Document:

Master Purchase and Sale and License Agreement

 Exhibit 10.58 
 Portions of this exhibit marked [*] are requested to be treated confidentially. 
 

 
  

 MASTER PURCHASE AND SALE 
 AND LICENSE AGREEMENT 
 Between 
 MERCK & CO., INC. 
 and

 SALIX PHARMACEUTICALS, LTD. 
 Dated as of February 22, 2007 

 

 
  

 TABLE OF CONTENTS 
  

							
	 1
	 	 DEFINITIONS
	  	2
			
	 2
	 	 SALE AND PURCHASE OF ASSETS; LIABILITIES
	  	10
				
		 	 2.1
	  	 Sale of Assets
	  	10
		 	 2.2
	  	 Rights Retained by Merck
	  	11
		 	 2.3
	  	 Liabilities
	  	12
		 	 2.4
	  	 Consideration
	  	12
		 	 2.5
	  	 Inventory
	  	14
		 	 2.6
	  	 Closing
	  	14
		 	 2.7
	  	 Regulatory and Third Party Approvals
	  	15
		 	 2.8
	  	 Post-Closing Payments
	  	15
			
	 3
	 	 LICENSES
	  	16
				
		 	 3.1
	  	 Trademark License
	  	16
		 	 3.2
	  	 NDA License
	  	17
		 	 3.3
	  	 Manufacturing Know-How License
	  	17
			
	 4
	 	 REPRESENTATIONS AND WARRANTIES
	  	18
		 	 4.1
	  	 Representations and Warranties of Merck
	  	18
		 	 4.2
	  	 Representations and Warranties of Salix
	  	22
			
	 5
	 	 REGULATORY COVENANTS
	  	24
				
		 	 5.1
	  	 Maintenance of NDAs
	  	24
		 	 5.2
	  	 Labeling
	  	25
		 	 5.3
	  	 Regulatory Compliance
	  	25
		 	 5.4
	  	 Adverse Events
	  	26
		 	 5.5
	  	 Recalls
	  	27
			
	 6
	 	 SUPPLY AND MANUFACTURING COVENANTS
	  	27
				
		 	 6.1
	  	 Supply of Products
	  	27
		 	 6.2
	  	 FDA Approval
	  	28
		 	 6.3
	  	 Storage and Distribution of the Products
	  	28
		 	 6.4
	  	 Continued Sale of Diuril OS Product
	  	28
			
	 7
	 	 OTHER COVENANTS RELATING TO THE PRODUCTS
	  	29
				
		 	 7.1
	  	 Customer Matters
	  	29
		 	 7.2
	  	 Promotion and Marketing
	  	29
		 	 7.3
	  	 Medical and Other Inquiries
	  	30

  

 i 

 

 
  

							
		 	 7.4
	  	 Returned Products, Chargebacks and Rebates
	  	31
		 	 7.5
	  	 Price Submissions and Certifications
	  	32
		 	 7.6
	  	 Audits and Price Submissions
	  	34
		 	 7.7
	  	 Restatements of Price Submissions
	  	34
		 	 7.8
	  	 Indemnification Related to Price Submissions
	  	35
		 	 7.9
	  	 Provision of Historical Pricing Information
	  	35
			
	 8
	 	 ADDITIONAL COVENANTS
	  	36
				
		 	 8.1
	  	 Covenants of Merck
	  	36
		 	 8.2
	  	 Covenants of Salix
	  	37
		 	 8.3
	  	 Mutual Covenants
	  	38
			
	 9
	 	 INDEMNIFICATION
	  	41
				
		 	 9.1
	  	 Indemnification
	  	41
		 	 9.2
	  	 Third-Party Claim Procedure
	  	42
		 	 9.3
	  	 Limitations on Indemnification
	  	43
			
	 10
	 	 MISCELLANEOUS
	  	43
				
		 	 10.1
	  	 Force Majeure
	  	43
		 	 10.2
	  	 Assignment/Change of Control
	  	44
		 	 10.3
	  	 Survival
	  	45
		 	 10.4
	  	 Exclusive Jurisdiction
	  	45
		 	 10.5
	  	 Equitable Remedies
	  	45
		 	 10.6
	  	 Notices
	  	46
		 	 10.7
	  	 Entire Agreement
	  	47
		 	 10.8
	  	 Section Headings
	  	47
		 	 10.9
	  	 Applicable Law
	  	47
		 	 10.10
	  	 Dispute Resolution
	  	47
		 	 10.11
	  	 Expenses
	  	48
		 	 10.12
	  	 Bulk Sales Statutes
	  	49
		 	 10.13
	  	 Waiver
	  	49
		 	 10.14
	  	 Severability
	  	49
		 	 10.15
	  	 Incorporation by Reference
	  	49
		 	 10.16
	  	 Assignment
	  	49
		 	 10.17
	  	 Independent Contractors
	  	49
		 	 10.18
	  	 No Third Party Beneficiaries
	  	50
		 	 10.19
	  	 Waiver of Rule of Construction
	  	50
		 	 10.20
	  	 Counterparts
	  	50
		 	 10.21
	  	 Compliance with Laws and Regulations
	  	50

  

 ii 

 

 
  

 EXHIBITS 
 SCHEDULES 
  

					
	 Schedule
	  	1.19	  	 Documents

	 Schedule
	  	1.38	  	 Licensed Trademarks

	 Schedule
	  	1.40	  	 Manufacturing Know-How

	 Schedule
	  	1.41	  	 Form of Merck FDA Letters

	 Schedule
	  	1.55	  	 Purchase Orders

	 Schedule
	  	1.58	  	 Related Company

	 Schedule
	  	1.60	  	 Form of Salix FDA Letters

	 Schedule
	  	2.5	  	 Price of Inventory

	 Schedule
	  	2.7.2	  	 Third Party Consents

	 Schedule
	  	4.1.9	  	 Inventory

	 Schedule
	  	6.4	  	 Diuril Market History and Anticipated Need

	 Schedule
	  	8.3.2	  	 Approved Salix Press Release

  

 iii 

 

 
  

 MASTER PURCHASE AND SALE AND LICENSE AGREEMENT 
 This MASTER PURCHASE AND SALE AND LICENSE AGREEMENT (this “Agreement”) made as of this 22nd day of February, 2007 between: 
 Salix Pharmaceuticals, Ltd., a corporation incorporated under the laws of the State of Delaware, whose head office is located at 1700 Perimeter Park Drive,
Morrisville, NC 27560 (“Salix”); and 
 Merck & Co., Inc., a corporation organized under the laws of the State of New
Jersey, whose head office is located at One Merck Drive, P.O. Box 100, Whitehouse Station, New Jersey, 08889-0100, U.S.A. (“Merck”). 
 RECITALS 
 WHEREAS, Merck and certain of its Affiliates (as defined below) are the
owners of a business engaged in the manufacture, use, marketing, sale, and distribution of the Existing Products (as defined below), for which they have been granted the NDAs (as defined below). 
 WHEREAS, Merck wishes to sell, transfer and assign or license or cause to be sold, transferred and assigned or licensed to Salix the Assets
(as defined below), and Salix desires to purchase or license such Assets from Merck, upon the terms and conditions hereinafter set forth. 
 WHEREAS, Merck intends to enter into, and Salix intends to enter into, certain ancillary agreements including, but not necessarily limited to: 
  

	 	(a)	a Supply Agreement by which Merck or its Affiliates will manufacture, or have manufactured and supply to Salix or its designees the Existing Products and the active pharmaceutical
ingredients for the Existing Products; 

  

	 	(b)	a Trademark and Domain Name License Agreement by which Merck or its Affiliates will license to Salix the Licensed Trademarks (as defined below); 

  

	 	(c)	a Transition Services Agreement by which Merck or its Affiliates will provide certain transition services to Salix with respect to the Existing Products; and

  

	 	(d)	one or more Bills of Sale and Assignment, by which Merck will transfer certain Assets to Salix. 

 

 
  

 NOW, THEREFORE, in consideration of the mutual agreements and covenants contained herein and
for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows: 
  

	1	DEFINITIONS 

 For the purposes of this Agreement, the
following terms are defined as follows: 
  

	1.1	“Affiliate” means, with respect to a Person, any other Person directly or indirectly controlling or controlled by, or under direct or indirect common control with,
such Person. For purposes of this definition, a Person shall be deemed to control another Person if it owns or controls, directly or indirectly, more than fifty percent (50%) of the voting equity of the other Person (or other comparable
ownership if such other Person is not a corporation). 

  

	1.2	“Ancillary Agreement(s)” means the Supply Agreement, the Trademark License Agreement, and the Transition Services Agreement. 

  

	1.3	“Assets” means (a) the Documents, (b) Merck’s rights under all Purchase Orders, except for accounts receivable existing on the Closing Date,
(c) the NDAs, (d) all clinical and regulatory data contained in the NDAs that are solely related to the Products (subject to the rights and licenses retained by Merck and its Affiliates as set forth in Section 2.2 and 3.3),
(e) the Inventory and (f) all current customer lists of Merck related to the sale of Existing Products in the Territory. 

  

	1.4	“Astellas” means Astellas Pharma Inc., formerly known as Yamanouchi Pharmaceutical Co., Ltd. 

  

	1.5	“Astellas Agreements” means that certain License Agreement by and between Merck and Astellas, dated as of June 30, 1981, and that certain Supply Agreement by
and between Merck and Astellas, dated as of June 20, 1981, each as amended, and the various related agreements by and between Merck and Astellas, or their respective Affiliates, entered into in connection therewith. For the avoidance of
doubt, the Astellas Agreements are not Assets. 

  

	1.6	“Assumed Liabilities” means (a) all liabilities and obligations that Salix has expressly assumed or agreed to assume or perform under this Agreement,
(b) Merck’s obligations under all Purchase Orders that are included in the Assets, and (c) all Liabilities arising out of the sale, purchase, consumption or use of the Products or the Assets in the Field in the Territory from and
after the Closing Date, except for the Excluded Liabilities. 

