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Royalty Purchase Agreement By And Between Mallinckrodt Medical Imaging - Ireland And Zalicus Pharmaceuticals Ltd. Dated As Of January 31, 2014

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 This Royalty Agreement involves

ZALICUS INC. | Alza Corporation | Mallinckrodt Inc | Mallinckrodt LLC | Neuromed Development Inc | Neuromed Pharmaceuticals Ltd | Zalicus Inc | ZALICUS PHARMACEUTICALS LTD

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Title: ROYALTY PURCHASE AGREEMENT BY AND BETWEEN MALLINCKRODT MEDICAL IMAGING - IRELAND AND ZALICUS PHARMACEUTICALS LTD. DATED AS OF JANUARY 31, 2014
Governing Law: New York     Date: 2/3/2014
Industry: Biotechnology and Drugs     Sector: Healthcare

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ROYALTY PURCHASE AGREEMENT BY AND BETWEEN

MALLINCKRODT MEDICAL IMAGING - IRELAND AND

ZALICUS PHARMACEUTICALS LTD. DATED AS OF JANUARY 31, 2014

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THIS ROYALTY PURCHASE AGREEMENT dated as of January 31, 2014

(“ Agreement ”), is made by and between ZALICUS PHARMACEUTICALS LTD., formerly known as Neuromed Pharmaceuticals Ltd., a British Columbia company and affiliate of Zalicus Inc. (“ Seller ”), and MALLINCKRODT MEDICAL IMAGING - IRELAND, an affiliate of Mallinckrodt LLC (the successor in interest to Mallinckrodt Inc.) and an Irish corporation

(“ Purchaser ”), and each of Seller and Purchaser are entering into this Agreement and acting for and on behalf of their Affiliates (as herein defined).

     WHEREAS, Mallinckrodt Inc. (an Affiliate of Purchaser) and Neuromed Development Inc. (a former Affiliate of Seller) were parties to that certain Asset Purchase Agreement, dated as of June 11, 2009 and amended as of July 15, 2009 (the “ Purchase Agreement ”), pursuant to which Neuromed Development Inc. sold all of its tangible and intangible rights in and to the dosage pharmaceutical product now marketed in the United States by Purchaser under the name Exalgo® (“ Product ”), including all of Neuromed Development Inc.’s and its affiliates rights under and pursuant to the Development and Commercialization Agreement by and between Alza Corporation and Neuromed Development Inc., dated April 20, 2007 and as variously amended thereafter (“ Original License Agreement ”),

     WHEREAS, pursuant to Exhibit D of the Purchase Agreement, Mallinckrodt LLC, as successor in interest to Mallinckrodt Inc. is responsible for payment to Seller on a continuing basis of certain royalties based upon Net Sales (as defined in the Purchase Agreement) of Product (“ Royalty Payment Obligations ”, as further defined herein below) and has certain additional reporting and other obligations to Seller under such Exhibit D (collectively with the “ Royalty Payment Obligations ”, the “ Exhibit D Obligations ”, as further defined herein below), and

     WHEREAS, Seller desires to sell, transfer, assign and convey to Purchaser, and Purchaser desires to purchase, acquire and accept from Seller, all of Seller’s right, title and interest in and to the Royalty Payment Obligations, for the consideration and on the terms and subject to the conditions set forth in this Agreement.

     NOW, THEREFORE, in consideration of the representations, warranties, covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Seller and Purchaser hereby agree as follows:

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ARTICLE I
DEFINITIONS; INTERPRETATION

     Section 1.1 Definitions . For purposes of this Agreement, the following capitalized terms have the meanings specified below:

(i)     

2013 Royalty Year ” means the calendar year 2013.

 

(ii)     

Adverse Claim ” means a lien, pledge, security interest, charge or other encumbrance in or on any Person’s assets or properties in favor of any other Person.

 

(iii)     

Affiliate ” means, with respect to any Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, or is Controlled by, or is under common Control with, such Person.

