Exhibit 10.2

EXECUTION VERSION

CERTAIN MATERIAL (INDICATED BY AN ASTERISK) HAS BEEN OMITTED FROM THIS DOCUMENT
PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED MATERIAL HAS BEEN
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.

Dated 11 September 2014

 

 

Dr. Falk Pharma GmbH

- and -

Salix Pharmaceuticals, Inc.

 

 

FIRST AMENDMENT TO LICENSE AGREEMENT

(Budesonide)

 

 

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THIS FIRST AMENDMENT TO LICENSE AGREEMENT is made to be effective as of the 11th
day of September, 2014

BETWEEN:

(1) Dr. Falk Pharma GmbH, a company organized under the laws of Germany, with
its principal offices at Leinenweberstrasse 5, 79108 Freiburg, Germany (“Falk”);
and

(2) Salix Pharmaceuticals, Inc., a company incorporated in the State of
California whose principal place of business is 8510 Colonnade Center Drive,
Raleigh, North Carolina 27615, U.S.A. (“Salix”).

WHEREAS:

(a) Falk and Salix are parties to that certain License Agreement, dated 13 March
2008 (the “Original Agreement”);

(b) Falk and Salix are parties to litigation, Civil Action No. 12-cv-1104-GMS
(D. Del.), with Lupin Limited and Lupin Pharmaceuticals, Inc. relating to
Salix’s APRISO® product (the “Litigation”);

(c) Falk and Salix desire to settle the Litigation and in connection therewith
to grant to Lupin Ltd. (as hereinafter defined) the right to distribute the Foam
Product (as such term is defined in the Original Agreement) in Canada; and

(d) In order to effect the afore-described arrangements, Falk and Salix wish to
expand the territory covered by the Original Agreement to include Canada and in
connection therewith to make certain modifications to the arrangements set forth
in the Original Agreement;

NOW THEREFORE, in consideration of the foregoing premises and other good and
valuable consideration, the sufficiency and receipt of which is hereby
acknowledged, the parties hereto, intending to be legally bound, hereby agree as
follows:

 

1. DEFINITIONS

 

  1.1. In this First Amendment the following definitions shall apply unless the
context requires otherwise:

“Applicable Laws” means the applicable laws, rules and regulations that may be
in effect from time to time.

 

  1.2. Terms defined in the Original Agreement or in Clause 2 of this First
Amendment are used in this First Amendment with the same meanings accorded to
them in the Original Agreement (as amended by Clause 2, if relevant) or in
Clause 2, as the case may be.

 

2. AMENDMENTS TO DEFINITIONS IN ORIGINAL AGREEMENT

 

  2.1. Clause 1.1 of the Original Agreement is amended by adding at the end
thereof the following definitions:

 

  2.1.1. “Agreement” shall mean this License Agreement as from time to time
amended in accordance with the provisions of Clause 23 hereof.

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  2.1.2. “Authorized Generic” shall mean any product that (i) contains the
Compound, including without limitation Product, (ii) is approved for
distribution in the United States under or pursuant to any NDA filed by or on
behalf of Falk or Salix in respect of such product, and (iii) is distributed
without the trademark used by Falk and/or Salix for purposes of distribution and
sale of the branded version of the product.

 

  2.1.3. “Canada Term” shall commence on the First Amendment Date and continue
in respect of each Product until whichever is the later of: (a) the Patent
Expiry Date (Canada) as applicable to such Product or (b) the seventeenth (17th)
anniversary of the Launch of such Product, but subject always to earlier
termination under Clause 17.

 

  2.1.4. “Canada Territory” shall mean Canada.

 

  2.1.5. “First Amendment” shall mean that certain First Amendment to License
Agreement, dated the First Amendment Date, between Falk and Salix, as the same
may be amended from time to time in accordance with the provisions of the said
document.

 

  2.1.6. “First Amendment Date” shall mean 11 September 2014.

 

  2.1.7. “Generics Manufacturer” shall mean any Third Party that as a material
part of its business markets or sells Generic Products anywhere in the world or
has any Affiliate that does so.

 

  2.1.8. “Generic Product” shall mean a product that gains marketing approval
without de novo evidence of safety and efficacy, such as through an abbreviated
new drug application (ANDA) as defined in 21 U.S.C. 355(j) or an application
submitted pursuant to 21 U.S.C. 355(b)(2) or an application submitted pursuant
to equivalents of such statutory provisions in jurisdictions other than the
United States.

 

  2.1.9. “Lupin Atlantis” shall mean Lupin Atlantis Holdings S.A., a Swiss
company.

 

  2.1.10. “Lupin Canada Distribution Agreement” shall mean that certain
Distribution Agreement (Canada), dated the First Amendment Date, between Salix
and Lupin Atlantis.

 

  2.1.11. “Lupin Ltd.” shall mean Lupin Limited, an Indian corporation.

 

  2.1.12. “Lupin Parties” shall mean, collectively, Lupin Atlantis, Lupin Ltd.,
and Lupin Pharma.

 

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  2.1.13. “Lupin Pharma” shall mean Lupin Pharmaceuticals, Inc., a Virginia
corporation.

 

  2.1.14. “Lupin Settlement Agreement” shall mean that certain Settlement
Agreement, dated the First Amendment Date, between Falk, Salix, Lupin Ltd., and
Lupin Pharma.