  

	1.7	“Business” means Merck’s and its Affiliates’ business related to the manufacture, sale, marketing or distribution of the Existing Products in the
Territory. 

  

	1.8	“Business Day” means any day other than Saturday, Sunday or a day on which banking institutions in the State of New Jersey are permitted or obligated by law to
close. 

  

	1.9	“Calendar Quarter” means a three-month period commencing on January 1, April 1, July 1, or October 1. 

  

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	1.10	“Change of Control” of a Party means (i) the sale of all or substantially all of a Party’s assets or business relating to this Agreement; (ii) the
closing of a merger, reorganization or consolidation involving a Party in which the voting securities of such Party outstanding immediately prior thereto (or any securities of the surviving entity issued in exchange therefor) cease to represent at
least fifty percent (50%) of the combined voting power of the surviving entity immediately after such merger, reorganization or consolidation; or (iii) an event whereby any Person or group (as defined in Section 13(d)(3) or 14(d)(2)
of the Exchange Act has become the direct or beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of more than 50% of the voting stock of a Party. 

  

	1.11	“cGMP” means current Good Manufacturing Practices, as specified in the United States Code of Federal Regulations (21 CFR Part 210 & Part 211).

  

	 1.12
	 “Chlorothiazide” means 6-chloro-2H-1,2,4-benzothiadiazine-7sulfonamide 1, 1-dioxide, having the
empirical formula C7H6CIN304S2, a molecular weight of
295.72 and the structural formula: 

 

 
  

	1.13	“Chlorothiazide Derivative” means any Derivative of Chlorothiazide in Oral Suspension developed by or on behalf of Salix or its Affiliates.

  

	1.14	“Confidential Information” means (i) the terms and conditions of this Agreement and the Ancillary Agreements and (ii) any and all information, know-how
and data, whether oral, written or graphical, including without limitation, Manufacturing Know-How, disclosed or provided by Merck or its Affiliates to Salix or its Affiliates or by Salix or its Affiliates to Merck or its Affiliates (including any
analysis, materials, product or conclusions drawn or derived therefrom) or which are derived from any visits by personnel of Merck or its Affiliates or Salix or its Affiliates to the location of Salix or Merck, respectively, or are otherwise known
to Merck or its Affiliates or Salix or its Affiliates through its visits or contacts with Salix or Merck, respectively, whether such information, know-how and/or data is disclosed, provided or derived before or after the Closing Date. Any
information that constitutes Confidential Information of Merck prior to the Closing Date and that is included in the Assets shall, at Closing, become Confidential Information of Salix. 

  

	1.15	“Derivative” means any hydrate, solvate, salt, polymorphic form (including but not limited to a different crystal form), racemate, isomer, enantiomer, prodrug,
metabolite, ester, or other analog or derivative of a particular chemical compound or molecule. 

  

 3 

 

 
  

	1.16	“Distributor Returned Products” means any Existing Product sold on or after the Closing Date by Merck in its capacity as distributor for Salix under the Transition
Services Agreement and returned to Salix or to Merck within the time allowed for return under Merck’s Standard Return Terms and Conditions. Distributor Returned Products does not include any Supplied Products or other Products sold directly by
Salix after the Closing. 

  

	1.17	“Diuril OS NDA” means the new drug application 11-870, including any submissions, amendments or supplements thereto and any official correspondence with FDA, as of
the Closing Date. 

  

	1.18	“Diuril OS Product” means the prescription oral suspension pharmaceutical product containing Chlorothiazide as the active ingredient and approved for human
therapeutic use by the FDA pursuant to the Diuril OS NDA, which product, from its date of first commercial sale through the Closing Date, has been identified by NDC 0006-3239-66. 

  

	1.19	“Documents” means the documents and records relating to the Existing Products owned, held or controlled by Merck or any of its Affiliates, as listed on Schedule
1.19. 

  

	1.20	“Encumbrance” means, with respect to the Assets, any mortgage, lien, license, pledge, charge, security interest or encumbrance of any kind, including, without
limitation, the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such asset; provided the Astellas Agreements or any continuing rights or obligations of any Party under
or pursuant thereto do not constitute an Encumbrance. 

  

	1.21	“Exchange Act” means the Securities Exchange Act of 1934, as amended. 

  

	1.22	“Excluded Assets” means all assets, property, rights and interests of Merck and its Affiliates and Related Companies other than the Assets, including, without
limitation, all patents, information, know-how, trademarks, trade names, good will, intellectual property and proprietary rights, new drug applications and their equivalents (other than the NDAs), NDC numbers and their equivalents, product
registrations, accounts receivable, and other assets of Merck and its Affiliates. For the avoidance of doubt, the Manufacturing Know-How and Non-Oral Suspension Pepcid Products are Excluded Assets. 

  

	1.23	“Excluded Liabilities” means the liabilities retained by Merck pursuant hereto, namely all Liabilities relating to (a) the Existing Products or any or all of
the Assets if such Liabilities are made or brought prior to the Closing Date or (b) any Existing Product sold by Merck prior to the Closing Date if such Liabilities are made and brought on or after the Closing Date. 

  

	1.24	“Execution Date” means the date of execution of this Agreement as first written above. 

  

	1.25	“Existing Products” means the Diuril OS Product and the Pepcid OS Product. 

  

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	 1.26
	 “Famotidine” means
N ́-(aminosulfonyl)-3-[[[2-[(diaminomethylene)amino]-4-thiazolyl]methyl]thio]propanimidamide, having the empirical formula C8H15N7O2S3, a molecular weight of 337.43 and the structural formula: 

 

 
  

	1.27	“Famotidine Derivative” means any Derivative of Famotidine in Oral Suspension developed by or on behalf of Salix or its Affiliates. 

  

	1.28	“FDA” means the U.S. Food and Drug Administration. 

  

	1.29	“Field” means the use of a pharmaceutical product in humans by prescription for the treatment of only those diseases and conditions for which the Products have been
approved (or subsequent to the Closing Date, are approved) for marketing in the Territory and only as an Oral Suspension formulation. For the avoidance of doubt, the Field shall not include any prescription formulation except for Oral Suspension,
any over-the-counter or non-human products or uses or any other products that may be dispensed without a prescription from a licensed physician. 

  

	1.30	“First Commercial Sale” means the first sale for end use or consumption by humans of a Generic Product in the Territory. 

  

	1.31	“First Post-Closing Period” means the period from the Closing Date through [*]. 

  

	1.32	“Fiscal Year Gross Sales” means the gross sales (as defined in accordance with generally accepted accounting principles and determined in a manner consistent with
that applied in preparing Salix’s annual audited financial statements) of the Products realized by Salix during any fiscal year following the Closing Date (including the partial fiscal year commencing on the Closing Date and ending on
December 31, 2007). 

  

	1.33	“Generic Product” means any Oral Suspension pharmaceutical product in final form containing Famotidine as the sole active ingredient and in the same strength as the
Pepcid OS Product, [*]. 

  

	1.34	“Governmental Authority” means any national, regional, state, county, local or other government, or other court of competent jurisdiction, legislature,
governmental, administrative or regulatory agency, department, body, bureau, council or commission or any other national, regional, state, county, local or other governmental authority or instrumentality, in each case having jurisdiction in the
Territory, including, but not limited to, the FDA. 

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 5 

 

 
  

	1.35	“IND” means (a) an Investigational New Drug Application (as defined in the Food, Drug, and Cosmetic Act, as amended, and the regulations promulgated
thereunder, including 21 CFR part 312) that is required to be filed with the FDA before beginning clinical testing of a Product in human subjects, or any successor application or procedure, and (b) all supplements and amendments that may be
filed with respect to the foregoing. 

  

	1.36	“Inventory” means all saleable finished and packaged goods inventory of Merck related exclusively to the Existing Products and located within, or held by Merck for
distribution within, the Territory. 

  

	1.37	“Liabilities” means any claims and/or complaints (including, without limitation, all damages, losses, expenses, adverse reactions, recalls, product and packaging
complaints and other liabilities). 

  

	1.38	“Licensed Trademarks” means the trademarks relating to the Existing Products listed in Schedule 1.38, all of which will be licensed to Salix for use in the
sale of the Existing Products in the Territory on an irrevocable (except as otherwise expressly provided in the Trademark License Agreement), perpetual, fully-paid, royalty-free, transferable and sublicensable basis pursuant to the Trademark License
Agreement. 

  

	1.39	“Loss” or “Losses” means each and all of the following items to the extent actually incurred: claims, actions, causes of action, liabilities,
losses, damages, judgments, fines, penalties, amounts paid in settlement and reasonable costs and expenses incurred in connection therewith, including, without limitation, interest which is imposed in connection therewith, reasonable costs and
expenses of suits and proceedings, and reasonable fees and disbursements of counsel. 

  

	1.40	“Manufacturing Know-How” means the data, information and know-how that is not generally known, is controlled (whether by ownership or license) by Merck or its
Affiliates as of the Closing Date, and is used by or on behalf of Merck as of the Closing Date for the manufacture of the Existing Products in the Field in the Territory on the Closing Date, regardless of whether it is included in the NDAs or
otherwise, including, but not limited to, (1) the data, information and know-how that is identified or described with more specificity on Schedule 1.40 and (2) any other Manufacturing data, information and know-how provided by Merck
pursuant to Section 3.3.1 that is not generally known. For the avoidance of doubt, if such data, information or know-how becomes publicly disclosed (other than as a result of any disclosure by Salix in breach of its obligations under
Section 8.3.4 or any other provision of this Agreement or the Supply Agreement), such data, information or know-how shall no longer be deemed Manufacturing Know-How. 

  

 6 

 

 
  

	1.41	“Merck FDA Letters” means the letters from Merck to the FDA, duly executed by Merck, to be filed with the FDA no later than one (1) Business Day
following the Closing Date with regard to the NDAs, the form of which is attached hereto as Schedule 1.41. 

  

	1.42	“Merck Image Product” shall mean Existing Products using the label for such Existing Product as it exists on the Closing Date in the Territory.

