Exhibit 10.1

[ *** ]   CERTAIN INFORMATION CONTAINED IN THIS DOCUMENT MARKED BY BRACKETS HAS
BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 24b-2 OF THE SECURITIES AND EXCHANGE ACT OF 1934 AS AMENDED.

Execution Copy
SETTLEMENT AGREEMENT
          This Settlement Agreement, dated as of July 23, 2010 (the “Effective
Date”), is by and among Purdue Pharma L.P., a Delaware limited partnership
(“Purdue”), King Pharmaceuticals, Inc., a Tennessee corporation (“KPI”), and
Alpharma Inc., a Delaware corporation and a wholly-owned subsidiary of KPI
(“Alpharma” and, together with KPI, “King”). Purdue and King are sometimes
referred to herein individually as a “Party” and collectively as the “Parties.”
W I T N E S S E T H:
          WHEREAS, Purdue is the owner of United States patent number 6,696,088
(the “’088 Patent”) and United States patent number 7,658,939 (the “’939
Patent”);
          WHEREAS, Purdue and King are involved in litigation, Civil Action
No. 1:08 -cv- 50, (the “Action”) in the United District Court for the Western
District of Virginia (the “District Court”) concerning, inter alia, the validity
and infringement by King of the ’088 Patent and the ’939 Patent resulting from
King’s having obtained approval from the United States Food and Drug
Administration (the “FDA”) for all dosage strengths of Embeda®, an extended
release oral formulation of morphine (the “Embeda® Products”) through its
submission of New Drug Application (“NDA”) No. 22-321 (collectively with all
amendments and supplements thereto as of the Effective Date, the “King NDA”) and
subsequently selling the Embeda® Products;
          WHEREAS, in the Action, King has sought a declaratory judgment that
its Embeda® Products do not infringe the ’088 Patent or the ’939 Patent and that
such patents are invalid, and Purdue has asserted counterclaims against King
that the Embeda® Products infringe one or more claims of the ’088 Patent and the
’939 Patent, and the Parties now seek to resolve these claims and counterclaims
without further litigation; and
 

***   Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

 

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          NOW THEREFORE, for good and valuable consideration, the sufficiency
and receipt of which are hereby acknowledged, the Parties agree as follows:
          1. (a) On the Effective Date, in addition to this Settlement
Agreement, Purdue and King are executing and delivering to each other the
following documents:
                    (i) a Release by Purdue, in the form of Exhibit 1(a)(i)
hereto (the “Purdue Release”); and
                    (ii) a Release by King, in the form of Exhibit 1(a)(ii)
hereto (the “King Release”, and, together with the Purdue Release, the
“Releases”).
               (b) Unless otherwise expressly set forth herein, as used herein,
the term “Settlement Agreement” shall refer to this Settlement Agreement, and
such Settlement Agreement, together with each of the Exhibits attached hereto,
shall be referred to as the “Settlement Documents.” The definitions of the terms
herein apply equally to the singular and plural of the terms defined. Whenever
the context may require, any pronoun will include the corresponding masculine,
feminine and neuter forms. The words “include”, “includes” and “including” will
be deemed to be followed by the phrase “without limitation”. Unless the context
requires otherwise, (i) any definition of or reference to any agreement,
instrument or other document herein will be construed as referring to such
agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein or therein), and
(ii) the words “herein”, “hereof” and “hereunder”, and words of similar import,
will be construed to refer to this Settlement Agreement in its entirety and not
to any particular provision hereof. For purposes of the Settlement Documents,
“Affiliate” means, as to any Party, any person, firm, trust, partnership,
corporation, company or other entity or combination thereof, which directly or
indirectly controls, is controlled by or is under common control with such
Party. The terms “control” and “controlled” mean ownership of fifty percent
(50%) or more, including ownership by trusts with substantially the same
beneficial interests, of the voting and equity rights of such person, firm,
trust, partnership, corporation,
 