 

  2.1.15. “Lupin Sublicense Agreement” shall mean that certain Sublicense
Agreement (Apriso®), dated the First Amendment Date, between Falk, Salix, Lupin
Ltd., and Lupin Pharma.

 

  2.1.16. “Patent Expiry Date (Canada),” in respect of each Product, shall mean
the date on which such Product shall cease to be the subject of any Valid Claim
in any Falk Patents in the Canada Territory.

 

  2.1.17. “Patent Expiry Date (U.S.),” in respect of each Product, shall mean
the date on which such Product shall cease to be the subject of any Valid Claim
in any Falk Patents in the United States Territory.

 

  2.1.18. “Salix COGS” has the meaning set forth in Schedule A to the First
Amendment.

 

  2.1.19. “Sublicense Revenue” shall mean all payments directly or indirectly by
or on behalf of a Sublicensee to Salix or its Affiliates relating to, or
resulting from, in either case directly or indirectly, an arrangement respecting
a Sublicense in respect of the Canada Territory, including

(a) all upfront and other payments payable to Salix upon execution of such a
Sublicense with a Sublicensee in respect of Salix’s rights hereunder;

(b) all development, regulatory, commercialization or other milestone payments
for milestones under any such Sublicense;

(c) all license maintenance fees under any such Sublicense;

(d) all payments to Salix for the supply of a Product for purposes of its
Exploitation under such Sublicense;

(e) all payments to Salix under any such Sublicense for the reimbursement of
research and development costs incurred by Salix;

(f) the fair market value of any equity securities issued in respect of any such
Sublicense to Salix that exceeds any amount paid by Salix for such securities;

 

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(g) the amount by which any amount paid by a Sublicensee to Salix for equity
securities issued to such Sublicensee in respect of any such Sublicense exceeds
the fair market value of such equity securities;

(h) all royalties, profit share payments, distribution fees, and other payments
under such Sublicense based on the sales of Products; and

(i) the fair market value of any other form of consideration paid to Salix by a
Sublicensee for such a Sublicense,

but excluding in all cases Salix COGS to procure or Manufacture a Product for
which payments under Clause (d) above are made to Salix and Salix’s actual cost
to perform activities in and specifically for the sublicensed territory for
which payments under Clause (e) above are made to Salix. The amount of
Sublicense Revenue for any Quarter shall be reduced by any amount of Sublicense
Revenue previously received by Salix that Salix is required to return or refund
to the payor thereof during such Quarter.

 

  2.1.20. “Sublicensee” shall mean any Third Party who is granted a Sublicense
and, for the avoidance of doubt, shall include Lupin Atlantis in its capacity as
Salix’s counterparty for the Lupin Canada Distribution Agreement.

 

  2.1.21. “United States Term” shall commence on the Effective Date and continue
in respect of each Product until whichever is the later of (a) the Patent Expiry
Date (U.S.) as applicable to such Product or (b) the seventeenth (17th)
anniversary of the Launch of such Product, but subject always to earlier
termination under Clause 17.

 

  2.1.22. “United States Territory” shall mean the United States of America and
its territories and possessions and the commonwealth of Puerto Rico.

 

  2.2. The definition of “ANDA Date” contained in Clause 1.1 of the Original
Agreement is amended by replacing the term “Territory” with the term “United
States Territory.”

 

  2.3. The definition of “Approval” contained in Clause 1.1 of the Original
Agreement is amended by replacing the acronym “USA” with the term “United States
Territory.”

 

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  2.4. The definition of “Falk Patents” contained in Clause 1.1 of the Original
Agreement is amended to read in its entirety as follows:

“Falk Patents” shall mean, (a) insofar as the context relates to the Canada
Territory (but without thereby limiting Clause (b)), any Patent in the name of
Falk or any Falk Affiliate existing at any time during the Canada Term relating
in any manner to the Exploitation of the Compound in any formulation (including
any foam or oral formulation and whether alone or in combination with any other
Compound) in the Canada Territory and, (b) insofar as the context relates to the
United States Territory (but without thereby limiting Clause (a)), any Patent in
the name of Falk or any Falk Affiliate existing at any time during the United
States Term, including the Patents listed in Schedule 1, relating in any manner
to the Exploitation of the Compound in any formulation (including any foam or
oral formulation and whether alone or in combination with any other Compound) in
the United States Territory.

 

  2.5. The definition of “Launch” contained in Clause 1.1 of the Original
Agreement is amended by replacing the term “Territory” with the term “United
States Territory.”

 

  2.6. The definition of “Market Assumption” contained in Clause 1.1 of the
Original Agreement is amended by replacing term “Territory” with the term
“United States Territory.”

 

  2.7. The definition of “Net Sales” contained in Clause 1.1 of the Original
Agreement is amended as follows:

 

  2.7.1. The clause beginning with “shall mean” and ending with “following
items” contained in the said definition is amended to read in its entirety as
follows:

shall mean gross amounts invoiced in respect of sales to Third Parties of such
Product, in the United States Territory, by Salix, its Affiliates or
Sublicensees and, in the Canada Territory, by Salix or its Affiliates (but not
by Sublicensees), less the following items:

 

  2.7.2. The following provision shall be added at the end thereof:

For the avoidance of doubt, no sales of a Product that give rise to, or are made
pursuant to arrangements involving, Sublicense Revenue that is shared between
Falk and Salix pursuant to Clause 3.3 shall constitute or be included in Net
Sales.