 

(iv)     

Bankruptcy Event ” means the occurrence of any of the following in respect of any Person: (1) an admission in writing by such Person of its inability to pay its debts as they become due or a general assignment by such Person for the benefit of creditors; (2) the filing of any petition or answer by such Person seeking to adjudicate itself as bankrupt or insolvent, or seeking for itself any liquidation, winding-up, reorganization, arrangement, adjustment, protection, relief or composition of such Person or its debts under any law relating to bankruptcy, insolvency, receivership, winding-up, liquidation, reorganization, examination, relief of debtors or other similar law now or hereafter in effect, or seeking, consenting to or acquiescing in the entry of an order for relief in any case under any such law, or the appointment of or taking possession by a receiver, trustee, custodian, liquidator, examiner, assignee, sequestrator or other similar official for such Person or for any substantial part of its property; (3) corporate or other entity action taken by such Person to authorize any of the actions set forth in clause (1) or (2) of this definition; or (4) without the consent or acquiescence of such Person, the entering of an order for relief or approving a petition for relief or reorganization or any other petition seeking any reorganization, arrangement, composition, readjustment, liquidation, dissolution or other similar relief under any present or future bankruptcy, insolvency or similar statute, law or regulation, or the filing of any such petition against such Person, or, without the consent or

 

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acquiescence of such Person, the entering of an order appointing a trustee, custodian, receiver or liquidator of such Person or of all or any substantial part of the property of such Person, in each case where such petition or order shall remain unstayed or shall not have been stayed or dismissed within sixty (60) days from entry thereof.

 

(v)     

Bill of Sale ” has the meaning set forth in Section 3.4 below.

 

(vi)     

Closing Date ” means the date of this Agreement.

 

(vii)     

Code ” means the United States Internal Revenue Code of 1986, as amended.

 

(viii)     

Consent ” means any consent, approval, license, permit, order, authorization, registration, filing or notice.

 

(ix)     

Control ” and its derivatives mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or other voting interests, by contract or otherwise.

 

(x)     

Excluded Assets ” means any and all other rights of Seller to payment, compensation, indemnification or other consideration that exist or may arise under or in respect of the Purchase Agreement (if any) other than the Royalty Payment Obligations.

 

(xi)     

Excluded Liabilities and Obligations ” has the meaning set forth in Section 2.4 hereof.

 

(xii)     

Exhibit D Obligations ” has the meaning set forth in the recitals hereof.

 

(xiii)     

Governmental Entity ” means any United States or foreign (x) federal, state, local, municipal or other government, (y) governmental or quasi-governmental entity of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal) or (z) body exercising or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory, or taxing authority, or power of any nature, including any arbitral tribunal.

 

(xiv)     

Granted Security Interest ” has the meaning set forth in Section 4.8 below.

 

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(xv)     

Indemnified Party ” has the meaning set forth in Section 7.4 below.

 

(xvi)     

Indemnifying Party ” has the meaning set forth in Section 7.4 below.

 

(xvii)     

Judgment ” means any judgment, order, ruling, injunction, assessment, award, writ or decree of any Governmental Entity or arbitrator.

 

(xviii)     

Knowledge of Purchaser ” or “ Knowledge of Seller ”, as applicable in any given circumstance, means the knowledge of any executive officer of such party, or of any Affiliate. For purposes of this Agreement, any such individual shall be deemed to have knowledge of a particular fact or other matter if such individual is actually aware of such fact or other matter after reasonable inquiry.

 

(xix)     

Law ” means any law, statute, code, rule, regulation or ordinance of any Governmental Entity and all Judgments.

 

(xx)     

Original License Agreement ” has the meaning set forth in the recitals hereof.

 

(xxi)     

Person ” means any individual, firm, corporation, partnership, limited liability company, trust, joint venture, association, unincorporated organization, Governmental Entity or other entity or organization.

 

(xxii)     

Product ” has the meaning set forth in the recitals hereof.

 

(xxiii)     

Purchase Agreement ” has the meaning set forth in the recitals hereof.

 

(xxiv)     

Purchased Assets ” means the Royalty Payment Obligations to be purchased by Purchaser from Seller hereunder in return for the Purchase Price.

 

(xxv)     

Purchased Royalty Period ” means the period beginning on (and including) January 1, 2014 and ending on the date any obligations to make royalty or other payments arising under any of the Exhibit D Obligations finally cease.