***   Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

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company or other entity or combination thereof or the power to direct the
management of such person, firm, trust, partnership, corporation, company or
other entity or combination thereof.
          2. On the Effective Date, counsel for Purdue and counsel for King
shall jointly inform the District Court of the execution of this Settlement
Agreement and, immediately after Purdue’s receipt of the Settlement Payment,
counsel for Purdue and counsel for King shall jointly file with the District
Court a stipulation dismissing the Action with prejudice. Such stipulation of
dismissal shall be in the form attached as Exhibit 2 hereto.
          3. Purdue covenants that neither it nor any of its Affiliates will
sue, make, or assert against King, its Affiliates, successors in interest,
suppliers, contractors, subcontractors, agents, wholesalers, retailers,
customers, end users, manufacturers, or distributors (“King parties”) any Claim
for patent infringement of the ´088 Patent, the ´939 Patent or any other United
States patent owned by Purdue or any Purdue Affiliate, or for which Purdue or a
Purdue Affiliate has the right to grant a license, including without limitation,
those patents and applications listed in paragraph 5, that would be infringed,
directly or indirectly, by one or more Embeda® Products (collectively, the
“Purdue Patents”) with respect to the manufacture, use, sale, offer for sale or
importation of the Embeda® Products (hereinafter, the “Covenant not to Sue”).
This Covenant not to Sue shall not apply to any patent outside the United
States, provided that Purdue shall obtain a limited covenant not to sue from its
foreign Affiliates to permit King to manufacture Embeda® outside of the United
States solely for sale in the United States. This Covenant not to Sue shall run
with title to the Purdue Patents and shall bind any assignee or other person or
entity who acquires an interest in any of the Purdue Patents through assignment,
conveyance, grant or otherwise. Any assignment in any interest in any of the
Purdue Patents shall be subject to the terms of this paragraph 3. Purdue shall
defend, indemnify, and hold King harmless from and against any and all Claims
arising from a breach of Purdue’s obligations in this paragraph 3. King shall
defend, indemnify and hold Purdue and its Affiliates harmless from any and all
claims arising in connection with King’s use of any Purdue Patent. King shall
have no right to enforce any Purdue Patent. This Covenant not to Sue shall not
extend beyond the Embeda® Products. As used herein, “Claim” means any claim,
counterclaim, third party
 

***   Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

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claim, demand, action or cause of action for patent infringement. Purdue and
King acknowledge and agree that the execution of the Settlement Documents and
the payment of the Settlement Payment and/or Royalties set forth in paragraph 4,
shall not be construed as an express or implied admission of misconduct,
responsibility, or liability whatsoever of either Party, and the Parties
expressly and specifically deny all such admissions. Rather, it is acknowledged
and agreed that the Settlement Documents have been entered into solely for the
purpose of settling and compromising the Action and to avoid the expense and
uncertainty of continued litigation. Without limiting the foregoing, no
admission is made by King by execution of the Settlement Documents or by payment
of the Settlement Payment and/or Royalties as to (i) the validity or
enforceability of any Purdue Patent or of King’s alleged infringement thereof,
or (ii) the appropriateness of any particular royalty or other payment.
          4. (a) No later than ten (10) business days after the execution of
this Settlement Agreement, King will pay Purdue a one-time, non-refundable cash
payment of [ *** ] United States dollars (US$ [ *** ]) (“Settlement Payment”) by
wire transfer of immediately available funds to an account previously designated
in writing by Purdue. In addition, King will pay Purdue a non-refundable
royalty, quarterly in arrears at the end of each calendar quarter, equal to [
*** ] percent ([ *** ]) of the Net Sales of Embeda® Products during the
applicable calendar quarter (the “Royalty”) during the Royalty Term (defined
below). Such Royalty will begin to accrue commencing August 1, 2010 and the
first payment shall be due with respect to the period commencing August 1, 2010
and ending on September 30, 2010 and quarterly thereafter. King shall pay such
Royalty to Purdue by wire transfer in immediately available funds, to an account
previously designated in writing by Purdue, within [ *** ] days following the
end of each calendar quarter with respect to Net Sales during the immediately
preceding calendar quarter. King shall pay interest on any and all amounts not
paid when due hereunder at a rate equal to the lesser of (i) [ *** ] percent ([
*** ]) above the prime rate reported in The Wall Street Journal (Eastern
Edition) on the date such Royalty was due, but not less than [ *** ] percent ([
*** ]), and (ii) the maximum permissible rate under the law. Such interest shall
accrue from the date such payment was originally due.
 