 

  2.8. The definition “Patent Expiry Date” contained in Clause 1.1 of the
Original Agreement is deleted.

 

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  2.9. The definition of “Product” contained in Clause 1.1 of the Original
Agreement is amended to read in its entirety as follows:

“Product” shall mean any formulation of the Compound (alone or in combination
with another active ingredient) in the Field the Exploitation of which, (a) in
respect of the Canada Territory, falls within any Valid Claim of the Falk
Patents in the Canada Territory and, (b) in respect of the United States
Territory, falls within any Valid Claim of the Falk Patents in the United States
Territory, and in both cases ((a) and (b)) shall include the Foam Product and
the Oral Product, as the context may require.

 

  2.10. The definition of “Sublicense” contained in Clause 1.1 of the Original
Agreement is amended to read in its entirety as follows:

“Sublicense” shall mean (a) a sublicense granted by Salix to a Third Party of
the rights granted under Clause 2.1 or (b) the Lupin Canada Distribution
Agreement. For the avoidance of doubt, (a) except for the Lupin Canada
Distribution Agreement and the arrangements contemplated thereby, the
appointment by Salix of any distributor, wholesaler or dealer of a Product shall
not be a Sublicense; and (b) the appointment of a manufacturer to manufacture a
Product for or on behalf of Salix shall not be deemed a Sublicense.

 

  2.11. The definition of “Term” contained in Clause 1.1 of the Original
Agreement is amended to read in its entirety as follows:

“Term” shall mean the Canada Term and the United States Term or either of them.
When the context so requires, Term shall be understood to mean the later to
expire of the Canada Term and the United States Term.

 

  2.12. The definition of “Territory” contained in Clause 1.1 of the Original
Agreement is amended to read in its entirety as follows:

“Territory” shall mean the Canada Territory and the United States Territory or
either of them.

 

  2.13. The definition of “Third Party Patents” contained in Clause 1.1 of the
Original Agreement is amended by replacing the term “Territory” with the term
“United States Territory.”

 

  2.14. The definition of “Valid Claim” contained in Clause 1.1 of the Original
Agreement is amended to read in its entirety as follows:

“Valid Claim” shall mean, (a) in respect of the Canada Territory, a claim of any
issued and unexpired Patent in the Canada Territory and, (b) in respect of the
United States Territory, a claim of any issued and unexpired Patent in the

 

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United States Territory, in each case ((a) and (b)) which has not been held
permanently revoked, unenforceable or invalid by a decision of a court or other
governmental agency of competent jurisdiction, unappealable or unappealed within
the time allowed for appeal and which has not been admitted to be invalid or
unenforceable through reissue or disclaimer or otherwise.

 

3. LICENSE GRANT

 

  3.1. Clause 2.1 of the Original Agreement is amended to read in its entirety
as follows:

2.1 Falk grants to Salix:

2.1.1 from the Effective Date for the United States Term in respect of the Falk
Patents, the Falk IP and the Falk Product Data the sole and exclusive royalty
bearing right and license to use the same and to develop, use and Exploit
Products in the Field throughout the United States Territory (subject only to
the CyDex License, as acknowledged in Clause 2.2) and a non-exclusive right and
license to manufacture and have manufactured Products in the Field in any part
of the world for Exploitation in the United States Territory and Falk therefore
undertakes:

(a) not at any time during the United States Term to grant or purport to grant
to any Third Party any rights to Exploit a Product in the Field in the United
States Territory; and

(b) not itself to Exploit a Product in the Field during the United States Term
in the United States Territory; and

(c) to maintain during the United States Term as Confidential Information
(subject to the provisions of Clause 11), all Product Data (including Joint
Product Date) and not to disclose any Product Data to any Third Party otherwise
than under terms relating to confidentiality and restricting the use of such
Product Data in any manner in the Field in the United States Territory.

2.1.2 from the First Amendment Date for the Canada Term in respect of the Falk
Patents, the Falk IP and the Falk Product Data the sole and exclusive royalty
bearing right and license to use the same and to develop, use and Exploit any
Product that is a Foam Product in the Field throughout the Canada Territory
(subject only to the CyDex License, as acknowledged in Clause 2.2) and a
non-exclusive right and license to manufacture and have manufactured any Product
that is a Foam Product in the Field in any part of the world for Exploitation in
the Canada Territory and Falk therefore undertakes:

(a) not at any time during the Canada Term to grant or purport to grant to any
Third Party any rights to Exploit a Product that is a Foam Product in the Field
in the Canada Territory; and

 

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(b) not itself to Exploit a Product that is a Foam Product in the Field during
the Canada Term in the Canada Territory; and

(c) to maintain during the Canada Term as Confidential Information (subject to
the provisions of Clause 11), all Product Data (including Joint Product Data)
and not to disclose any Product Data to any Third Party otherwise than under
terms relating to confidentiality and restricting the use of such Product Data
in any manner in the Field in the Canada Territory.

For clarity, the license granted to Salix under Cause 2.1.2 is limited to any
Product that is a Foam Product.

