Pozen/Tribute -- summary under Inversions

Overview

Tribute is proposing an inversion transaction (targeted to be completed in Q4, 2015) with Pozen, a Delaware public company, which would result in both companies being held through an Irish holding company (Parent) with Pozen and Tribute shareholders holding approximately 63% and 37% of the shares of Parent, respectively, before giving effect to a subsequent financing. To achieve this structure, Pozen will cause Parent to be incorporated, “Ltd2” (an Irish private limited company) would be incorporated as a direct, wholly-owned subsidiary of Parent, and each of US Merger Sub and Can Merger Sub would be incorporated as sister corporations and subsequently transferred to become direct, wholly-owned subsidiaries of Ltd2. Can Merger Sub would acquire all of the outstanding "Tribute Common Shares" under the (OBCA) “Arrangement” in exchange for delivering Parent shares, and US Merger Sub would be merged with and into Pozen under a Delaware merger, with Pozen as the survivor (the “Merger”). The Merger and Arrangement (collectively, the "Transaction") are conditional on an opinion from Pozen's special tax counsel to the effect that Code s. 7874, existing regulations promulgated thereunder, and official interpretation thereof should not apply so as to cause Parent to be treated as a U.S. corporation for Code purposes - – and a U.S.$3.5M termination fee is payable to Tribute if this opinion cannot be delivered.

Tribute

An Ontario specialty pharmaceutical company with a primary focus on the acquisition, licensing, development and promotion of healthcare products in Canada and the U.S. markets whose shares trade on the TSX and OTCQX.

Parent

A private limited company formed on May 12, 2015 under the laws of Ireland which has not conducted any material activities other than in connection with the proposed transactions. It is expected that Parent Shares will be listed on NASDAQ, and a listing application has been made to the TSX.

US Merger Sub

A Delaware corporation initially incorporated on August 13, 2015 as a sister company to Parent and as at the transactions closing date will be an indirect subsidiary of Parent.

Can Merger Sub

An Onario corporation incorporated on June 5, 2015 and a wholly-owned indirect subsidiary of Parent.

Pozen

Pozen is a specialty pharmaceutical Delaware company that to date has historically focused on developing novel therapeutics for unmet medical needs and licensing those products to other pharmaceutical companies for commercialization. Pozen Common Stock is currently listed on NASDAQ.

Ltd2

Aralez Pharmaceuticals Holdings Limited, an Irish private limited company which is a direct, wholly-owned subsidiary of Parent

Plan of Arrangement

1. Tribute Common Shares held by dissenting shareholders will be deemed to have been transferred to Can Merger Sub.
2. If a Tribute Optionholder provides to Tribute a duly completed Optionholder Election Form, its “Exchange Options” will be deemed to be surrendered to Tribute in exchange for Tribute Common Shares. If a Tribute Optionholder does not deliver an Optionholder Election Form, its Tribute Options shall be deemed to be (A) Exchange Options in the event they are in the money; or (B) surrendered to Tribute in exchange for a cash payment of C$0.0001 from Tribute per applicable Tribute Option in the event they are not in the money.
3. Tribute Warrants will entitle their holder to purchase Parent Shares.
4. After the Arrangement Effective Time, Tribute Compensation Options will entitle their holders to purchase Parent Shares and Tribute Indenture Warrants for no additional consideration beyond that set out in the related certificates (as adjusted for the Arrangement Exchange Ratio).
5. The Tribute Common Shares will be transferred to Can Merger Sub in exchange for Parent Shares (delivered directly by Parent or on its behalf by the Arrangement Depositary on behalf of Parent) based on the Arrangement Exchange Ratio of 0.1455 Parent Shares per Tribute Common Share.
6. Rollover Options (i.e., options elected by the holder to be such) will be assumed by Parent and converted into Parent Options.

Final structure

Upon completion of the Transaction, Parent will be the public holding company and each of Pozen and Tribute will be an indirect wholly-owned subsidiary. To effect this structure, Pozen caused Parent to be incorporated, Ltd2 to be incorporated as a direct, wholly-owned subsidiary of Parent, and each of US Merger Sub and Can Merger Sub to be incorporated as sister corporations and subsequently transferred to become direct, wholly-owned subsidiaries of Ltd2. Each of Ltd2, US Merger Sub and Can Merger Sub currently has a nominal amount of stock outstanding. Upon completion of the Transaction (excluding "Parent Financing"), Parent expects that the Parent Shares shown below in the 2nd column will be outstanding based on the securities of Pozen and Tribute outstanding as at October 26, 2015 (calculated on a fully diluted basis) shown in the 1st column:

Creation of distributable reserve

Under Irish law, dividends may be paid (and share repurchases and redemptions must generally be funded) only out of "distributable reserves", which Parent will not have immediately following the completion of the Transaction. Distributable reserves generally means accumulated realized profits less accumulated realized losses and includes reserves created by way of capital reduction. Shareholders are therefore being asked to approve the creation of distributable reserves of Parent (through the reduction of the share premium account of Parent) in order to facilitate Parent's ability to pay dividends (and repurchase or redeem shares) after the Transaction.