***   Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

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               (b) (i) The Royalty shall be payable for Net Sales made on or
after August 1, 2010 until the earlier to occur of (A) the expiration of all of
the following: the ’088 Patent; the ’939 Patent; and any patents claiming
priority to United States patent application nos. 10/689,866 and 10/700,861
which issue before the later to expire of the ’088 Patent and the ’939 Patent
and which would be infringed by the Embeda® Products, and (B) the date on which,
following the entry of a judgment in another case or proceeding after the
Effective Date, each and every asserted claim of all of the following: the ’088
Patent and the ’939 Patent covering the Embeda® Products; and any patents
claiming priority to United States patent application nos. 10/689,866 and
10/700,861 which issue before the later to expire of the ’088 Patent and the
’939 Patent and which would be infringed by the Embeda® Products is held to be
either (I) unenforceable or (II) invalid, or both; provided, however, that in
the case of either clause (I) or (II) above, the mandate affirming the judgment
in such other case or proceeding is issued by the United States Court of Appeals
for the Federal Circuit following appeal of such judgment, or the time for
appeal from that judgment has lapsed (the “Royalty Term”).
               (c) Each Royalty payment by King hereunder shall be accompanied
by a royalty report from King certified by an appropriate financial officer of
King which sets forth (i) the Net Sales derived from the sale of Embeda®
Products, during the immediately preceding calendar quarter, and (ii) the amount
of the Royalty payable with respect to such Net Sales. If Purdue disputes the
Net Sales and/or Royalty amounts set forth in the royalty report, such dispute
shall be resolved in accordance with Section 4(e).
               (d) “Net Sales” shall mean the gross amount invoiced by King, or
any licensee, subcontractor or agent of King, for the sale of the Embeda®
Products in the United States, less the following amounts directly attributable
to Embeda® Products: (i) sales and excise taxes, value added taxes, and duties
which fall due as a direct consequence of such sales and any other governmental
charges imposed upon the importation, use or sale, but only to the extent that
such taxes and duties are (A) actually included and itemized in the gross
amounts invoiced to and specifically paid by the purchaser over and above the
usual selling price, (B) not recovered or recoverable and (C) not income or
franchise
 

***   Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

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taxes or taxes in lieu thereof; (ii) trade, sales, trade show, quantity and cash
discounts, promotional discounts (e.g., co-pay cards) and stocking allowances;
(iii) credits to customers for purchaser returns, returned goods allowances,
billing and shipping errors, recalls, rejected goods and damaged goods;
(iv) price adjustments, including those on customer inventories following price
changes; (v) allowances or credits to customers on account of withdrawal,
recall, or return; (vi) rebates, and wholesaler chargebacks or similar credits
or payments granted to customers pursuant to contract or otherwise (including
any and all federal, state or local government rebates, discounts or
chargebacks, including Medicaid and Medicare rebates); (vii) freight, shipment
and insurance costs; and (viii) amounts paid pursuant to inventory management
agreements. The amounts described in clauses (i) through (viii) above shall be
accrued in accordance with United States generally accepted accounting
principles consistently applied. Net Sales shall not include amounts invoiced
for the supply, disposition or use of Embeda® Products in clinical or
pre-clinical trials or as free samples (such samples to be in quantities common
in the industry).
               (e) (i) Purdue shall have the right for a period of three years
after receiving a royalty report, and at its expense, to engage Deloitte &
Touche Financial Advisory Services LLP, an affiliate thereof, or another
independent certified public accounting firm chosen by Purdue and reasonably
acceptable to King (a “CPA Firm”), to inspect and audit the relevant records of
King solely to verify the contents of the royalty report. King shall make its
records available for inspection and audit upon reasonable advance written
notice during regular business hours at such place or places where such records
are customarily kept. Such inspection and audit right shall not be exercised
more than once in any calendar year. The results of each inspection, if any,
shall be provided to both Parties and shall be binding on all Parties unless
King provides a written objection to the inspection and audit findings within
thirty days of receipt thereof. In the event that any such inspection and audit
shall conclude that the Royalty is understated by [ *** ] percent ([ *** ]) or
more in any given calendar year, King shall pay the reasonable fees of the CPA
Firm in respect of the inspection, and make any payments required to remedy the
underpayment with interest as provided herein. Any dispute regarding the results
of any inspection and audit shall be submitted to another independent certified
public accounting firm acceptable to both
 

