HOUSTON - Complaining that Pernix Therapeutics Holdings Inc. failed to pay shareholders, Denver resident Keith Prichard has resorted to legal action.
A lawsuit filed Dec. 18 in the Houston Division of the Southern District of Texas asserts Pernix "defaulted on its unconditional obligation to the Cypress shareholders to pay $10 million into escrow."
The defendant acquired Cypress Pharmaceuticals Inc. on Dec. 31, 2012.
Prior to the transaction, Pernix and the shareholders entered into a definitive Securities Purchase Agreement which mandates the closing to occur at the end of last year, according to the lawsuit.
Court documents allege that before closing, Pernix revealed to the shareholders that "it could no longer obtain the financing necessary to pay them the agreed upon cash consideration due at closing, and that the deal could not go forward unless the shareholders agreed to accept substantially less cash up front."
"In order to save the deal, certain shareholders of Cypress - represented by Pritchard as sellers' agent - agreed to reduce the upfront cash consideration they were to receive at closing by $16.5 million and to reduce the aggregate amount due upon the occurrence of an agreed upon milestone event by $5 million," the suit says.
"In exchange, Pernix agreed to increase the value of the stock consideration by $21.5 million, and to grant each recipient of shares of Pernix common stock the right to require Pernix to purchase all or any portion of the shares still held on the first anniversary of the issuance of the shares at a price calculated to equal $5.38 per share."
Pritchard adds "as a pretext for reneging on its payment obligations, Pernix has asserted various baseless indemnification claims against the Cypress shareholders."
"However, the agreements between the parties make clear that, irrespective of any such claims, Pernix must pay the entire $10,000,000 balance due into an escrow account pending resolution of all such claims, which it has failed to do," the original petition says.
Attorney Timothy S. McConn of Andrews Kurth LLP in Houston is representing the complainant.
Case No. 4:13-CV-3701