  

	1.43	“Merck’s Standard Terms and Conditions” means the standard return terms and conditions as provided by Merck to Salix prior to the Closing Date, as the
same may be amended by Merck from time to time for its products generally, in Merck’s sole and absolute discretion upon notice to Salix. 

  

	1.44	“NDAs” means the Pepcid OS NDA and the Diuril OS NDA, collectively. 

  

	1.45	“Non-Oral Suspension Pepcid Products” means any pharmaceutical preparation for sale by prescription, except for Oral Suspension, in final form containing
Famotidine for any and all uses outside of the Field, including without limitation the Pepcid Tablet Products and any combination product including active ingredients other than Famotidine in combination with Famotidine. 

  

	1.46	“Oral Suspension” means a liquid preparation that consists of solid particles dispersed throughout a liquid phase in which the particles are not soluble and
that is intended to be administered orally. 

  

	1.47	“Party” shall mean Merck and Salix, individually, and “Parties” shall mean Merck and Salix, collectively. 

  

	1.48	“Pepcid OS NDA” means the new drug application 19-527, including any submissions, amendments or supplements thereto and any official correspondence with FDA,
as of the Closing Date. 

  

	1.49	“Pepcid OS Product” means the prescription oral suspension pharmaceutical product containing Famotidine as the active ingredient and approved by the FDA for
human therapeutic use pursuant to the Pepcid OS NDA, which product, from its date of first commercial sale through the Closing Date, has been identified by NDC 0006-3538-92. 

  

	1.50	“Pepcid Tablet NDA” means the new drug application 19-462, including any submissions, amendments or supplements thereto and any official correspondence with
FDA, as of the Closing Date. 

  

	1.51	“Pepcid Tablet Products” means the prescription tablet pharmaceutical products identified by NDC 0006-0963-31, NDC 0006-0963-58, NDC 0006-0964-31 and NDC
0006-0964-58 and containing Famotidine as the active ingredient. 

  

 7 

 

 
  

	1.52	“Permitted Encumbrance” means, with respect to any Asset, any encumbrance for Taxes not yet due or delinquent or for those Taxes being contested in good
faith by appropriate proceedings for which adequate reserves have been established. 

  

	1.53	“Person” means any individual, partnership, limited partnership, limited liability company, joint venture, syndicate, sole proprietorship, corporation,
unincorporated association, trust, trustee, executor, administrator or other legal personal representative, or any other legal entity. 

  

	1.54	“Products” means, collectively, (i) the Existing Products and (ii) any prescription Oral Suspension pharmaceutical product in final form containing
Famotidine or Chlorothiazide, as the case may be, or any Famotidine Derivative or Chlorothiazide Derivative, as the case may be, as the sole active ingredient. 

  

	1.55	“Purchase Orders” means all purchase orders for the sale of Existing Products in the Territory after the Closing Date accepted by Merck prior to the Closing
Date and all sales contracts pursuant to which Merck is obligated to sell Existing Products in the Territory after the Closing Date entered into by Merck prior to the Closing Date, in each case to the extent that they relate solely to Existing
Products, as listed on Schedule 1.55 attached hereto. 

  

	1.56	“Rebate” means any payment or credit required under any agreement or by operation of law, including, without limitation, any retroactive form of the
foregoing, rebate payable to a managed care organization or a pharmaceutical benefit manager and any rebate payable to a State Medicaid program (as described in the Social Security Act, 42 U.S.C. Section 1398r-8, and related provisions) or to a
State pharmaceutical assistance program. 

  

	1.57	“Recorded Information” means information or data that is physically recorded or stored in a readable or retrievable form, including, without limitation, any
information or data recorded in or on any writing, microfiche, computer disk, or electronic or optical storage media. 

  

	1.58	“Related Company” means (a) Johnson & Johnson-Merck Consumer Pharmaceuticals Co., (b) the several joint ventures between Merck and
Schering-Plough Corporation, and (c) any joint venture, partnership, corporation or other business entity in which Merck owns an equity interest of fifty percent (50%) or less, as set forth on Schedule 1.58.

  

	1.59	“Returned Products” means any Existing Product sold by Merck before the Closing Date and returned to Salix or to Merck within the time allowed for returns
under Merck’s Standard Return Terms and Conditions. Returned Products do not include any Supplied Products or other Products sold directly by Salix after the Closing Date. 

  

	1.60	“Salix FDA Letters” means the letters from Salix to the FDA, duly executed by Salix, to be filed with the FDA no later than one (1) Business Day
following the Closing Date with regard to the NDAs, the form of which is attached hereto as Schedule 1.60. 

  

 8 

 

 
  

	1.61	“Second Post-Closing Period” means the period from [*], through [*]. 

  

	1.62	“Serious” means (as per ICH E2A) an adverse experience at any dose which is fatal or life threatening, results in persistent or significant
disability/incapacity, requires in-patient hospitalization or results in prolongation of existing hospitalization, is a congenital anomaly/birth defect, or is a medically important event or reaction (even if not life-threatening, resulting in death,
or requiring hospitalization) if, based upon appropriate medical judgment, such medical event or reaction may jeopardize the patient’s or subject’s health or may require medical intervention to prevent one of the other outcomes listed
previously. 

  

	1.63	“Specifications” means the final release quality specifications for the Existing Products. 

  

	1.64	“Subsidiary” means an Affiliate of Salix of which one hundred percent (100%) of the voting stock or other equity interest is owned directly or
indirectly by Salix. 

  

	1.65	“Supplied Products” means the Existing Products manufactured, labeled and packaged by Merck or its Affiliate that are sold to Salix pursuant to the Supply
Agreement or the Transition Services Agreement (including, without limitation, Existing Products distributed for Salix by Merck under the Transition Services Agreement). 

  

	1.66	“Supply Agreement” means that certain agreement, dated as of even date herewith, by which Merck or its Affiliates will manufacture, or have manufactured and
supply to Salix or its designees the Existing Products and the active pharmaceutical ingredients for the Existing Products. 

  

	1.67	“Taxes” means all taxes of any kind, and all charges, fees, customs, levies, duties, imposts, required deposits or other assessments, including all federal,
state, local or foreign net income, capital gains, gross income, gross receipt, property, franchise, sales, use, excise, withholding, payroll, employment, social security, worker’s compensation, unemployment, occupation, capital stock,
transfer, gains, windfall profits, net worth, asset, transaction, and other taxes, and any interest, penalties or additions to tax with respect thereto, imposed upon any person by any taxing authority or other Governmental Authority under applicable
law. 

  

	1.68	“Territory” means the United States of America and its territories and possessions, including, without limitation, the Commonwealth of Puerto Rico. With
respect to Diuril OS Product only the Territory shall include Sweden. 

  

	1.69	“Trademark License Agreement” means that certain Trademark and Domain Name License Agreement, dated as of even date herewith, by which Merck or its
Affiliates will license to Salix the Licensed Trademarks. 

  

	1.70	“Transition Services Agreement” means that certain agreement, dated as of even date herewith, by which Merck or its Affiliates will provide certain
transition services to Salix with respect to the Existing Products. 

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 9 

 

 
  

	1.71	Other Definitions 

 The following terms have the
meaning set forth in the Sections below: 
  

			
	 DEFINED TERM
	  	LOCATION OF DEFINITION
	 AAA
	  	10.10.1
	 Agreement
	  	Introduction
	 AMP
	  	7.5.1
	 Approvals
	  	4.1.11
	 Asset Acquisition Statement
	  	2.4.2
	 Closing
	  	2.6.1
	 Closing Date
	  	2.6.1
	 Closing Payment
	  	2.4.1(b)
	 CMS
	  	7.5.5
	 Excluded Claim
	  	10.10
	 FCPs
	  	7.9.2
	 FD&C Act
	  	4.1.8
	 FSS
	  	7.9.2
	 Insurance Term
	  	8.2.2(a)
	 Manufacturing Know-How License
	  	3.3.1
	 Merck
	  	Introduction
	 Merck Intellectual Property
	  	4.1.7
	 Non-FAMP
	  	7.5.2
	 Retained Rights
	  	2.2.1
	 Sales Data
	  	4.1.13
	 Salix
	  	Introduction
	 Salix Insurance
	  	8.2.2(a)
	 Third Party Auditor
	  	7.6.1
	 Third Party Consents
	  	2.7.2

  

	2	SALE AND PURCHASE OF ASSETS; LIABILITIES 

  

	2.1	Sale of Assets 

  

	 	2.1.1	Subject to the terms and conditions hereof, Merck agrees to sell, transfer and assign (or in the case of the Licensed Trademarks and Manufacturing Know-How, to license), or cause
its Affiliates to sell, transfer and assign (or in the case of the Licensed Trademarks and Manufacturing Know-How, to license), to Salix, on the Closing Date, the Assets, free and clear of all Encumbrances other than the Permitted Encumbrances, and
Salix agrees to purchase (or in the case of the Licensed Trademarks and Manufacturing Know-How, to license) from Merck, on the Closing Date, such Assets. 

  

 10 

 

 
  

	 	2.1.2	Salix shall not acquire pursuant hereto any assets or rights of any kind or nature, real or personal, tangible or intangible, other than (i) all right, title and
interest in and to the Assets and (ii) the licenses to the Manufacturing Know-How and Licensed Trademarks described herein and in the Ancillary Agreements, subject to the conditions and rights set forth herein and therein, and Merck shall
retain all other assets, including, without limitation, the Excluded Assets. Nothing contained in this Agreement shall be deemed to create a liability or obligation for, or to impose any restriction on, any Related Company. 

 

	 	2.1.3	It is understood that Salix receives no rights by virtue of this Agreement (a) in any countries other than the Territory, except the right to (i) conduct research and
development concerning Products outside the Territory and (ii) manufacture Products outside the Territory for sale or distribution in the Territory or use in research and development outside the Territory, or (b) outside the Field. For
greater certainty, but without limiting the generality of anything otherwise contained herein, it is expressly understood and agreed that after the Closing Date, Salix shall not (A) sell, market or distribute Products (a) outside the
Territory or (b) outside of the Field in the Territory or (B) knowingly sell, market or distribute Products to any Person for resale, marketing or distribution (x) outside the Territory or (y) outside the Field in Territory,
except, in the case of (A) and (B), for the purposes of (1) conducting research and development outside the Territory or (2) Manufacturing Products for sale or distribution in the Territory or use in research and development outside
the Territory. 