***   Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

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Purdue and King. The decision of such firm will be binding on the Parties, and
the Party with the least favorable outcome from such binding decision shall pay
the fees and expenses of such firm.
                    (ii) Prior to any inspection and audit taking place, the
independent certified public accounting firm shall enter into a confidentiality
agreement reasonably acceptable to King with respect to the information to which
they are given access.
          5. (a) King agrees that, except as provided in paragraphs 5(b), 5(c)
and 5(d), it will not initiate, file, participate, finance, aid, raise a defense
or assist in any action or proceeding before a court, agency, other tribunal or
other governmental authority (except as required by court order, subpoena or
law, or in defending any claim of infringement) that challenges the validity,
patentability, priority of invention or other claim to priority or
enforceability of the ’088 Patent, the ’939 Patent, any patents claiming
priority to United States patent application nos. 10/689,866 and 10/700,861, or
any of the following patents: U.S. Patent Nos. 6,277,384; 6,375,957; 6,475,494;
6,696,066; 7,172,767; 7,419,686; 6,228,863; and 6,627,635. The term “assist”
shall mean to provide any third party with King’s analysis of any of the patents
identified above in this paragraph 5(a) in furtherance of a validity challenge,
provided that “assist” shall not include providing or disclosing such analysis
pursuant to the requirement of a governmental or judicial agency, or in response
to a subpoena or any discovery request made upon King, or if required by
operation of law. Nothing in this paragraph or elsewhere in this Settlement
Agreement shall preclude or prohibit any actions by King related to the
prosecution of its patent applications. King will not provide to any third party
any Purdue confidential information, or attorney work product relating to Purdue
confidential information, except as required by statute, ordinance, regulations,
court order or compulsory legal process, provided that King will request
confidential treatment with respect to any confidential information or attorney
work product disclosed pursuant hereto.
               (b) With respect to King sequestered antagonist products other
than Embeda® Products, King will not be prohibited from taking any of the
actions specified in paragraph 5(a)
 

***   Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

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on or after the date on which King files an NDA for such sequestered-antagonist
product other than an Embeda® Product.
               (c) King will not be prohibited from taking any of the actions
specified in paragraph 5(a) if Purdue or any assignee or Affiliate of Purdue
breaches its obligations under paragraph 3.
               (d) King will not be prohibited from taking any of the actions
specified in paragraph 5(a) if Purdue or any of its Affiliates commences a
patent infringement proceeding in the United States against King alleging
infringement of any patent specified in paragraph 5(a).
          6. Purdue represents and warrants as of the Effective Date that (a) it
has all necessary power and authority to execute and deliver the Settlement
Documents and to perform its obligations thereunder, (b) the execution, delivery
and performance of the Settlement Documents have been duly and validly
authorized by it, (c) there is no other agreement, whether written or oral,
among the Parties hereto with respect to the subject matter of the Settlement
Documents other than as set forth herein and therein, (d) Purdue and/or one of
its Affiliates owns the entire right, title and interest in and to the Purdue
Patents, including without limitation, U.S. Patent Nos. 6,696,088; 7,658,939;
6,277,384; 6,375,957; 6,475,494; 6,696,066; 7,172,767; 7,419,686; 6,228,863; and
6,627,635; no other person or entity has any rights under the Purdue Patents,
and neither Purdue nor any of its Affiliates has otherwise transferred or
assigned any of its rights under the Purdue Patents; (e) Purdue and/or one of
its Affiliates has the sole right to enforce the Purdue Patents; and (f) neither
Purdue nor any of its Affiliates has transferred or assigned any of its rights
or claims with respect to the Action to a third party. Upon execution and
delivery of the Settlement Documents by Purdue, the Settlement Documents shall
constitute the legal, valid and binding agreements of Purdue, enforceable
against it in accordance with their respective terms and conditions, subject to
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforceability of creditors’ rights generally and other general
equitable principles which may limit the right to obtain certain remedies.
          7. KPI and Alpharma represent and warrant as of the Effective Date
that (a) each of them has all necessary power and authority to execute and
deliver the Settlement Documents and to
 