In the event that any of the following events occurs:

(1) At any time following the first anniversary of the first commercial sale of
a Foam Product in the United States Territory by or on behalf of Salix following
receipt of regulatory marketing approval for the Foam Product in the United
States Territory, and Salix has not then provided a Future Canadian Product
Notice (as such term is defined in the Lupin Canada Distribution Agreement) to
Lupin in respect of at least one Foam Product, or

(2) Any time,

(y) in respect of any and all Future Canadian Product Notices provided by Salix
to Lupin under the Lupin Canada Distribution Agreement that refer to a Foam
Product, the times provided in Section 2.3(b) of the Lupin Canada Distribution
Agreement for delivery by Lupin of a timely Exercise Notice (as such term is
defined in the Lupin Canada Distribution Agreement) with respect thereto have
expired without Lupin having provided a timely Exercise Notice in respect of any
such Future Canadian Product Notice, or

(z) in respect of any and all Future Canadian Product Notices provided by Salix
to Lupin that refer to a Foam Product and as to which Lupin has provided a
timely Exercise Notice, the times provided in Section 2.3(c)(i) and (ii) of the
Lupin Canada Distribution Agreement (determined without regard to any extension
of such time periods that might otherwise be agreed by Salix and Lupin pursuant
to such Section 2.3 of the Lupin

 

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Canada Distribution Agreement) for Salix and Lupin to have reached agreement
pursuant to which a Foam Product will become a Distribution have expired without
any Foam Product becoming a Distribution Product,

then the license granted by Falk to Salix in respect of the Canada Territory,
and all other provisions of this Agreement as they relate to such license in
respect of the Canada Territory, shall terminate and be of no further force or
effect and the Canada Term shall end. Upon any such termination, Falk and Salix
shall cooperate in good faith to restore to Falk all rights in respect of the
Foam Products in respect of the Canada Territory.

 

  3.2. Clause 2.4 of the Original Agreement is amended by adding an additional
sentence at the end thereof, such sentence to read as follows:

Notwithstanding the foregoing, Falk approves and consents to the Lupin Canada
Distribution Agreement as it exists on the Second Amendment Date, subject to the
following:

 

  (a) any amendment or modification or waiver of any of the provisions of the
Lupin Canada Distribution Agreement that

 

  (i) concern or relate to, directly or indirectly, the rights granted to Salix
under this Agreement (for clarity, and without limitation, as amended by the
First Amendment) or under the First Amendment;

 

  (ii) concern or relate to, directly or indirectly, any Falk IP or any
Products;

 

  (iii) concern or relate to, directly or indirectly, any sublicense of any Falk
IP granted by Salix;

 

  (iv) would impact or adversely affect any payments that Falk would be entitled
to receive under this Agreement (for clarity, and without limitation, as amended
by the First Amendment), their amount, or calculation, including without
limitation any Shared Sublicense Revenue;

 

  (v) impose upon Falk any additional obligations,

shall require the prior written consent of Falk;

(b) notwithstanding any other provision hereof, Salix may not, without the prior
written consent of Falk, which Falk may

 

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withhold in its discretion, sublicense or otherwise grant any rights to
manufacture and have manufactured any Product to any of the Lupin Parties or
their respective Affiliates; and

(c) Falk’s consent to and approval of the Lupin Canada Distribution Agreement
hereunder extends, subject to the other terms and conditions of this Agreement,
to the Foam Product only.

Salix will keep Falk reasonably informed of each Commercialization Plan (as
defined in the Lupin Canada Distribution Agreement) with respect to any Product
proposed, developed or agreed by Salix and Lupin pursuant to the Lupin Canada
Distribution Agreement, including without limitation Sections 2.3 and 3.3 of the
Lupin Canada Distribution Agreement, and any updates thereof or modifications
thereto, and the Salix COGS and any changes to Salix COGS (as defined in the
Lupin Canada Distribution Agreement) with respect to any Product agreed upon by
Lupin and Salix, including copies of the documents setting forth any such
Commercialization Plan and Salix COGS.

 

  3.3. Clause 2 of the Original Agreement is amended by adding a new Clause 2.5
at the end thereof, such new Clause 2.5 to read in its entirety as follows:

2.5 The parties acknowledge and confirm that Salix prior to the First Amendment
Date validly terminated its obligations under this Agreement in respect of the
Oral Product pursuant to Clause 17.4 and that accordingly the Oral Product as of
the First Amendment Date was a Terminated Product for purposes of this Agreement
and will remain so from and after the First Amendment Date (notwithstanding
anything in the First Amendment).

 

4. CONSIDERATION

 

  4.1. Clause 3.1.8 of the Original Agreement is amended by replacing the term
“Patent Expiry Date” with the term “Patent Expiry Date (U.S.).”

 

  4.2. Clause 3.1.9 of the Original Agreement is amended by replacing the term
“Patent Expiry Date” with the term “Patent Expiry Date (U.S.).”

 

  4.3. Clause 3 of the Original Agreement is amended by adding a new Clause 3.3
at the end thereof, such new Clause 3.3 to read in its entirety as follows:

3.3 When Salix enters into arrangements with one or more Sublicensees relating
to the Canada Territory, Salix shall pay Falk *** of all Sublicense Revenues
received by Salix pursuant to any such arrangements (such amount the “Shared
Sublicense Revenues”).