 

(xxvi)     

Purchase Price ” shall mean the amount to be paid by Purchaser to Seller pursuant to Section 2.1(b).

 

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(xxvii) “ Purchaser ” has the meaning set forth in the recitals hereof.

(xxviii)“ Royalty Payment Obligations ” means any and all amounts due to be paid by Mallinckrodt LLC to Seller under the terms and conditions of Exhibit D to the Purchase Agreement based upon Net Sales (as defined in the Purchase Agreement) of the Product during the Purchased Royalty Period.

(xxix)     

Royalty Receivables ” means all accrued royalties and other consideration attributable to Net Sales in respect of Product sold by Mallinckrodt LLC prior to the Purchased Royalty Period and payable by Mallinckrodt LLC to Seller under the terms and conditions of the Purchase Agreement.

 

(xxx)     

Seller ” has the meaning set forth in the recitals hereof.

 

(xxxi)     

Seller’s Financial Institution ” has the meaning set forth in Section 4.8 below.

 

(xxxii)     

Tax ” or “ Taxes ” mean means any federal, state, local or foreign income, gross receipts, license, payroll, employment, excise, severance, occupation, premium, windfall profits, environmental, customs duties, capital stock, franchise, profits, withholding, social security, unemployment, disability, real property, personal property, abandoned property, value added, alternative or add-on minimum, estimated or other tax of any kind whatsoever, including any interest, penalty or addition thereto, whether disputed or not.

 

(xxxiii)“ Third Party Claim ” has the meaning set forth in Section 7.5 below.

(xxxiv)“ Transaction Documents ” means this Agreement, the Bill of Sale and all of the other agreements, documents, letters and certificates executed or delivered in connection herewith.

(xxxv)     

UCC ” means the Uniform Commercial Code as in effect in the State of New York, as applicable.

 

     Section 1.2 Certain Interpretations . Except where expressly stated otherwise in this Agreement, the following rules of interpretation apply to this Agreement:

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     (i) “include,” “includes” and “including” shall be deemed to be followed by the words “without limitation”;

     (ii) “hereof,” “hereto,” “herein” and “hereunder” and words of similar import when used in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement;

(iii)     

references to a Person are also to its permitted successors and assigns;

 

(iv)     

references to an “Article,” “Section,” “Exhibit” or “Schedule” refer to an Article

 

or Section of, or an Exhibit or Schedule to, this Agreement;

     (v) references to “$” or otherwise to dollar amounts refer to the lawful currency of the United States;

     (vi) references to a Law include any amendment or modification to such Law and any rules and regulations issued thereunder, whether such amendment or modification is made, or issuance of such rules and regulations occurs, before or after the date of this Agreement; and

     (vii) references to this “Agreement” shall include a reference to all Exhibits attached to this Agreement, all of which constitute a part of this Agreement and are incorporated herein for all purposes.

ARTICLE II

PURCHASE AND SALE OF PURCHASED RECEIVABLES

 

Section 2.1 Purchase and Sale .

     (a) Purchase and Sale . Upon the terms and subject to the conditions of this Agreement, on the Closing Date, Seller shall sell, transfer, assign and convey to Purchaser, and Purchaser shall purchase, acquire and accept from Seller, free and clear of all Adverse Claims, Seller’s right, title and interest in and to the Purchased Assets.

     (b) Purchase Price . The Purchase Price for the Purchased Assets is Seven Million Two Hundred Thousand Dollars ($7,200,000), which shall be payable by Purchaser to Seller on the Closing Date to an account that was designated by Seller to Purchaser prior to the date hereof.