***   Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

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perform their obligations thereunder, (b) the execution, delivery and
performance of the Settlement Documents have been duly and validly authorized by
each of them, (c) there is no other agreement, whether written or oral, among
the Parties hereto with respect to the subject matter of the Settlement
Documents other than as set forth herein and therein, (d) KPI or Alpharma owns
all right, title and interest in and to the King NDA, no other person or entity
has any rights under the King NDA, and neither KPI nor Alpharma has otherwise
transferred or assigned any of its rights under the King NDA subject to the lien
of Credit Suisse AG as collateral agent pursuant to the Credit Agreement dated
as of May 11, 2010, among KPI and the lenders named therein and (e) neither KPI
nor Alpharma has transferred or assigned any of its rights or claims with
respect to the Action. Upon execution and delivery of the Settlement Documents
by KPI and Alpharma, the Settlement Documents shall constitute the legal, valid
and binding agreements of each of them, enforceable against each of them in
accordance with their respective terms and conditions, subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforceability of creditors’ rights generally and other general equitable
principles which may limit the right to obtain certain remedies.
          8. WARRANTY DISCLAIMER. EXCEPT AS EXPRESSLY SET FORTH IN THIS
SETTLEMENT AGREEMENT, NEITHER PURDUE NOR ANY OF ITS AFFILIATES MAKES ANY
REPRESENTATIONS OR EXTENDS ANY WARRANTIES OF ANY KIND, EITHER EXPRESS OR
IMPLIED, INCLUDING ANY EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT, INCLUDING WITH RESPECT TO THE
PURDUE PATENTS OR ANY OTHER PATENT HELD BY PURDUE. FURTHERMORE, UNLESS EXPRESSLY
STATED IN THIS SETTLEMENT AGREEMENT, NOTHING IN THIS SETTLEMENT AGREEMENT SHALL
BE CONSTRUED AS A WARRANTY THAT ANY PATENT, THE PRACTICE OF ANY INVENTION
CLAIMED IN ANY PATENT OR OTHER PROPRIETARY RIGHTS INCLUDED IN THE PURDUE PATENTS
DO NOT, OR THE MAKING, HAVING MADE, USING, SELLING, OFFERING FOR SALE OR
IMPORTING OF EMBEDA® PRODUCTS BY ANY PERSON DOES NOT, INFRINGE ANY PATENT RIGHTS
OR
 