 

*** Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.

 

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In respect of the Lupin Canada Distribution Agreement, the obligation of Salix
to pay to Falk the amounts contemplated by this Clause 3.3 shall survive the
termination of the Canada Term (including as a result of the occurrence of the
Patent Expiry Date (Canada)) in respect of any product that was at any time
prior to the expiration of the Canada Term a “Product” as defined herein and was
marketed, distributed or sold by Lupin Atlantis pursuant to the Lupin Canada
Distribution Agreement and continue thereafter for so long as the Lupin Canada
Distribution Agreement, or any similar or follow-on arrangement between Salix
and Lupin Ltd. and its Affiliates for the marketing, distribution or sale of
such product in Canada, remains in effect.

Falk and Salix acknowledge and agree that this continued consideration payable
by Salix is fair and reasonable in light of Salix’s continued use of the Falk IP
(other than any expired Falk Patents) in continuing to perform the Lupin Canada
Distribution Agreement. Notwithstanding any provision herein to the contrary,
failure by Salix to make the payments due hereunder following expiration of the
Canada Term shall entitle Falk to terminate this Agreement pursuant to Clause
18.6, including the licenses granted pursuant to Clause 19.4. Should a court of
competent jurisdiction rule, in a final, unappealable or unappealed ruling, that
Falk’s right to such continued consideration is not enforceable, the parties
will promptly commence negotiations to establish appropriate consideration
payable to Falk.

 

5. MINIMUM ROYALTY PAYMENTS

 

  5.1. Clause 4.1 of the Original Agreement is amended by replacing the term
“Patent Expiry Date” with the term “Patent Expiry Date (U.S.).”

 

  5.2. Clause 4.3 of the Original Agreement is amended by replacing the term
“Patent Expiry Date” in all three places it appears with the term “Patent Expiry
Date (U.S.).”

 

  5.3. Clause 4.4 of the Original Agreement is amended by replacing the term
“Patent Expiry Date” with the term “Patent Expiry Date (U.S.).”

 

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6. PAYMENT

 

  6.1. Clause 5.1 of the Original Agreement is amended to read in its entirety
as follows:

5.1 Salix shall prepare a statement in respect of each Quarter which shall show
in reasonable detail for the Quarter in question the calculation of Royalties
due to Falk with respect to aggregate Net Sales and Shared Sublicense Revenues
due to Falk. Such statement shall specify in reasonable detail the calculation
of Net Sales and Sublicense Revenues (in each case in accordance with the
definition set out in Clause 1) in respect of each Product and the applicable
Royalties and Shared Sublicense Revenues due to Falk and such other information
relating to the calculation of Net Sales and Sublicense Revenues as Falk may
reasonably request from time to time. Such statement shall be submitted to Falk
within ninety (90) days of the end of the Quarter to which it relates together
with remittance for Royalties due to Falk under Clauses 3.1.8, 3.1.9 and 3.1.10
(as applicable) and Shared Sublicense Revenues due to Falk under Clause 3.3.

 

  6.2. Clause 5.2.1 of the Original Agreement is amended by adding a new
sentence at the end thereof, such sentence to read as follows:

For clarity, the records that may be accessed and inspected by such accounting
firm pursuant to this Clause 5.2.1 shall include any relevant documents or
information received by Salix from any Lupin Party or their Affiliates.

 

7. OBLIGATIONS OF SALIX

 

  7.1. Clause 6.1.3 of the Original Agreement is amended by replacing the term
“Term” with the term “United States Term” and by replacing the term “Territory”
with the term “United States Territory.”

 

  7.2. Clause 6.2.7 of the Original Agreement is amended by replacing the term
“Term” with the term “United States Term.”

 

  7.3. Clause 6.3.5 of the Original Agreement is amended by replacing the term
“Term” with the term “United States Term.”

 

  7.4. Clause 6.7 of the Original Agreement is amended by replacing the term
“Territory” with the term “United States Territory.”

 

  7.5. Clause 6 of the Original Agreement is amended by adding new Clauses 6.13,
6.14 and 6.15 at the end thereof, such new Clauses 6.13, 6.14 and 6.15 to read
as follows:

6.13 In no event shall Salix, without Falk’s prior written consent, use, or
commit to use, as a manufacturer of Product any Generics Manufacturer or any of
its Affiliates.

 

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6.14 In no event shall Salix, without Falk’s prior written consent, appoint or
use, or commit to appoint or use, any Generics Manufacturer or any of its
Affiliates as a distributor in or for the United States Territory of any
Authorized Generic upon terms that would permit such Generics Manufacturer or
its Affiliate to sell any Authorized Generic in the United States Territory
prior to the first commercial sale of a Generic Product that is approved for
distribution and sale in the United States Territory under or pursuant to an
ANDA or other regulatory filing for which the product described in the NDA under
which the Authorized Generic is to be distributed or sold in the United States
Territory is the reference-listed drug.

6.15 Salix shall not transfer, assign or make available to any Lupin Party or
any Generics Manufacturer or any of their respective Affiliates any NDA or any
NDS (as that term is defined in the Lupin Canada Distribution Agreement) with
respect to any Product. For clarity, the foregoing prohibition shall also apply
even if any Lupin Party or any Generics Manufacturer or any of their respective
Affiliates acts as a distributor of any Authorized Generic.