  

	2.2	Rights Retained by Merck 

  

	 	2.2.1	Notwithstanding Section 2.1 above, and subject to the remaining provisions of this Agreement, Merck (on behalf of itself and its Affiliates) as of the Closing Date
reserves and retains the right (collectively, the “Retained Rights”) to use any data, know-how or intellectual property contained in the Assets to the extent they relate to: 

  

	 	(a)	the Excluded Assets or the Excluded Liabilities; 

  

	 	(b)	the manufacture, marketing, distribution, import or sale of the Products inside and outside of the Territory solely and exclusively for non-prescription use and non-human
use; 

  

	 	(c)	the use of the Existing Products solely and exclusively for research and/or development purposes; 

  

	 	(d)	except as provided in Section 8.1.1, any pharmaceuticals, biologicals or chemical entities or products (other than the Existing Products) currently or hereafter
developed, acquired, manufactured or marketed by Merck, including formulations, other than Oral Suspensions, containing the same active pharmaceutical ingredient(s) as the Existing Products; 

  

 11 

 

 
  

	 	(e)	any and all purposes outside the Territory; or 

  

	 	(f)	the defense or prosecution of any legal or regulatory proceeding to which Merck and/or its Affiliates is a party or a potential party. 

  

	 	2.2.2	Merck reserves and retains a right of reference to the NDAs in connection with (i) manufacture of the Existing Products under the Supply Agreement and (ii) any and all of
the purposes set forth in Section 2.2.1. 

  

	 	2.2.3	Merck reserves and retains all rights with respect to registrations and sales relating to the Products outside the Territory and outside the Field in the Territory, provided that
Salix, or any third party(ies) Manufacturing Products or conducting research and developments concerning Products on Salix’s behalf, outside the Territory to the extent expressly permitted by this Agreement, may obtain any such registrations as
may be required in order to perform such activities outside the Territory. 

  

	2.3	Liabilities 

  

	 	2.3.1	Assumed Liabilities. Subject to the terms and conditions hereof, as of the Closing Date, Salix shall assume the Assumed Liabilities related to the Assets.

  

	 	2.3.2	Excluded Liabilities. Salix shall not assume any liabilities or obligations of Merck or any of its Affiliates (other than the Assumed Liabilities to be assumed by Salix) and
the Excluded Liabilities shall remain the sole obligation and responsibility of Merck and its Affiliates. 

  

	2.4	Consideration 

  

	 	2.4.1	Purchase Price 

  

	 	(a)	Salix has heretofore paid to Merck the sum of FIVE HUNDRED THOUSAND DOLLARS (US $500,000). 

  

	 	(b)	At the Closing, Salix shall pay to Merck the sum of FIFTY-FOUR MILLION FIVE HUNDRED THOUSAND DOLLARS (US $54,500,000) by wire transfer of immediately available funds in
accordance with the written instructions delivered by Merck to Salix (the “Closing Payment”). 

  

	 	(c)	 In the event that any Person (including Merck, its Affiliates and any Related Company) other than (i) Salix or its Affiliates, (ii) a Person of
which Salix or its Affiliates owns an equity interest greater than one percent (1%) or (iii) any Person (other than Merck or its Affiliates) to 

  

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whom Salix, its Affiliates or a Person defined in clause (ii) may grant rights under the Assets, including, without limitation, the NDAs, obtains the
requisite regulatory approvals for and achieves a First Commercial Sale during the First Post-Closing Period, Merck shall, within 60 days after demand by Salix accompanied by reasonably sufficient evidence that such First Commercial Sale has
occurred, pay to Salix the sum of FIFTEEN MILLION DOLLARS (US $15,000,000) by wire transfer of immediately available funds in accordance with the written instructions delivered by Salix to Merck. 

  

	 	(d)	In the event that (i) a First Commercial Sale does not occur during the First Post-Closing Period, and (ii) any Person (including Merck, its Affiliates and any
Related Company) other than (x) Salix or its Affiliates, (y) a Person of which Salix or its Affiliates owns an equity interest greater than one percent (1%) or (z) any Person (other than Merck or its Affiliates) to whom Salix,
its Affiliates or a Person of which Salix or its Affiliates owns an equity interest greater than one percent (1%) may grant rights under the Assets, including, without limitation, the NDAs, obtains the requisite regulatory approvals for and
achieves a First Commercial Sale during the Second Post-Closing Period, then Merck shall, within 60 days after demand by Salix accompanied by reasonably sufficient evidence that such First Commercial Sale has occurred, pay to Salix the sum of [*]
DOLLARS (US $[*]) by wire transfer of immediately available funds in accordance with the written instructions delivered by Salix to Merck. Any payment by Merck pursuant to this Section 2.4.1 shall be deemed to be an adjustment to the
purchase price for the Assets. In no event shall Merck be obligated to make more than one payment pursuant to this Section 2.4.1. 

  

	 	2.4.2	Allocation of Consideration. Merck and Salix recognize their mutual obligations pursuant to Section 1060 of the Code to file timely IRS Form 8594 (the
“Asset Acquisition Statement”) with each of their respective United States federal income tax returns. Accordingly, Merck and Salix shall, as promptly as practicable following the Closing Date with respect to the Existing Products,
but in any event not later than sixty (60) days following the Closing Date allocate the Purchase Price between and among the underlying asset categories. If Merck and Salix shall have agreed on a Purchase Price allocation and an Asset
Acquisition Statement, then Merck and Salix shall file the Asset Acquisition Statement in the form so agreed and neither Merck nor Salix shall take a tax position which is inconsistent with such Purchase Price allocation. Merck and Salix agree to
cooperate to make any and all filings necessary or required in all other jurisdictions in which Assets are located and further agree that the positions taken in such filings shall be consistent with the Asset Acquisition Statement.

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 13 

 

 
  

	2.5	Inventory  

 At or prior to Closing, Merck
shall deliver to Salix a listing, based on Merck’s inventory records of the Inventory maintained by Merck as of the Closing Date. At Closing, Salix shall pay to Merck, in consideration for the Inventory, the amount equal to (i) the number
of units of Pepcid OS Products reflected in such inventory, multiplied by the cost therefor specified on Schedule 2.5, plus (ii) the number of units of Diuril OS Products reflected in such inventory, multiplied by the cost therefor
specified on Schedule 2.5. 
  

	2.6	Closing 

  

	 	2.6.1	Closing. The closing of the transactions contemplated by this Agreement (the “Closing”) and all actions specified in this Agreement to occur at the Closing
shall take place via facsimile at 10:00 a.m., New York time, on the date of this Agreement, or at such other time and/or on such other date as Merck and Salix shall agree. The date on which the Closing takes place is referred to herein as the
“Closing Date”. 

  

	 	2.6.2	Closing Deliveries. 

  

	 	(a)	At the Closing, Merck shall deliver the following to Salix: 

  

	 	(i)	the Ancillary Agreements, executed by Merck; 

  

	 	(ii)	a copy of the executed Merck FDA Letters; 

  

	 	(iii)	an electronic copy of the NDAs; and 

  

	 	(iv)	a copy of the Third Party Consent listed on Schedule 2.7.2. 

  

	 	(b)	At the Closing, Salix shall deliver the following to Merck: 

  

	 	(i)	the Ancillary Agreements, executed by Salix; 

  

	 	(ii)	a copy of the executed Salix FDA Letters; 

  

	 	(iii)	the Closing Payment (by wire transfer of immediately available funds to an account designated by Merck); and 

  

	 	(iv)	payment for the Inventory (by wire transfer of immediately available funds to an account designated by Merck). 

  

	 	2.6.3	Merck shall deliver to Salix the Documents electronically (unless otherwise provided on Schedule 1.19) as soon as reasonably practicable but in no event later than [*]
Business Days after the Closing Date, except for the Documents listed on items 4 and 7 of Schedule 1.19, each of which shall be delivered no later than [*] days of the Closing Date or as otherwise provided on Schedule 1.40.
Notwithstanding any provision of this Agreement to the contrary, Merck shall have the right to retain copies of the NDAs and the Documents for its records and in order to exercise the Retained Rights. 

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

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	2.7	Regulatory and Third Party Approvals 

  

	 	2.7.1	FDA Notification of Transfer of the NDAs 

  

	 	(a)	Salix and Merck shall file the Salix FDA Letters and the Merck FDA Letters, respectively, with the FDA within one (1) Business Day after the Closing Date. Salix shall be
responsible for the payment of any filing or similar fees payable to the FDA with respect to the transfer of the NDAs and the Products to the Salix. Transfer of title to the NDAs shall be effective as of the Closing Date. 

 

	 	(b)	In addition to the filing of the Salix FDA Letters and Merck FDA Letters, the Parties shall each, at the request of the other Party, promptly make any further filings and
take any actions reasonably required to consummate the transactions contemplated hereby and perform its obligations hereunder, including without limitation, filing with the FDA, any other notices, assignments, documents and/or other materials
required by applicable regulations and laws. 

  

	 	2.7.2	Third Party Consents. Each of the Parties hereto shall use its reasonable efforts and cooperate with the other Party hereto to promptly secure all necessary
consents, approvals, authorizations, exemptions and waivers from third parties as shall be required in order to enable the Parties hereto to promptly effect the transactions contemplated hereby (the “Third Party Consents”) (all of
which are listed in Schedule 2.7.2), and will otherwise use its reasonable efforts to cause the prompt consummation of such transactions in accordance with the terms and conditions hereof. 