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     (c) Seller Audit Rights . 1 Notwithstanding any other provision hereof, this Agreement shall not be interpreted as eliminating or reducing any obligation of Mallinckrodt LLC to Seller under the Exhibit D Obligations with respect to all or any portion of the 2013 Royalty Year or all or any portion of any other period prior to the Purchased Royalty Period; provided that and notwithstanding the immediately foregoing, the parties agree that Seller shall have no right, under and pursuant to Section 3(c) of Exhibit D of the Purchase Agreement and from and after the Closing Date, to audit any royalty payments made by Mallinckrodt LLC with respect to all or any portion of the 2013 Royalty Year or all or any portion of any other period prior to the Purchased Royalty Period. Except as and to the extent noted above in the first sentence of this Section 2.1(c), the provisions of Exhibit D of the Purchase Agreement shall survive for so long and to the extent necessary to provide both parties thereto with such rights as may be required to secure for them the benefits and to place upon them the obligations of such Exhibit D as it relates to any periods elapsing before the Purchased Royalty Period. Except as and to the extent specifically set forth above in this Section 2.1(c) with respect to royalty payments to be made for periods occurring prior to the Purchased Royalty Period, and in consideration of the payment by Purchaser on the Closing Date of the Purchase Price for the Purchased Assets in accordance with Section 2.1(a) herein above and all other applicable provisions hereof, it is understood that from and after the Closing Date, neither Purchaser nor any of its Affiliates (including Mallinckrodt LLC) shall have any further liability or obligation of any nature whatsoever under or with respect to the Exhibit D Obligations, including (without limitation) any obligation to make payment of royalties or any other payments as a consequence of sales of Product during the Purchased Royalty Period.

     (d) Irrevocable Assignment and Sale . The Seller and the Purchaser intend and agree that the sale, contribution, assignment, transfer and conveyance of the Purchased Assets under this Agreement shall be, and are, a true, complete, absolute and irrevocable assignment and sale by the Seller to the Purchaser of the Purchased Assets and that such assignment and sale shall provide the Purchaser with the full benefits of ownership of the Purchased Assets. Neither the Seller nor the Purchaser intends the transactions contemplated hereby to be, or for any purpose characterized as, a loan from the Purchaser to the Seller or a pledge or assignment or a security agreement. The Seller waives any right to contest or otherwise assert that this Agreement does not constitute a true, complete, absolute and irrevocable sale and assignment by the Seller to the Purchaser of the Purchased Assets under Law, which waiver shall be enforceable against the

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Seller in any Bankruptcy Event in respect of the Seller. The sale, contribution, assignment, transfer, conveyance and granting of the Purchased Assets shall be reflected on the Seller’s financial statements and other records as a sale of assets to the Purchaser.

     (e) Filings . The Seller hereby authorizes the Purchaser to execute, record and file, and consents to the Purchaser executing, recording and filing, at the Purchaser’s sole cost and expense, financing statements in the appropriate filing offices under the UCC (and continuation statements with respect to such financing statements when applicable), and amendments thereto, in such manner and in such jurisdictions as are necessary or appropriate to evidence or perfect the sale, contribution, assignment, transfer, conveyance and grant by the Seller to the Purchaser, and the purchase, acquisition and acceptance by the Purchaser from the Seller, of the Purchased Assets and to perfect the security interest in the Purchased Assets granted by the Seller to the Purchaser pursuant to Section 2.1(f) immediately below.

     (f) Security . Notwithstanding that the Seller and the Purchaser expressly intend for the sale, contribution, assignment, transfer, conveyance and granting of the Purchased Assets to be a true, complete, absolute and irrevocable sale and assignment, the Seller hereby assigns, conveys, grants and pledges to the Purchaser, as security for its obligations created hereunder in the event that the transfer contemplated by this Agreement is held not to be a sale, a first priority security interest in and to all of the Seller’s right, title and interest in, to and under the Purchased Assets and, in such event, this Agreement shall constitute a security agreement.

     Section 2.2 No Purchase or Sale of Excluded Assets . Notwithstanding anything to the contrary contained in this Agreement, Seller shall retain all of its right, title and interest in and to, and there shall be excluded from the sale, transfer, assignment and conveyance to Purchaser under this Agreement, all Excluded Assets.

 

Section 2.3 Taxes .

     (a) Transfer Taxes . Any transfer, documentary, sales, use, value-added, gross receipts, stamp, registration or other similar Taxes incurred in connection with or as a consequence of the transfer and sale of the Purchased Assets pursuant to this Agreement shall be borne by Purchaser. 2 The parties hereto shall cooperate, to the extent reasonably requested and legally permitted, to reduce any such transfer Taxes.