 

8. PRODUCT DATA

The first sentence of Clause 8.3 of the Original Agreement is amended to read in
its entirety as follows:

All right, title and interest in all Product Data arising from any Studies shall
be jointly owned by Salix and Falk and either may use such Joint Product Data
without further payment or obligation to the other and each of the Parties shall
be free to use and Exploit such Joint Product Data and to incorporate it in any
regulatory filing Provided that Falk acknowledges that during the United States
Term it shall not, and shall not authorise or permit any Third Party to, use any
Joint Product Data in the United States Territory and that during the Canada
Term is shall not, and shall not authorise or permit any Third Party to, use any
Joint Product Data in the Canada Territory.

 

9. TRADEMARKS

Clause 9.1 of the Original Agreement is amended by adding at the end thereof a
new sentence, such sentence to read as follows:

Salix shall not grant any right to use any Salix trademark for any Product in
the Territory to any Lupin Party except for purposes of the marketing,
distribution and sale of Product in

 

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Canada as and to the extent contemplated by Lupin Canada Distribution Agreement
as it exists on the First Amendment Date.

 

10. INTELLECTUAL PROPERTY OWNERSHIP AND INFRINGEMENT

 

  10.1. The introductory clause in Clause 10.3 of the Original Agreement is
amended to read in its entirety as follows:

In the event that Salix at any time during the Canada Term or the United States
Term becomes aware of any misappropriation or infringement or alleged
misappropriation or infringement by a Third Party (the “Infringer”) of any part
of the Falk IP in the Canada Territory or United States Territory, respectively,
Salix shall give prompt written notice thereof to Falk (save only in respect of
the Joint Product Data, under Clause 10.4):

 

  10.2. Clause 10.3.2 of the Original Agreement is amended by replacing the term
“Territory” with the phrase “Canada Territory or United States Territory, as
applicable pursuant to the forepart of this Clause 10.3”.

 

  10.3. The first sentence of Clause 10.4 of the Original Agreement is amended
to read in its entirety as follows:

In the event that Salix at any time during the Canada Term or the United States
Term becomes aware of any misappropriation or infringement or alleged
misappropriation or infringement by an Infringer of any part of the Joint
Product Data in the Canada Territory or United States Territory, respectively,
Salix shall give prompt written notice thereof to Falk and Salix shall have the
first right (but not the obligation) to take such Remedies as may be necessary
or desirable to prevent such infringement and preserve the Joint Product Data.

 

  10.4. The introductory clause in Clause 10.6 of the Original Agreement is
amended to read in its entirety as follows:

In the event that a Third Party institutes a patent, trade secret or other
infringement suit against Salix or its Affiliates during the Canada Term or the
United States Term, alleging that its Exploitation of the Product in the Canada
Territory or United States Territory, respectively, infringes one or more
Patents or other Intellectual Property rights held by such Third Party (an
“Action”), Salix shall promptly notify Falk thereof in writing and promptly
discuss with Falk the best way to respond.

 

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11. CONFIDENTIALITY

Clause 11.5 of the Original Agreement is amended by adding a new sentence at the
end thereof, such new sentence to read as follows:

In no event shall Salix disclose any Confidential Information of Falk that
constitutes or relates to Manufacturing Technology or any NDA or any NDS or any
other regulatory filings or submissions, or drafts thereof, in the United States
Territory or the Canada Territory, including without limitation any dossiers
related to regulatory filings, to any Lupin Party or any Generics Manufacturer
or any of their respective Affiliates without the prior written consent of Falk.
Salix shall not appoint any of the Lupin Parties or their Affiliates as Salix’s
administrative agent or other agent, or otherwise grant any authority to Lupin
Party or any of their Affiliates, for purposes of making any filings with
regulatory authorities in the Canada Territory or the United States Territory
without the prior written consent of Falk.

 

12. FILINGS; CONFIDENTIALITY AND NON-DISCLOSURE

 

  12.1. Falk and Salix each agrees to make such filings in respect of this First
Amendment and the other agreements being executed by Falk and Salix and other
persons in connection herewith as may be required by Applicable Laws, including
those filings with the United State Federal Trade Commission and the United
States Department of Justice required by Clause 1112 of Subtitle B of Title XI
of the United States Medicare Prescription Drug, Improvement, and Modernization
Act of 2003. Each of Falk and Salix agrees that filings contemplated by the
preceding sentence shall be permitted to be made by the other notwithstanding
any provision contained in Clause 11 of the Original Agreement to the contrary.

 

  12.2. Subject to Clause 10.1 of this First Amendment, disclosure of this First
Amendment and its terms shall be governed by the provisions of Clause 11 of the
Original Agreement mutatis mutandis.

 

13. RESTRICTIONS

Clause 15.2 of the Original Agreement is amended to read in its entirety as
follows:

15.2 Falk undertakes and covenants as follows:

15.2.1 Subject to Clause 15.2.3, it shall not within the Canada Territory either
directly or indirectly during the Canada Term be involved in the marketing, use,
sale or exploitation of any product containing the Compound. For clarity, the
provisions of this Clause 15.2.1 shall cease to apply if the rights with respect
to the Canada Territory revert back to Falk as provided for in Clause 2.1.2.