***   Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

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OTHER INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY. IT IS HEREBY AGREED AND
ACKNOWLEDGED BY KING THAT PURDUE IS GIVING NO GUARANTEE OR WARRANTY, EXPRESS OR
IMPLIED, TO KING IN RELATION TO THE SAFETY OR THERAPEUTIC EFFECTIVENESS OF THE
EMBEDA® PRODUCTS OR THE VALIDITY OR ENFORCEABILITY OF ANY INTELLECTUAL PROPERTY
RIGHTS. FURTHER, KING WILL NOT GIVE ANY SUCH GUARANTEE OR WARRANTY TO ANY THIRD
PARTIES ON BEHALF OF PURDUE.
          9. Except as (a) required by statute, ordinance or regulation,
including reporting requirements under the Securities Exchange Act of 1934, as
amended, (b) required pursuant to compulsory legal process, (c) necessary for
the exercise of the rights granted to the Parties under the Settlement
Documents, or (d) expressly permitted under this paragraph 9, none of Purdue,
King, or any of their respective Affiliates will publicly announce or otherwise
disclose to any third party any of the terms of the Settlement Documents,
without the prior written approval of the other Party, which prior written
approval shall not be unreasonably withheld. Purdue acknowledges that King
reasonably expects to disclose certain information about the Settlement
Documents (i) pursuant to reporting requirements under the securities laws and
regulations and (ii) to certain third parties to the extent necessary to
demonstrate the rights granted to King hereunder. To the extent King determines
to file this Settlement Agreement as part of its periodic reporting
requirements, it will redact the Settlement Payment and Royalty and request
confidential treatment from the SEC for such information. King will use
commercially reasonable efforts to have such confidential treatment granted.
Other than as provided in the immediately preceding two sentences, if either
Party determines that it will be required to file the Settlement Documents to
comply with legal or regulatory requirements, promptly after the giving of
notice by such Party as contemplated above, the Parties will use commercially
reasonable efforts to agree on those provisions of the Settlement Documents that
the Parties will seek to have redacted as provided above. Notwithstanding
anything to the contrary above, (i) Purdue may disclose the terms of the
Settlement Documents to third parties in connection with patent litigation
involving the ’088 Patent, the ’939 Patent or the other Purdue Patents or
 

***   Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

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in connection with settlement discussions and agreements with alleged infringers
of ’088 Patent, the ’939 Patent or the other Purdue Patents, subject to all such
third parties keeping the terms of the Settlement Documents confidential, and
(ii) each Party may disclose the terms of the Settlement Documents to its
respective Affiliates, insurers, lenders, attorneys and accountants, subject to
such Affiliates, insurers, lenders, attorneys and accountants being bound by
confidentiality obligations.
          10. (a) The Settlement Documents are binding upon and shall inure to
the benefit of each Party hereto, and each of their respective successors and
permitted assigns. Except as provided in paragraph 10(b), King may not assign,
transfer, license or otherwise convey any of its rights or obligations under the
Settlement Documents without the prior written consent of Purdue, which consent
may be withheld in the sole discretion of Purdue. Any assignment or attempted
assignment of the rights hereunder by KPI or Alpharma in contravention of the
provisions of this paragraph 10 shall be void and shall have no force or effect.
               (b) King may transfer or assign this Agreement, or any rights or
obligations in this Agreement, to (i) a third party that acquires (x) all or
substantially all of the assets of King, (y) the non-Embeda® sequestered
antagonist products of King, or (z) the Embeda® Products, (ii) a third party
that is the surviving third party in a merger with King, (iii) a corporate
successor in interest of King, or (iv) an Affiliate of King; provided that in
the case of an assignment permitted by clause (b)(i)(y) or (b)(iv), King shall
remain subject to the terms and conditions of this Settlement Agreement.
               (c) Any party that becomes a transferee, assignee or successor in
interest pursuant to paragraphs 10(a) or 10(b) except for 10(b)(i)(y) of this
Settlement Agreement, or obtains any rights or obligations hereunder, as a
result of any assignment or transfer, will thereby become subject to all
obligations and other applicable terms and conditions of this Settlement
Agreement and King will require that such party agree in writing to be bound by
such obligations, terms and conditions to the same extent as King had been
bound. Any party that becomes a transferee, assignee or successor in interest
pursuant to paragraph 10(b)(i)(y) of this Settlement Agreement, or obtains any
rights or obligations hereunder, as a result of such assignment or transfer,
will thereby become subject to the applicable terms
 