  

	2.8	Post-Closing Payments  

  

	 	2.8.1	During the five-year period commencing on the Closing Date, Salix shall provide Merck with quarterly reports, not later than 45 days after the end of each Calendar Quarter, of the
Fiscal Year Gross Sales to date achieved by Salix. Such reports shall be certified by the chief financial officer of Salix as true and correct, and shall be accompanied by such information and documentation as Merck may reasonably request to permit
it to substantiate and verify such reports. In the event that, during the five-year period commencing on the Closing Date, Salix achieves Fiscal Year Gross Sales in excess of the amounts specified below, Salix shall pay to Merck the following
amounts, each payable within ten (10) Business Days following the date of the report disclosing such Fiscal Year Gross Sales except as otherwise specified in this Section 2.8: 

  

	 	(a)	When Salix’s Fiscal Year Gross Sales first reach $[*] million, Salix shall pay to Merck the sum of $[*] million; 

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 15 

 

 
  

	 	(b)	When Salix’s Fiscal Year Gross Sales first reach $[*] million, Salix shall pay to Merck the sum of $[*] million; and 

  

	 	(c)	When Salix’s Fiscal Year Gross Sales first reach $[*] million, Salix shall pay to Merck the sum of $[*] million. 

  

	 	2.8.2	The payments specified above shall be cumulative and all payments payable under this Section 2.8 shall not exceed $6 million in the aggregate. Salix and Merck agree to
cooperate in the preparation of a supplemental Asset Acquisition Statement consistent with their obligations under Section 2.4.2 and Treasury Reg. § 1.1060-1(e) as a result of any adjustment to the Purchase Price. If more than one
Fiscal Year Gross Sales target is first achieved in a single fiscal year, then the payment for each such target shall be payable, but Salix shall have the right to defer payment of the second such payment for a period of [*] and, if three payments
are due with respect to a single fiscal year, to defer payment of the third such payment for a period of [*]. 

  

	 	2.8.3	Salix has no right of setoff of any amounts due and payable, or any liabilities arising, under this Agreement against any amounts due and payable, or any liabilities arising, under
the Ancillary Agreements. In addition, Salix has no right of setoff of any amounts due and payable, or any liabilities arising, under the Ancillary Agreements against any amounts due and payable, or any liabilities arising, under this Agreement. The
payment obligations under each of this Agreement and the Ancillary Agreements remain independent obligations of each Party, irrespective of any amounts owed to the other Party under this Agreement or the respective Ancillary Agreements.

  

	3	LICENSES 

  

	3.1	Trademark License 

 At Closing, Merck and
Salix shall enter into a Trademark License Agreement, granting Salix a perpetual, irrevocable (except as otherwise expressly provided in the Trademark License Agreement), fully-paid, royalty-free, exclusive, sublicensable, assignable license to the
Licensed Trademarks in the Territory for use in the registration, manufacture, marketing, distribution and/or sale of the Products in the Territory and the Manufacturing of Products outside the Territory for use or sale in the Territory. In such
Trademark License Agreement, the Parties shall agree to take such further actions as reasonably requested by the other Party, to effect the grant of the license to the Licensed Trademarks in accordance with the intent of this Agreement. 

 

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 16 

 

 
  

	3.2	NDA License 

  

	 	3.2.1	Subject to the terms and conditions of this Agreement, Salix hereby grants to Merck, effective as of the Closing, a perpetual, fully-paid, royalty-free, irrevocable and
non-exclusive license, with the right to sublicense, to use and reference the NDAs and the data and know-how contained in the NDAs (a) for the research, manufacture (by or on behalf of Merck), sale and marketing of products other than the
Products, including, without limitation, the Non-Oral Suspension Pepcid Products, in the Territory for use outside the Field, and (b) for all purposes with respect to the Products and all other products outside the Territory.

  

	 	3.2.2	Subject to the terms and conditions of this Agreement, Merck hereby grants to Salix, effective as of the Closing, a perpetual, fully-paid, royalty-free, irrevocable and
non-exclusive license, with the right to sublicense, to use and reference the “Drug Substance Specifications and Analytical Methods” sections of the Pepcid Tablet NDA and any other sections of the Pepcid Tablet NDA that the FDA advises
Salix are necessary for, together with the data and know-how contained in those sections of the Pepcid Tablet NDA, the research, manufacture (by or on behalf of Salix), sale and marketing of the Products in the Field inside the Territory.

  

	3.3	Manufacturing Know-How License 

  

	 	3.3.1	License Grant. Subject to the terms and conditions of this Agreement, the Supply Agreement and the Transitions Services Agreement, Merck hereby grants to Salix, effective as
of the Closing, under the Manufacturing Know-How (i) a perpetual, irrevocable, fully-paid, royalty-free, exclusive (subject to Merck’s right to manufacture and have manufactured the Products pursuant to the Supply Agreement) worldwide
license, with the right to sublicense, to manufacture or have manufactured (including by third parties for Salix) Products solely for use or sale in the Field in the Territory and (ii) a perpetual, irrevocable, fully-paid, royalty-free,
nonexclusive, worldwide license, with the right to sublicense, to manufacture or have manufactured (including by third parties for or on behalf of Salix) Products for purposes of conducting research and development of Products outside the Territory
(collectively, the “Manufacturing Know-How License”); provided that Salix shall not be entitled to exercise its rights under the Manufacturing Know-How License to manufacture or have manufactured the Products for sale prior to the
date of expiration or termination of the Supply Agreement, except as otherwise permitted thereby. 

  

	 	3.3.2	Merck Ownership of Manufacturing Know-How. Salix acknowledges and agrees that, notwithstanding any information or data contained in the NDAs relating to Manufacturing, Merck
retains sole ownership of and title to the Manufacturing Know-How and no ownership interest in or title to the Manufacturing Know-How is or has been transferred or conveyed to Salix or any other Person by this Agreement or otherwise. Salix
acknowledges and agrees that it shall not at any time claim adversely to Merck or its Affiliates any right, title or interest in or to the Manufacturing Know-How, except as necessary to exercise, defend or protect its rights hereunder or under the
Ancillary Agreements with respect thereto. 

  

 17 

 

 
  

	 	3.3.3	Supply of Active Ingredient and Materials. From and after the expiration or termination of the Supply Agreement, Salix, at its own expense, shall, as between the
Parties, be responsible for (a) obtaining its own source of Famotidine, Chlorothiazide and any other ingredients and materials associated with the manufacture of the Existing Products, (b) obtaining all equipment necessary to manufacture
the Existing Products, and (c) Manufacturing the Existing Products, provided that this Section 3.3.3 shall not create any affirmative obligation on the part of Salix to undertake any of the foregoing activities.

  

	4	REPRESENTATIONS AND WARRANTIES 

  

	4.1	Representations and Warranties of Merck 

 Merck hereby represents and warrants to Salix with regard to itself and/or the Assets, as the case may be, that, as of the Closing Date: 
  

	 	4.1.1	Corporate Status. Merck is a corporation duly organized and validly existing and in good standing under the laws of the State of New Jersey, USA and has all requisite
corporate power and authority to own, use or operate the Assets, to produce, market, distribute and sell the Existing Products prior to the Closing Date and to consummate the transactions contemplated hereby. 

  

	 	4.1.2	Authority. Merck and its Affiliates each has the full corporate power and authority to enter into this Agreement, the Ancillary Agreements and any other documents
contemplated hereby or thereby. Such deliveries will convey to Salix good and marketable title to the Assets. The execution and delivery of this Agreement and Ancillary Agreements and the consummation of the transactions contemplated hereby and
thereby have been duly authorized by the necessary corporate actions of Merck and its Affiliates. This Agreement, the Ancillary Agreements and any other documents contemplated hereby or thereby constitute valid and legally binding obligations of
Merck and its Affiliates enforceable against them in accordance with their respective terms. 

  

	 	4.1.3	Non-Contravention. The execution, delivery and performance by Merck and its Affiliates (as applicable) of this Agreement, the Ancillary Agreements and any other agreements
and instruments contemplated hereunder will not (i) in any material respect violate any statute, regulation, judgment order, decree or other restriction of any Governmental Authority to which Merck or any of its Affiliates is subject,
(ii) violate any provision of the corporate charter, by-laws or other organizational documents of Merck or any of its Affiliates, or (iii) constitute a material violation or breach by Merck or any of its Affiliates of any provision of any
material contract, agreement or instrument to which Merck or any of its Affiliates is a Party or to which Merck or any of its Affiliates may be subject although not a Party. 

  

 18 

 

 
  

	 	4.1.4	No Broker. There is no broker, finder or financial advisor acting or who has acted on behalf of Merck, who is entitled to receive any brokerage or finder’s or financial
advisory fee from Salix in connection with the transactions contemplated by this Agreement. 

  

	 	4.1.5	No Lawsuits; Consents. There is no lawsuit, arbitration or proceeding pending or, to the knowledge of Merck, threatened against Merck which might prevent the
consummation of any of the transactions contemplated by this Agreement or have a material adverse effect upon the Assets, and, except for the consents required to be obtained pursuant to Section 2.7, the execution, delivery and
performance by Merck of this Agreement, the Ancillary Agreements and each of the instruments contemplated hereby to which Merck is a Party and the consummation by Merck of the transactions contemplated hereby and thereby, require no action by or in
respect of, or filing with any Governmental Agency or any other consent of any Person, firm or other entity. 

  

	 	4.1.6	Title to the Assets. Merck and its Affiliates are the true and lawful owners of, and will convey to Salix upon Closing, all right, title and interest in the Assets,
free and clear of any adverse interest, claim, lien, pledge, mortgage, security interest, restriction on transfer or Encumbrance other than Permitted Encumbrances. 

  

	 	4.1.7	Intellectual Property. Merck owns all right, title and interest to the Assets, Manufacturing Know-How, and Licensed Trademarks with respect to the Existing Products
for use in the Field in the Territory (collectively, the “Merck Intellectual Property”), free and clear of all Encumbrances. Neither Merck nor its Affiliates has any Recorded Information constituting notice of any claim in the
Territory (i) that the Licensed Trademarks are not valid or enforceable trademarks, (ii) that Merck’s use of the Merck Intellectual Property infringes upon or conflicts with any trademark, service mark, name, logo, design, trade dress
or other intellectual property rights of any third party, or (iii) that a third party is engaged in the unauthorized use or infringement of the Merck Intellectual Property. Any necessary registration, maintenance and renewal fees due in
connection with the Licensed Trademarks have been paid in a timely manner and all necessary documents and certificates in connection with the Licensed Trademarks have, for the purposes of maintaining the Licensed Trademarks, been filed in a timely
manner with all necessary Governmental Authorities in the Territory. 