15.2.2 Subject to Clause 15.2.3, it shall not within the United States Territory
either directly or indirectly during the United States Term be involved in the
marketing, use, sale or exploitation of any product containing the Compound.

15.2.3 The restriction set forth in Clauses 15.2.1 and 15.2.2 shall cease to
apply in respect of the marketing, use, sale or exploitation in the Territory of
any Terminated Product under Clause 18.1 after the effective date of termination
of the rights and obligations of Salix under this Agreement in respect of the
Terminated Product.

 

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14. TERMINATION

Clause 17.1 of the Original Agreement is amended to read in its entirety as
follows:

17.1 This Agreement shall become effective in respect of the United States
Territory as of the Effective Date and in respect of the Canada Territory as of
the First Amendment Date and unless earlier terminated pursuant to the other
provisions of this Clause 17 or, in the case of the Canada Territory, Clause
2.1.2, shall continue in full force and effect, in respect of the United States
Territory, for the United States Term and, in respect of the Canada Territory,
for the Canada Term.

 

15. CONSEQUENCES OF TERMINATION

 

  15.1. Clause 18.3.3 is amended to add a sentence at the end of said Clause
18.3.3 which shall read as follows:

Without limiting the foregoing, the provisions of Clause 2.4 requiring the
consent of Falk, the last sentence of Clause 9.1, and the provisions of Clauses
3.3, 5, 6.13, 6.14, 6.15 and 11.5 shall survive termination or expiration of
this Agreement.

 

  15.2. Clause 18.5 is amended to read in its entirety as follows:

18.5 If this Agreement as it relates to the Canada Territory expires upon the
expiration of the Canada Term in respect of all Products, the licenses granted
hereunder in respect of the Canada Territory shall continue thereafter on a non
exclusive basis and shall, subject to Clause 18.5.1, be fully paid-up and
perpetual:

18.5.1 Salix shall thereafter, and notwithstanding anything in Clause 3 to the
contrary, be entitled to Exploit Products in the Canada Territory subject to
continued payment by Salix to Falk as and to the extent required by Clause 3.3
and in respect of Royalties due in respect of Net Sales in the United States
Territory;

18.5.2 Falk shall be entitled either itself or by a Third Party to exploit
Products in the Canada Territory; and

18.5.3 in that event, the provisions of Clause 2.4 requiring the consent of
Falk, the last sentence of Clause 9.1, and the provisions of Clauses 3.3, 5,
6.13, 6.14, 6.15 and 11.5 shall survive termination or expiration of this
Agreement.

 

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For clarity, the provisions of this Clause 18.5 are subject to the provisions of
Clause 3.3 and shall not alter or qualify the obligation of Salix to make the
payments contemplated thereby to Falk.

 

  15.3. Clause 18 is amended by adding a new Clause 18.6 at the end thereof,
such new Clauses 18.6 to read in its entirety as follows:

18.6 If this Agreement as it relates to the United States Territory expires upon
the expiration of the United States Term in respect of all Products, the
licenses granted hereunder in respect of the United States Territory shall
continue thereafter on a non exclusive basis and shall be fully paid-up and
perpetual and for the avoidance of doubt:

18.6.1 Salix shall thereafter, and notwithstanding anything in Clause 3 to the
contrary, be entitled to Exploit Products in the United States Territory free of
any further payment to Falk except in respect of Royalties due in respect of Net
Sales in the Canada Territory and Shared Sublicense Revenues due in respect of
Sublicenses granted by Salix in respect of the Canada Territory; and

18.6.2 Falk shall be entitled either itself or by a Third Party to exploit
Products in the United States Territory.

 

16. LAW AND ARBITRATION

Any controversy or claim of whatsoever nature arising out of or relating in any
manner whatsoever to this First Amendment or any breach of any terms of this
First Amendment shall be governed by and construed in all respects in accordance
with the laws of England without regard to any choice of law provisions or rule
that might otherwise refer construction or interpretation of this First
Amendment to the substantive law of another jurisdiction. Any dispute arising
out of or relating to the existence, negotiation, validity, formation,
interpretation, breach, performance or application of this First Amendment shall
be subject to resolution exclusively in accordance with the provisions of
Clauses 27 and Clauses 28.2, 28.2 [sic], and 28.3 of the Original Agreement.

 

17. ENTIRE AGREEMENT AND SEVERABILITY

 

  17.1. This First Amendment and the Original Agreement, as amended by this
First Amendment, constitute the entire agreement between the Falk and Salix with
respect to the subject matter thereof. This First Amendment supersedes all prior
agreements, whether written or oral, with respect to the subject matter of this
First Amendment. Each of Falk and Salix confirms that it is not relying on any
representations, warranties or covenants of the other in entering into this
First Amendment except as specifically set out in this First Amendment. Nothing
in this First Amendment is intended to limit or exclude any liability for fraud.

 

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  17.2. The Original Agreement, as amended by this First Amendment, is ratified
by the parties hereto and as so amended shall continue in full force and effect.

 

  17.3. This First Amendment is intended to be valid and effective under any
Applicable Laws and, to the extent permissible under Applicable Laws, shall be
construed in a manner to avoid violation of or invalidity under any Applicable
Laws. Should any provisions of this First Amendment be or become invalid,
illegal or unenforceable under any Applicable Laws, the other provisions of this
First Amendment shall not be affected and shall remain in full force and effect
and, to the extent permissible under Applicable Laws, any such invalid, illegal
or unenforceable provision shall be deemed amended lawfully to conform with the
intent of the parties.