***   Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

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and conditions of this Settlement Agreement (other than paragraphs 21 and 22),
and King will require that such party agree in writing to be bound by such
obligations, terms and conditions to the same extent as King had been bound.
          11. The Settlement Documents set forth the entire agreement and
understanding among the Parties hereto as to the subject matter hereof and
supersede all other documents, oral consents or understandings, if any, made
between Purdue and King (excluding any agreements or stipulations endorsed by
court order) before the Effective Date with respect to the subject matter
hereof. None of the terms of the Settlement Documents shall be amended or
modified except in a writing signed by each of the Parties hereto. The Parties
acknowledge that there have been a number of drafts of the Settlement Documents
exchanged between them prior to the Parties’ agreement on the final version of
the Settlement Documents which have been executed by them. The Parties expressly
agree that these drafts have been superseded by the executed Settlement
Documents and shall not be used in any dispute between the Parties as evidence
with respect to interpreting the meaning of any provision of this Settlement
Agreement.
          12. Any term or provision of the Settlement Documents which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be deemed
reformed to the extent required to make such term or provision valid or
enforceable in the manner most closely reflecting the Parties’ intentions as
reflected in the Settlement Documents (provided that any such reformation can be
achieved without material change to the economic value of the transactions
contemplated by the Settlement Documents), and shall not render invalid or
unenforceable the remaining terms and provisions of the Settlement Documents in
such jurisdiction or in any other jurisdiction.
          13. This Settlement Agreement, and the rights and obligations created
hereunder, shall be governed by and interpreted according to the substantive
laws of the State of New York without regard to its choice of law or conflicts
of law principles.
          14. Any notice required under this Settlement Agreement shall be in
writing and shall be given (and shall be deemed to be duly given upon receipt)
by delivery in person, by facsimile or
 

***   Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
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by registered or certified mail (postage prepaid, return receipt requested) to
the respective Parties at the following addresses (or at such other address for
a Party as shall be specified by like notice):

     
 
  If to Purdue:
 
   
 
  Purdue Pharma L.P.
 
  One Stamford Forum
 
  201 Tresser Boulevard
 
  Stamford, CT 06901-3431
 
  Attention: General Counsel
 
  Fax No.: (203) 588-6272
 
   
 
  with a copy to:
 
   
 
  Chadbourne & Parke LLP
 
  30 Rockefeller Plaza
 
  New York, NY 10112
 
  Attention: Stuart D. Baker
 
  Fax No.: (212) 489-7130
 
   
 
  If to King:
 
   
 
  King Pharmaceuticals, Inc.
 
  501 Fifth Street
 
  Bristol, TN 37620
 
  Attention: General Counsel
 
  Telephone: (423) 989-8000
 
  Fax No.: (423) 990-2566
 
   
 
  with copies to:
 
   
 
  King Pharmaceuticals, Inc.
 
  400 Crossing Boulevard, 8th Floor
 
  Bridgewater, New Jersey 08807
 
  Attention: General Counsel
 
  Telephone: (908) 429-6000
 
  Fax No.: (908) 927-8430
 
   
 
  Hunton & Williams, LLP
 
  Attention: Thomas G. Slater
 
  Riverfront Plaza, East Tower
 
  951 East Byrd Street
 
  Richmond, Virginia 23219
 
  Telephone (804) 788-8200
 
  Fax No. (804) 788-8218

          15. A waiver by any Party of any term or condition of this Settlement
Agreement in any one instance shall not be deemed or construed to be a waiver of
such term or condition for any other
 

