          

        

         

         

        16.
          Arbitration.

         

        
          (a)
            Each
            and every controversy or claim arising out of or relating to this Agreement
            shall be settled by arbitration in Philadelphia, Pennsylvania, in accordance
            with the commercial rules (the “Rules”) of the American Arbitration Association
            then obtaining, and judgment upon the award rendered in such arbitration
            shall
            be final and binding upon the parties and may be confirmed in any court
            having
            jurisdiction thereof. Notwithstanding the foregoing, this Agreement to
            arbitrate
            shall not bar any party from seeking temporary or provisional remedies
            in any
            Court having jurisdiction. Notice of the demand for arbitration shall
            be filed
            in writing with the other party to this Agreement, which such demand
            shall set
            forth in the same degree of particularity as required for complaints
            under the
            Federal Rules of Civil Procedure the claims to be submitted to arbitration.
            Additionally, the demand for arbitration shall be stated with reasonable
            particularity with respect to such demand with documents attached as
            appropriate. In no event shall the demand for arbitration be made after
            the date
            when institution of legal or equitable proceedings based on such claim,
            dispute
            or other matter in question would be barred by the applicable statutes
            of
            limitations.

           

        

        (b)
          The
          arbitrators shall have the authority and jurisdiction to determine their
          own
          jurisdiction and enter any preliminary awards that would aid and assist
          the
          conduct of the arbitration or preserve the parties’ rights with respect to the
          arbitration as the arbitrators shall deem appropriate in their discretion.
          The
          award of the arbitrators shall be in writing and it shall specify in detail
          the
          issues submitted to arbitration and the award of the arbitrators with respect
          to
          each of the issues so submitted.

         

        (c)
          Within sixty (60) days after the commencement of any arbitration proceeding
          under this Agreement, each party shall file with the arbitrators its
          contemplated discovery plan outlining the desired documents to be produced,
          the
          depositions to be take, if ordered by the arbitrators in accordance with
          the
          Rules, and any other discovery action sought in the arbitration proceeding.
          After a preliminary hearing, the arbitrators shall fix the scope and content
          of
          each party’s discovery plan as the arbitrators deem appropriate. The arbitrators
          shall have the authority to modify, amend or change the discovery plans
          of the
          parties upon application by either party, if good cause appears for doing
          so.

         

        (d)
          The
          award pursuant to such arbitration will be final, binding and
          conclusive.

         

         

        
          
            
            

          

          
            13

            
              

            

          

          
            
            

          

        

         

         

        (e)
          Counsel to Company and Employee in connection
          with the negotiation of and consummation of this Agreement shall be entitled
          to
          represent their respective party in any and all proceedings under this
          Paragraph
          or in any other proceeding (collectively, “Proceedings”). Company and Employee,
          respectively, waive the right and agree they shall not seek to disqualify
          any
          such counsel in any such Proceedings for any reason, including but not
          limited
          to the fact that such counsel or any member thereof may be a witness in
          any such
          Proceedings or possess or have learned of information of a confidential
          or
          financial nature of the party whose interests are adverse to the party
          represented by such counsel in any such Proceedings.

         

        IN
          WITNESS WHEREOF,
          the
          undersigned parties have executed this Agreement on the year and day above
          written.

         

        
          	 	 	 
	 	MACE
                  SECURITY INTERNATIONAL, INC.
	 
 	 
 	 
 
	 	By:  	/s/ Robert
                  M.
                  Kramer
	 	
                  
Robert
                  M. Kramer, Executive Vice
                  President

          	 	 	 
	 
 	 
 	 
 
	 	        
                  	/s/ Louis
                  D.
                  Paolino, Jr.
	 	
                  
Louis
                  D. Paolino, Jr.
	 	 

        

         

         

        
          
            
            

          

          
            14

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