  

	 	4.1.8	 Compliance with Laws. The Manufacturing of the Existing Products is and has been conducted in compliance with cGMP, the Specifications, the NDAs, and
all other applicable laws, rules, and regulations, and the development, marketing, sale, distribution, import and export of the Existing Products and the conduct of 

  

 19 

 

 
  

	 	 
the Business are, and have been conducted, in compliance with all applicable laws, rules and regulations (including, but not limited to, the United States
Federal Food, Drug and Cosmetic Act, as amended (the “FD&C Act”) and the United States Prescription Drug Marketing Act, as amended from time to time) in all material respects. Neither the FDA nor any other Governmental
Authority, has notified Merck that it is in violation of any laws, rules or regulations with respect to the Existing Products, the Business or the development, manufacture, use, sale, marketing, import or export thereof or of the active ingredients
of the Existing Products in the Territory. 

  

	 	4.1.9	Inventory. Schedule 4.1.9 sets forth the Inventory as of the Closing Date. All of the Inventory was manufactured, produced, tested, validated and released in
accordance with cGMP and the Specifications; none of the Inventory has been adulterated or misbranded within the meaning of the FD&C Act and the regulations promulgated thereunder; and none of the Inventory is an article that may not be
introduced into interstate commerce under the provisions of Section 404 or 505 of the FD&C Act. The Existing Products in the Inventory are of a quality usable and saleable in the ordinary course of Business and do not have an expiration
date prior to [*] months after the Closing Date. 

  

	 	4.1.10	Third Party Contracts. Except for the Astellas Agreements, the Purchase Orders, the obligations that arise out of the listing of the Existing Products on the Federal Supply
Schedule, and a Section 340B contract with the Office of Drug Pricing, there are no contracts between Merck (or any Affiliate thereof) and any third parties (including, but not limited to, government agencies, health maintenance organizations
and other buyers of the Existing Products in the Territory) specifically relating to the sale of the Existing Products in the Territory. The Third Party Consent listed on Schedule 2.7.2 is in full force and effect as of the Closing Date and
shall not be modified or terminated after the Closing Date without the prior written consent of Salix. 

  

	 	4.1.11	Regulatory Status 

  

	 	(a)	Merck has all required approvals, licenses, permits, authorizations and registrations with any Governmental Authority with respect to the use of the Assets and the use,
manufacture, sale, marketing, and import of Existing Products in the Territory, including without limitation all required FDA registrations and the NDAs (the “Approvals”). Each Approval is in full force and effect. Merck is in
compliance in all material respects with each Approval. All information submitted or made known by Merck to any Governmental Authority for the purpose of seeking the Approvals has, to Merck’s knowledge, been true, accurate and complete in all
material respects, and Merck and its Affiliates have taken all reasonable steps to ensure that such information is true, accurate and complete in all material respects. 

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 20 

 

 
  

	 	(b)	Except for certain ongoing reporting and administrative requirements and except as otherwise disclosed in publicly available FDA records and filings, there are no outstanding
material commitments or obligations of Merck to the FDA or any other Governmental Authority with respect to the Approvals or the Existing Products. Merck has made available to Salix copies, if any, of all serious and unexpected adverse event reports
and periodic adverse event reports with respect to the Existing Products that have been filed by Merck with the FDA, including any correspondence relating thereto. 

  

	 	(c)	There is no action or proceeding by any Governmental Authority pending or, to the knowledge of Merck as of the Closing Date, threatened, seeking the revocation or suspension of any
Approval in the Territory. 

  

	 	4.1.12	Taxes. Merck has no material liability for Taxes that would affect Salix’s rights, title and interest in or Salix’s right to use or enjoy (free and clear of any
lien or restriction) any Asset, Licensed Trademark, or Manufacturing Know-How, or any aspect of the Business acquired by Salix pursuant to this Agreement or the Ancillary Agreements. 

  

	 	4.1.13	Sales Data. The historical sales data related to the Existing Products for the period from [*] to [*] provided to Salix prior to the date hereof (the “Sales
Data”) has been prepared by Merck pursuant to and is consistent with the books and records of Merck and presents fairly the sales of Existing Products for the respective periods covered thereby. The internal books and records of Merck upon
which the Sales Data was prepared have been kept accurately in all material respects. 

  

	 	4.1.14	Disclaimers. Merck does not make any representation or warranty, and specifically disclaims any warranty: 

  

	 	(a)	That the Assets will be useful to Salix for any purpose whatsoever; and more specifically Merck makes no representations or warranties concerning the Manufacturing process,
or the efficacy, efficiency or adequacy of the Assets for the purpose of Manufacturing, marketing or selling the Products or any other product either before or after the Closing. 

  

	 	(b)	Concerning the efficacy or safety for human use of Famotidine, Pepcid OS Product or any other product, whether in the formulation heretofore manufactured and sold under the name
“PEPCID” or in the form of any other hydrates, solvates, salts, polymorphic forms (different crystal forms) of Famotidine or any Derivatives thereof. 

  

	 	(c)	Concerning the efficacy or safety for human use of Chlorothiazide, or Diuril OS Product or any other product, whether in the formulation heretofore manufactured and sold
under the name “DIURIL” or in the 

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 21 

 

 
  

	 	 
form of any other hydrates, solvates, salts, polymorphic forms (different crystal forms) of Chlorothiazide or any Derivatives thereof.

  

	 	(d)	Concerning the accuracy, completeness or utility of the Documents contained within the Assets. 

  

	 	(e)	Concerning any legal and regulatory requirements that must be satisfied by Salix before Salix will be able lawfully to manufacture, market and sell the Products in the
Territory. 

  

	 	(f)	That any medical information provided by Merck to Salix concerning the use of the Existing Products is in accordance with sound medical practice or may be relied on by Salix
or any other Person for any purpose. 

  

	 	(g)	That it is the holder of any unexpired patent rights for the Existing Products in the Territory. 

  

	 	(h)	SALIX ACKNOWLEDGES AND AGREES THAT, EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES CONTAINED IN THIS AGREEMENT, MERCK HAS MADE NO REPRESENTATION OR WARRANTY WHATSOEVER
AND SALIX HAS NOT RELIED ON ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, EXCEPT THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, SALIX ACKNOWLEDGES AND AGREES THAT, EXCEPT AS EXPRESSLY PROVIDED IN
THIS AGREEMENT, SALIX IS ACQUIRING THE ASSETS ON AN “AS IS, WHERE IS” BASIS WITHOUT ANY EXPRESS OR IMPLIED WARRANTIES AS TO THE FITNESS FOR A PARTICULAR PURPOSE, MERCHANTABILITY OR CONDITION OF THE ASSETS OR AS TO THE NON-INFRINGEMENT OF
ANY INTELLECTUAL PROPERTY RIGHTS OF ANY PERSON OR AS TO ANY OTHER MATTER. 

  

	4.2	Representations and Warranties of Salix 

 Salix represents and warrants, as of the Closing Date that: 
  

	 	4.2.1	Corporate Status. Salix is a corporation duly incorporated and validly existing under the laws of the State of Delaware and has all requisite corporate power and
authority to own its properties and carry on its business as now being conducted and to consummate the transactions contemplated hereby. 

  

	 	4.2.2	 Authority. Salix and its Affiliates each has the full corporate power and authority to enter into this Agreement, the Ancillary Agreements and any
other documents contemplated hereby or thereby. The execution and delivery of this Agreement 

  

 22 

 

 
  

	 	 
and Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby have been duly authorized by the necessary corporate
actions of Salix and its Affiliates. This Agreement, the Ancillary Agreements and any other documents contemplated hereby or thereby constitute valid and legally binding obligations of Salix and its Affiliates enforceable against them in accordance
with their respective terms. 

  

	 	4.2.3	Non-Contravention. The execution, delivery and performance by Salix and its Affiliates (as applicable) of this Agreement, the Ancillary Agreements and any other
agreements and instruments contemplated hereunder will not (i) in any material respect violate any statute, regulation, judgment order, decree or other restriction of any Governmental Authority to which Salix is subject, (ii) violate any
provision of the corporate charter, by-laws or other organizational documents of Salix, or (iii) constitute a material violation or breach by Salix of any provision of any material contract, agreement or instrument to which Salix is a Party or
to which Salix may be subject although not a Party. 

  

	 	4.2.4	No Broker. There is no broker, finder, financial advisor or other Person acting or who has acted on behalf of Salix, who is entitled to receive any brokerage or
finder’s or financial advisory fee from Merck in connection with the transactions contemplated by this Agreement. 

  

	 	4.2.5	No Lawsuits; Consents. There is no lawsuit, arbitration or proceeding pending or, to the knowledge of Salix, threatened against Salix which might prevent the
consummation of any of the transactions contemplated by this Agreement, and, except for the consents required to be obtained pursuant to Section 2.7, the execution, delivery and performance by Salix of this Agreement, the Ancillary
Agreements and each of the instruments contemplated hereby to which Salix is a Party and the consummation by Salix of the transactions contemplated hereby and thereby, require no action by or in respect of, or filing with any Governmental Authority
or any other consent of any Person, firm or other entity. 

  

	 	4.2.6	Insurance. Salix has obtained the insurance coverages required in Section 8.2.2 hereof. 

  

	 	4.2.7	Debarred Personnel. Salix has not been debarred and is not subject to debarment pursuant to Section 306 of the Federal Food, Drug, and Cosmetic Act, as amended,
or nor is it the subject of a conviction described in such section. 

  

	 	4.2.8	Intention to Distribute Diuril OS Products. Salix has no current intention or plan to discontinue at any time the supply and distribution of the Diuril OS Product for
the Territory. 