 

18. EXPENSES

Subject to the ongoing indemnification obligations of Falk and Salix under
Clause 13 of the Original Agreement, each of Falk and Salix shall pay the fees
and expenses of its respective lawyers and other experts and all other expenses
and costs incurred by such party incidental to the negotiation, preparation,
execution and delivery of this First Amendment.

 

19. REPRESENTATIONS AND WARRANTIES

Clause 12.2.15 of the Original Agreement is hereby amended by adding at the
beginning thereof the phrase “to the knowledge of Falk.”

 

20. OTHER AGREEMENTS

Simultaneously herewith, Falk and Salix are entering into the Lupin Sublicense
Agreement with Lupin Ltd. and Lupin Pharma; Falk and Salix are entering into the
Lupin Settlement Agreement with Lupin Ltd. and Lupin Pharma; and Salix is
entering into the Lupin Canada Distribution Agreement with Lupin Atlantis. The
effectiveness of this First Amendment is explicitly conditioned on the
simultaneous execution and delivery by each of the parties thereto of each and
every one of the aforesaid agreements.

 

21. COUNTERPARTS

This First Amendment may be executed in two or more counterparts, each of which
shall be deemed an original and all of which taken together shall be deemed to
constitute one and the same instrument. An executed signature page of this First
Amendment delivered by facsimile or other electronic transmission shall be
effective as an original executed signature page.

[Signatures appear on the next page.]

 

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IN WITNESS WHEREOF, Falk and Salix have executed this First Amendment to be
effective the day and year first above written.

 

DR FALK PHARMA GmbH By:  

/s/ Ursula Falk

Name:  

Falk Ursula

Title:  

CEO

SALIX PHARMACEUTICALS, INC. By:  

/s/ Rick Scruggs

Name:  

Rick Scruggs

Title:  

EVP of Business Development

[Signature page for First Amendment to License Agreement]

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SCHEDULE A

Salix COGS

As used in this Agreement, “Salix COGS” means:

For Products that are manufactured for Salix by a Third Party:

The price paid by Salix to such Third Party for such Products, together with
warehousing, freight, duty, insurance and any other out-of-pocket costs or
expenses incurred by Salix in respect of such Products, without markup.

For Products that are manufactured by Salix or its Affiliates:

I. Salix COGS includes the costs of all direct materials, direct labor and
manufacturing overhead consumed, provided or procured by a manufacturing
facility in the manufacture of a particular Product, together with appropriate:
(i) allowances for manufacturing variances, (ii) inventory carrying charges, and
(iii) adjustments for inventory valuations as calculated using GAAP.

For such purposes:

A. Direct material costs include:

1. The cost of raw materials, process consumables (i.e., resins, membranes, etc.
to the extent not renewable and depreciable and more appropriately captured by
Item I.C.2. (below), containers, container components, packaging, labels and
other printed materials used in the production of the Product.

2. Scrap of raw materials, work in progress and finished goods (exclusive of
losses in excess of a reasonable allowance for wastage limits within normal
industry standards for the Product.)

B. Direct labor costs include:

1. Salaries and fringe benefits for personnel directly involved in the
manufacturing process of the Product.

C. Manufacturing overhead is limited to costs that can be identified in a
practical manner with specific units of production in accordance with GAAP but
cannot be included in specific direct material or direct labor costs. Such
overhead costs may include:

1. Department-specific manufacturing overhead allocations, including, but not
limited to, utilities (e.g., oil, electric, steam, water), indirect
manufacturing materials and supplies, consumables (e.g., production supply
materials, tools, spare parts), supervision, production management, plant
management, engineering and development support, maintenance and repair of the
production plant and production equipment, taxes (excluding income taxes) and
insurance with respect to the Product.

 

Schedule A - page 1

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2. Depreciation, which reflects on a pro rata basis over the reasonably
estimated life thereof, the use of assets in the manufacture of the Product.

3. Overhead allocations of costs from service areas directly involved in the
manufacture of a Product, including human resources, IT, quality assurance
analysis of raw materials in production, including analysis of semi-finished and
finished goods produced, materials management (including wages and salaries
relating to materials administration, purchasing and warehousing), regulatory
affairs, validation, inventory storage, process documentation, and other
services required to be performed in connection with the Manufacture of the
Product.

4. Rent and other costs allocable to the lease of facilities, equipment or
materials used to Manufacture the Product.

D. Allowances for manufacturing variances, including yield variances within cGMP
tolerances.

E. Allowances for adjustments to inventory, valuation, including reasonable
charges for spoilage, expiration of shelf life and like charges related to the
Product Manufactured.

F. Property and sales taxes on shipment and warehousing related to finished
goods.

II. Without limitation, Salix COGS does not include:

A. Costs incurred due to Product rework, except the reasonable allowance
included under item I.A.2.

B. Research and development costs.

C. Intercompany margins/markups on intercompany transfers between or among
manufacturing plants or Affiliates.

D. Insurance related to product liability.

E. Commercialization costs.

F. Overhead (including administrative, legal, accounting and similar costs),
except as specified in item I.C.

 

Schedule A - page 2