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     (b) Required Withholding . Purchaser shall withhold and deduct from the Purchase Price payable hereunder amounts required (if any) to be withheld and deducted from such consideration under the Code or other applicable Law. Any amounts so withheld and deducted shall be remitted by Purchaser on a timely basis to the appropriate Governmental Entity for the account of Seller, and Purchaser shall provide Seller reasonable evidence of such remittance within thirty (30) days of such remittance. To the extent that amounts are so withheld by Purchaser and duly paid over to the appropriate Governmental Entity, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to Seller in respect of which such deduction and withholding was made by the Purchaser. Seller shall furnish to Purchaser such forms, certificates and documentation (including, without limitation, Internal Revenue Service Forms W-8 and W-9) as may be necessary or appropriate, and that are legally required, to obtain any reduction of, credit for, or exemption from any withholding 3 .

     Section 2.4 No Assumed Liabilities . Notwithstanding any other provision set forth herein, Purchaser is not assuming, pursuant to this Agreement or the transactions contemplated herein, any liability or obligation of Seller or any of its Affiliates, whether now existing or hereafter arising, and all such liabilities and obligations shall be retained by, and remain the liabilities and obligations of, Seller or its Affiliates, as the case may be (the “ Excluded Liabilities and Obligations ”).

ARTICLE III
CLOSING DELIVERIES

     Section 3.1 Closing Date . The closing of the purchase and sale of the Purchased Assets shall take place at the offices of Purchaser in Hazelwood, Missouri effective on and as of the beginning of business on the date hereof, or at such other place, time and date as the parties hereto may mutually agree.

     Section 3.2 Payment of Purchase Price . On the Closing Date, the Purchaser shall deliver to Seller the Purchase Price in accordance with Section 2.1(b) by wire transfer of immediately available funds.

     Section 3.3 Seller’s Secretary Certificate . On the Closing Date, Seller shall deliver to Purchaser a certificate of the Secretary of Seller, dated the Closing Date, certifying as to (i) the incumbency of the officer of Seller executing this Agreement and (ii) the attached copies of

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Seller’s organizational documents and resolutions adopted by Seller’s Board of Directors authorizing the entry into this Agreement by Seller and the consummation by Seller of the transactions contemplated hereby.

     Section 3.4 Bill of Sale and Assignment . On the Closing Date, Seller and Purchaser shall each deliver to the other party hereto a duly executed bill of sale and assignment in form and substance reasonably acceptable to both parties and evidencing the sale and assignment to Purchaser of the Purchased Assets (the “ Bill of Sale ”).

     Section 3.5 Receipt . On the Closing Date, Seller shall deliver to Purchaser a duly executed receipt for payment of the Purchase Price.

     Section 3.6 Release of Granted Security Interest . On the Closing Date, and as a condition subsequent to Purchaser’s obligation hereunder to purchase the Purchased Assets, (i) Seller will deliver to Purchaser, in form and substance reasonably satisfactory to Purchaser, a full and final release by Seller’s Financial Institution of the Granted Security Interest with respect to the Purchased Assets and (ii) perform all actions contemplated to be performed by Seller under the terms and conditions of the payoff letter between Seller, Oxford Finance LLC and Oxford Finance Funding Trust 2012-1 dated January 31, 2014 and attached hereto as Exhibit A.

ARTICLE IV

SELLER’S REPRESENTATIONS AND WARRANTIES

Seller hereby represents and warrants to Purchaser as of the date hereof:

     Section 4.1 Existence . Seller is a corporation duly organized, validly existing and in good standing under the laws of the province of British Columbia, Canada. Seller has all power and authority, and all Consents of all Governmental Entities, required to own its property and conduct its business as now conducted and to exercise its rights and to perform its obligations under this Agreement. Seller is duly qualified to transact business and is in good standing in every jurisdiction in which such qualification or good standing is required by applicable Law except where the failure to be so qualified or in good standing would not reasonably be expected to have a material adverse effect on the performance of its obligations hereunder.

     Section 4.2 Authorization . Seller has the corporate power to enter into the Transaction Documents and to consummate the transactions contemplated thereby. The entry into the Transaction Documents, and the consummation of the transactions contemplated thereby, have

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