  

 23 

 

 
  

	 	4.2.9	Financial Capacity. Salix has adequate financial resources to complete the transactions contemplated hereby and to perform its obligations under this Agreement and the
Ancillary Agreements. 

  

	 	4.2.10	Compliance with State Law. Salix is aware of state laws in the United States relating to distribution of Merck Image Product, and can legally distribute Merck Image
Product in all states, territories and possessions of the United States. 

  

	5	REGULATORY COVENANTS 

  

	5.1	Maintenance of NDAs 

  

	 	5.1.1	After the Closing Date and until such time as Salix decides to withdraw the Pepcid OS NDA, Salix shall maintain the validity and good standing of the Pepcid OS NDA such that
Salix is authorized to manufacture (or have manufactured pursuant to and in accordance with the Supply Agreement) and to sell the Pepcid OS Product under the name “PEPCID” in the Territory, in accordance with applicable laws and
regulations. During such period, Salix shall not alter or impair the Pepcid OS NDA in any manner or take any other action with respect to the Assets that might adversely affect Merck’s or its Affiliates’ or Related Companies’ ability
to (i) manufacture the Pepcid OS Product under the Supply Agreement or (ii) otherwise exercise their rights regarding (x) the Excluded Assets or (y) Famotidine and its Derivatives outside the Field or outside the Territory.

  

	 	5.1.2	During the period specified in Section 6.4, Salix shall maintain the validity and good standing of the Diuril OS NDA such that Salix is authorized to manufacture
(or have manufactured pursuant to and in accordance with the Supply Agreement) and to sell the Diuril OS Product under the name “DIURIL” in the Territory, in accordance with applicable laws and regulations. During such period, Salix shall
not alter or impair the Diuril OS NDA in any manner or take any other action with respect to the Assets that might adversely affect Merck’s or its Affiliates’ or Related Companies’ ability to (i) manufacture the Diuril OS Product
under the Supply Agreement or (ii) otherwise exercise their rights regarding (x) the Excluded Assets or (y) Chlorothiazide and its Derivatives outside the Field or outside the Territory. 

  

	 	5.1.3	After the Closing Date and until such time as Merck decides to withdraw or convey the Pepcid Tablet NDA, Merck shall maintain the validity and good standing of the Pepcid
Tablet NDA such that Merck is authorized to manufacture and to sell the Pepcid Tablet Product under the name “PEPCID” in the Territory, in accordance with applicable laws and regulations. During such period, Merck shall not alter or impair
the Pepcid Tablet NDA in any manner that might adversely affect Salix’s or its Affiliates’ ability to exercise the rights pursuant to the license set forth in Section 3.2.2 hereof. 

  

 24 

 

 
  

	5.2	Labeling 

  

	 	5.2.1	From and after the Closing Date, except to the extent otherwise provided in this Agreement, the Supply Agreement or the Transition Services Agreement, Salix will be
responsible for developing, and shall promptly develop, at its own expense, new labeling (i.e., the package insert), new NDC numbers and printed packaging components, including, without limitation, bottle labels, cartons, shipper end-labels and
packaging data as appropriate for the Products. Unless otherwise specifically provided herein or in the Supply Agreement or Transition Services Agreement, Salix, at its own expense, shall prepare and file with the FDA any and all reports, documents
and materials, and take such other actions, as are necessary to undertake the foregoing. 

  

	 	5.2.2	Notwithstanding the provisions of Section 5.2.1, with respect to certain labeling for the Pepcid OS Product, the Parties acknowledge and agree as follows:

  

	 	(a)	The Pepcid OS Product and Pepcid Tablet Products share a common product circular and such product circular contains the Merck company signature. 

  

	 	(b)	Concurrently with or after the amendment described in subparagraph (b) above has been completed, (1) the Parties shall amend the product circular for the Pepcid OS
Product and the Pepcid Tablet Products in order to establish two separate product circulars so that (i) one refers primarily to the Pepcid OS Product and identifies Salix as the owner of such Pepcid OS Product and (ii) the other refers
primarily to the Pepcid Tablet Products and identifies Merck as the owner of such Pepcid Tablet Products. The foregoing amendments to the product circulars shall be effected by annual report submissions to FDA by Merck and Salix, respectively.
Thereafter, Salix shall be solely responsible for the product labeling as described in Section 5.2.1). 

  

	5.3	Regulatory Compliance 

 From and after the
Closing Date, except as provided in the Transition Services Agreement and with respect to the manufacture of the Existing Products pursuant to the Supply Agreement, Salix will be responsible for, and shall conduct, all regulatory compliance
activities with respect to the NDAs and the Products in the Territory. 
  

	 	5.3.1	Reporting Obligations. After the Closing Date, Salix shall have full responsibility for completing and filing, and shall complete and file, the annual report and all
other reports required by any Government Authority in the Territory for the Products. With respect to such period of time that Merck is supplying Existing Products to Salix pursuant to the Supply Agreement, Merck shall provide to Salix Merck’s
internal annual review to the extent applicable to the Existing Products in the Field and in the Territory. 

  

 25 

 

 
  

	 	5.3.2	Annual Report; Other FDA Submissions. Upon request by Merck, Salix shall promptly send to Merck a copy of the annual report for the NDAs, any other New Drug
Application(s) or other regulatory approvals or applications with respect to the Products, any supplements, amendments or changes to the NDAs, other New Drug Application(s), other regulatory approvals or applications, and any INDs or other filing,
correspondence or other communication (including any summaries or reports thereof) made with, or to, or received from, the FDA with respect to the Products, and any changes made to the product circular or product label for the Products after the
Closing Date. Merck agrees to assist Salix in the preparation of the first annual report for the Existing Products. 

  

	 	5.3.3	Third Party Contractors; Debarment. Salix shall not at any time retain or use in any capacity in connection with the research, development, manufacture, marketing,
sale or distribution of the Products any Person who has been debarred pursuant to Section 306 of the Federal Food, Drug, and Cosmetic Act, as amended, or who is the subject of a conviction described in such section. Salix shall inform Merck in
writing immediately if Salix, any of Salix’s Affiliates or, to Salix’s knowledge, any other Person connected with the research, development, manufacture, marketing, sale or distribution of the Products is debarred or is the subject of a
conviction described in such Section 306, or if any action, suit, claim, investigation or legal or administrative proceeding is pending or, to Salix’s knowledge, is threatened, relating to the debarment or conviction of Salix or any such
Person. 

  

	5.4	Adverse Events 

  

	 	5.4.1	Effective as of the Closing Date, Salix shall be responsible for reporting of adverse event information received with respect to the Products to meet the current requirements
for adverse drug reaction reporting to the FDA and shall comply with the adverse experience reporting requirements set forth in this Section 5.4 with respect to the Existing Products, except as otherwise provided in the Transition
Services Agreement. Pursuant to Section 2.6.3, Merck will provide Salix an electronic copy of all legacy data of adverse events or experiences, both Serious and non-Serious, as maintained by Merck on its global safety database.

  

	 	5.4.2	Merck and its Affiliates shall provide to Salix, and Salix shall provide to Merck, timely notice of all side effects, drug interactions and other adverse effects identified
or suspected by such Party with respect to the Existing Products. Merck shall provide Salix, and Salix shall provide Merck, with all necessary assistance in complying with all adverse reaction reporting requirements established by, or required
under, either of the NDAs within the Territory. 

  

 26 

 

 
  

	 	5.4.3	Merck shall provide Salix, and Salix shall provide Merck, within five (5) calendar days of “date first learned,” written notice of all such side effects, drug
interactions and other adverse effects reported to such Party or its Affiliates regarding the Products. With respect to any such information, Merck and Salix shall also use reasonable efforts to obtain, and to furnish to each other, such
information, including, but not limited to, patients, circumstances, consequences and sources of information, reasonably sufficient to permit the other Party to evaluate such side effects, drug interactions or other adverse effects of the Products.
Each Party shall retain all documents, reports, studies and other materials relating to any and all such side effects, drug interactions, or other adverse effects relating to the Products. Upon reasonable written notice, Merck shall permit Salix,
and Salix shall permit Merck, to inspect, and to make copies of, all such documents, reports, studies and other materials. 

  

	 	5.4.4	Merck shall provide Salix, and Salix shall provide Merck, with such assistance as the other Party shall reasonably request in connection with the identification, analysis,
mitigation and elimination of all such side effects, drug interactions and other adverse effects with respect to the Products, as applicable, provided, however, that, in the event that the FDA requires any clinical studies or additional
studies with respect to any such side effects, drug interactions or other adverse effects of the Products in order to maintain the NDA for such Products, Salix shall bear the costs in relation to the performance of any such studies Salix elects, in
its sole discretion, to conduct. 

  

	 	5.4.5	Within thirty (30) days of the Closing Date, Merck and Salix shall enter into a separate agreement, consistent with pharmaceutical industry practices and standards,
regarding procedures for adverse event reporting for the Products. 

  

	5.5	Recalls 

 Effective as of the Closing Date,
Salix shall have full responsibility for determinations to initiate recalls, field corrections or withdrawals with respect to Products sold or marketed in the Field in the Territory, provided, however, that during the term of the Supply Agreement
any recalls, field corrections or withdrawals shall be effected in accordance with the Supply Agreement. The costs of any such recall or withdrawal, to the extent not subject to the provisions of the Supply Agreement, shall be deemed to be an
Assumed Liability except to the extent encompassed within the term “Excluded Liability”, in which case such costs shall be borne by Merck. 
  

	6	SUPPLY AND MANUFACTURING COVENANTS 

  

	6.1	Supply of Products 

 Except with respect to
the Supplied Products pursuant to the Supply Agreement and any extension or modification thereof, Salix will manufacture, or have manufactured on its 

  

 27 

 

 
  

 
behalf by a third party, the Products, in compliance with cGMPs and in material compliance with those applicable laws governing quality compliance of human
pharmaceutical products. 
  