***   Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

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instance in the future (whether similar or dissimilar) or of any subsequent
breach of this Settlement Agreement. All rights, remedies, undertakings,
obligations and agreements contained in this Settlement Agreement shall be
cumulative and none of them shall be a limitation of any other remedy, right,
undertaking, obligation or agreement of any of the Parties.
          16. Each of the Parties agrees that in executing the Settlement
Documents and in accepting the consideration provided for herein, each of the
Parties does so with full knowledge of any and all rights that each of the
Parties may have with respect to the controversies herein compromised. Each of
the Parties affirms that it is not relying and has not relied upon any
representation or statement made by any of the other Parties with respect to the
facts involved in said controversies or with regard to each of the Parties’
legal rights or asserted legal rights, except as set forth in paragraphs 6, 7
and 20 hereof. Each of the Parties hereby assumes the risk of any mistake of
fact or legal right with regard to said controversies or with regard to any of
the facts or legal rights that are now unknown to such Party, except with
respect to any breach of paragraphs 6, 7 and 20 hereof.
          17. Each of the Parties agrees that it has received independent legal
advice from its attorneys with respect to the rights and asserted rights arising
out of the controversies between the Parties relating to the Action. Each of the
Parties further agrees that it and its counsel have had adequate opportunity to
make whatever investigation or inquiry they may have deemed necessary or
desirable in connection with the subject matter of this Settlement Agreement,
prior to the execution hereof.
          18. This Settlement Agreement may be executed in counterparts
(including by facsimile or other electronic transmission), and each fully
executed counterpart shall be deemed an original of this Settlement Agreement.
          19. Except for the rights, agreements and covenants specifically
granted pursuant to the Settlement Documents, no other right, written or oral
license, covenant not to sue, waiver or release of future infringement or other
written or oral authorization is or has been granted or implied by the
Settlement Documents. Furthermore, and for the avoidance of doubt, no activity
by King with respect to the making, having made, using, offering to sell,
selling, shipping, distributing or importing of any
 

***   Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

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pharmaceutical product or ingredient other than an Embeda® Product, shall
constitute an authorized sale under this Settlement Agreement.
          20. Purdue represents and warrants that it has no pending request for
interference with respect to Alpharma’s U.S. patent application Serial
No. 10/667,676 and related applications and covenants that it will not file any
such request for so long as King does not challenge the validity or
enforceability of the ’088 Patent or the ’939 Patent. Nothing in this paragraph
or elsewhere in this Settlement Agreement shall preclude or prohibit any other
actions by Purdue related to the prosecution of its patents.
          21. Each of Purdue and King agrees with respect to any future
litigation involving the ’088 Patent or the ’939 Patent to be bound by, and will
jointly request that the District Court adopt, the District Court’s June 22,
2010 findings in the Action with respect to the claim construction of certain
terms used in the ’088 Patent and the ’939 Patent. Notwithstanding the
foregoing, either Party may challenge such claim construction on an appeal from
the District Court.
          22. Each of Purdue and King agrees that any future litigation between
them with respect to the ’088 Patent and the ’939 Patent or any King
sequestered-antagonist product will be brought in the [ *** ].
          23. King acknowledges that, as a result of this Settlement Agreement,
there is no pending case or controversy between the Parties with respect to
infringement of the ’088 Patent or the ’939 Patent by the Embeda® Products. King
will not assert the fact of this Settlement Agreement or the existence of or
settlement of the Action or the allegations included in paragraphs [ *** ] of
the Complaint, paragraphs [ *** ] of the Amended Complaint and paragraphs [ ***
] of the Supplemental Complaint, in each case, filed in Civil Action 1:08-CV
00050 (U.S. District Court for the Western District of Virginia) in support of a
claim [ *** ] in any future litigation between the Parties.
 

***   Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

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***   Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.

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Settlement Agreement Signature Page
          IN WITNESS WHEREOF, each of the Parties has caused this Settlement
Agreement to be executed as of the Effective Date by its duly authorized officer
or agent.

            PURDUE PHARMA L.P.

By: Purdue Pharma Inc., its general partner
      By:   /s/ Edward B. Mahony         Name:   EDWARD B. MAHONY       
Title:   EVP, CFO AND TREASURER        KING PHARMACEUTICALS, INC.
      By:   /s/ Brian A. Markison         Name:   Brian A. Markison       
Title:   President & Chief Executive Officer        ALPHARMA INC.
      By:   /s/ James W. Elrod         Name:   James W. Elrod        Title:  
General Counsel     

 

***   Confidential treatment requested pursuant to a request for confidential
treatment filed with the Securities and Exchange Commission. Omitted portions
have been filed separately with the Commission.