Canadian tax consequences

Exchange will occur on a taxable basis for Canadian residents.

U.S. tax consequences

Reorganization

The Arrangement is intended to qualify as a "reorganization" within the meaning of Code s. 368(a), so that a U.S. holder of Tribute Common Shares will not recognize income, gain or loss upon the U.S. holder's receipt of Parent Shares in exchange for the U.S. holder's Tribute Common Shares in the Arrangement. However, a U.S. holder who is a five-percent transferee shareholder, as defined in the applicable Treasury regulations under s. 367(a), with respect to Parent immediately after the Arrangement will qualify for non-recognition treatment only if such U.S. holder files a "gain recognition agreement," as defined in the regulations, with the IRS.

Inversion rules. Under Section 7874 of the Code, Parent would be treated as a foreign corporation for Code purposes if the former stockholders of Pozen own (within the meaning of s. 7874) less than 80% (by both vote and value) of Parent Shares by reason of holding shares in Pozen (the "ownership test"). The Pozen Stockholders are expected to satisfy this test.. As a result, under current law, Parent is expected to be treated as a foreign corporation. Tribute's obligation to complete the transactions is conditional upon its receipt of a s. 7874 opinion from Pozen's special tax counsel, dated as of the Closing Date (subject to certain qualifications and limitations) to the effect that s. 7874, existing regulations promulgated thereunder, and official interpretation thereof should not apply so as to cause Parent to be treated as a U.S. corporation for Code purposes.

Termination fee

Under the Transaction Agreement, Pozen will be required to pay Tribute a Termination Fee of US$3,500,000 if Pozen's special tax counsel is unable to deliver the above opinion.

Termination for inversion rule changes

Pozen and/or Tribute are permitted to terminate the Transaction Agreement if, prior to the Closing Date, there is (i) a change in U.S. federal tax law (whether or not such change in law is yet effective) or any official interpretations thereof as set forth in published guidance by the U.S. Treasury Department or the IRS (other than IRS news releases) (whether or not such change in official interpretation is yet effective) or (ii) a bill that would implement such a change that has been passed by the United States House of Representatives and the United States Senate and for which the time period for the President of the United States to sign or veto such bill has not yet elapsed, in any such case, that, as a result of consummating the Transaction contemplated by the Transaction Agreement, in the opinion of nationally recognized U.S. tax counsel, would have a material adverse effect, including causing Parent to be treated as a United States domestic corporation for Code purposes, as further specified in the Transaction Agreement.

PFIC rules

Tribute believes that it is not treated as a passive foreign investment company.

Irish tax consequences

Irish domestic law provides that a non-Irish resident shareholder is not subject to dividend withholding tax on distributions received from Parent if such shareholder is beneficially entitled to the distributions and is either:

• a person (not being a company) resident for tax purposes in a "relevant territory" (including the U.S. and Canada) and is neither resident nor ordinarily resident in Ireland (for a list of "relevant territories" for DWT purposes see Appendix J to this Circular);
• a company resident for tax purposes in a "relevant territory," provided such company is not under the control, directly or indirectly, of a person or persons who is or are resident in Ireland;
• a company, wherever resident, that is controlled, directly or indirectly, by a person or persons resident in a "relevant territory" and who is or are (as the case may be) not controlled, directly or indirectly, by a person or persons who is or are not resident in a "relevant territory";
• a company, wherever resident, whose principal class of shares (or those of its 75% direct or indirect parent) is substantially and regularly traded on a stock exchange in Ireland, on a recognized stock exchange in a "relevant territory" or on such other stock exchange approved by the Irish Minister for Finance; or
• a company, wherever resident, that is wholly owned, directly or indirectly, by two or more companies where the principal class of shares of each of such companies is substantially and regularly traded on a stock exchange in Ireland, on a recognized stock exchange in a "relevant territory" or on such other stock exchange approved by the Irish Minister for Finance;

and provided, in all cases noted above, Parent or, in respect of shares held through DTC or CDS, any qualifying intermediary appointed by Parent, has received from the shareholder, where required, the relevant Irish Revenue Commissioners forms.