	6.2	FDA Approval 

 To the extent that the
manufacture, distribution and sale of the Products is subject to approval or certification by the FDA, Salix will not manufacture, distribute or sell the Products without such approval or certification. 
  

	6.3	Storage and Distribution of the Products 

 Salix shall comply with cGMP in the storage and distribution of Inventory and Supplied Products. 
  

	6.4	Continued Sale of Diuril OS Product 

 Merck
and Salix acknowledge and agree that the Diuril OS Product is medically necessary to treat a disease, illness, condition and/or patient population, that there are no alternative sources or acceptable alternative molecules, and that the Diuril OS
Product is currently being used for its appropriate indications in the Territory. It is the joint desire of Merck and Salix that the Diuril OS Product satisfy the foregoing need and continue to be available to the public to meet reasonably
anticipated patient needs. Consequently, and as a material inducement to Merck to enter into this Agreement, Salix agrees for a period of at least [*] to maintain a supply of Diuril OS Product for the Territory reasonably sufficient to meet
reasonably anticipated patient needs and demands as determined by reference to certain historical data as set forth on Schedule 6.4, but taking into account any subsequent developments that cause Merck and Salix to mutually agree in writing
that such Diuril OS Product is no longer medically necessary. In addition, Salix shall distribute the Diuril OS Product in the Territory in a manner reasonably calculated to meet such patient needs and demands. Further, no later than [*], Salix
shall obtain and receive approval from the FDA to provide for an update to the packaging and formulation of the Diuril OS Product from a source of supply other than Merck or its Affiliates and shall keep Merck periodically and reasonably informed of
such approval process. Any failure of Salix to perform its obligations under this Section 6.4 shall constitute a material breach of this Agreement. 
  

	6.5	Equipment 

 In the event that Merck
determines that it desires to sell certain equipment related to the manufacture of the Existing Products, and Salix desires to acquire any or all such equipment from Merck, Salix may request that Merck sell such equipment to Salix. In the event of
such request, Merck and Salix shall negotiate in good faith and seek to reach agreement for the sale of such equipment by Merck to Salix on an as is basis upon mutually acceptable terms, taking into account the fair market value of such equipment at
the time of sale. 
  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 28 

 

 
  

	7	OTHER COVENANTS RELATING TO THE PRODUCTS 

  

	7.1	Customer Matters 

  

	 	7.1.1	Customer Notification. Merck will notify the other parties to the Purchase Orders in writing within [*] Business Days after the Closing Date that Salix is the owner of
the NDAs for the Existing Products in the Territory but that Merck will continue to distribute the Existing Products, as Salix’s agent, for a limited period of time pursuant to the Transition Services Agreement. 

  

	 	7.1.2	Orders; Customer Service. Commencing on the Closing Date, Salix shall be responsible for receiving and processing all orders, undertaking all invoicing, collection and
receivables, and providing all customer service related to the sale of Products in the Territory including the handling of customer orders; provided, that Merck shall perform certain services for Salix with respect to the Existing Products. For a
period of [*] from and after the Closing Date, if Merck receives any customer order for an Existing Product in the Territory, Merck shall, within [*] of receipt, forward such order to Salix by facsimile, followed by the original hard copy if the
order is placed by hard copy and if requested by Salix. Except as provided in the Transition Services Agreement, commencing on the Closing Date, Salix shall be responsible for and handle all customer complaints and inquiries (medical and
non-medical) with respect to the Products. 

  

	7.2	Promotion and Marketing 

  

	 	7.2.1	Products Selling Price. Effective as of the Closing Date, Salix shall independently determine and set prices for the Products in the Territory to be sold by Salix,
including the selling price, volume discounts, rebates and similar matters. 

  

	 	7.2.2	Advertising and Promotional Materials 

  

	 	(a)	Salix Promotion. Commencing on the Closing Date, Salix shall be responsible for development of all advertising and promotional materials in the Territory for the
Products, if any. 

  

	 	(b)	FDA Contacts. Commencing on the Closing Date, Salix shall be the contact for review and discussion of all promotional materials for the Products with the FDA. In
connection with the transfer hereunder of the NDAs, Salix shall file on a timely basis after the Closing Date, all promotional materials for the Products as may be required with the FDA. 

  

	 	(c)	Use of Merck Trade Names. Except to the extent otherwise provided in the Supply Agreement or the Transition Services Agreement, beginning on

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 29 

 

 
  

	 	 
the Closing Date, Salix shall mark clearly all units of the Products manufactured or distributed by Salix to indicate Salix’s ownership of the Products
in the Territory and shall not use the words, names or combined letters “Merck”, “Merck & Co., Inc.”, “MMD”, “Merck Manufacturing Division”, “Merck Sharp & Dohme”, “MSD”,
“Merck Frosst”, “Frosst”, “Merck Frosst Canada Ltd.” or any variation thereof or other word, name or letter combination substantially similar thereto, or any other trade name or trademark (except as expressly set forth
in the Trademark License Agreement) of Merck, or any NDC of Merck, in connection with the Products or otherwise, or as part of the name of Salix. After the Closing Date, except to the extent otherwise provided in the Supply Agreement or the
Transition Services Agreement, Salix shall not give the impression to the public, to physicians or to the pharmaceutical marketplace that the Products are products of Merck or its Affiliates or are in any way connected with Merck or its Affiliates
(except in a public announcement approved by Merck as provided in Section 8.3.2), provided that Salix shall be entitled to identify any Existing Products supplied to Salix under the Supply Agreement as manufactured by Merck.

  

	 	(d)	Trade Dress. Commencing on the Closing Date, Salix shall not use trade dress, packaging (both internal and external) or labeling which is substantially the same
as that of Merck in connection with any Product which is not manufactured by, or purchased under this Agreement or the Supply Agreement from, Merck or its Affiliates. 

  

	7.3	Medical and Other Inquiries 

  

	 	7.3.1	Commencing on the Closing Date, Salix shall be responsible for, and shall respond to, all medical inquiries related to the Products. In addition, Salix shall be responsible
for, and shall conduct, all correspondence and communication with physicians and other health care professionals in the Territory relating to the Products. Salix shall keep such records and make such reports as shall be reasonably necessary to
document such communications in compliance with all applicable regulatory requirements. 

  

	 	7.3.2	Merck and Salix shall cooperate to effect an orderly transfer of the responsibilities associated with correspondence and communication with health care professionals and
customers relating to the Existing Products sold in the Territory. Except to the extent otherwise required in the case of medical emergency (in which case, Merck shall promptly inform Salix of the question and response), Merck will refer all
questions raised by health care professionals and customers relating to the Products sold by Salix in the Territory to Salix for response. Salix shall provide to Merck a U.S. toll-free telephone number and facsimile number to use for such referrals.

  

 30 

 

 
  

	7.4	Returned Products, Chargebacks and Rebates 

  

	 	7.4.1	Salix shall keep adequate records of any Returned Products and shall promptly notify Merck of receipt of any Returned Products. Salix shall at the request of Merck remit all
such Returned Products to Merck at: 

 [*] 
 [*] 
 [*] 
 [*] 
 at the expense of Merck, unless Merck specifically authorizes Salix to destroy such Returned Products
at Merck’s expense, in which event Salix shall provide such certifications regarding the destruction and cost of destruction of such Returned Products as Merck shall reasonably require. 
  

	 	7.4.2	Merck shall keep adequate records of any Distributor Returned Products and shall promptly notify Salix of receipt of any Distributor Returned Products. Merck shall at the
request of Salix remit all such Distributor Returned Products to Salix at: 

 Salix Pharmaceuticals, Ltd. 
 Attn: Brad Bainbridge 
 1700 Perimeter Park
Drive 
 Morrisville, NC 27560-8404 
 Fax: 919-862-1095 
 at the expense of Salix, unless Salix specifically authorizes Merck to destroy such Distributor Returned
Products at Salix’s expense, in which event Merck shall provide such certifications regarding the destruction and cost of destruction of such Distributor Returned Products as Salix shall reasonably require. 
  

	 	7.4.3	Merck shall give credit for all Returned Products in accordance with Merck’s Standard Return Terms and Conditions to (i) customers who purchased Returned Products
from Merck and return such Returned Products to Merck and (ii) Salix if Salix provides documentation that it provided credit to a customer who purchased Returned Products from Merck and returned such Returned Products to Salix. A Product shall
be deemed a Returned Product if it comes from a batch from which any sale was made by Merck prior to the Closing Date. 

  

	 	7.4.4	Salix shall be responsible for all Distributor Returned Products and shall give credit for all Distributor Returned Products in accordance with Merck’s Standard Return
Terms and Conditions to (i) customers who purchased Distributor Returned Products and return such Distributor Returned Products to Salix and (ii) Merck if Merck provides documentation that it provided credit to a customer who

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 31 

 

 
  

	 	 
purchased Distributor Returned Products and returned such Distributor Returned Products to Merck. A Product shall be deemed a Distributor Returned Product if
it does not come from a batch from which any sale was made by Merck prior to the Closing Date. 

  

	 	7.4.5	Merck shall be responsible for processing all chargebacks arising from sales of the Existing Products bearing Merck’s NDC by wholesalers to customers in the Territory.
Merck shall be responsible for the cost of such chargeback claims submitted prior to the Closing Date and through (and including) [*]. Salix shall be responsible for the cost of all chargeback claims submitted on or after [*] (including, without
limitation, any Supplied Products sold by Merck as distributor for Salix pursuant to the Transition Services Agreement). 

  

	 	7.4.6	Salix shall be responsible for payment of all non-Medicaid Rebates arising from the utilization of the Existing Products bearing Merck’s NDCs sold on and after the
Closing Date in the Territory (including, without limitation, the utilization of any Supplied Products sold by Merck as distributor for Salix pursuant to the Transition Services Agreement). 

  

	 	7.4.7	Merck shall be responsible for processing all Medicaid Rebates for the Existing Products bearing Merck’s NDC. Salix will cooperate as necessary to facilitate the
processing of Medicaid Rebate claims by Merck during this period. Salix shall reimburse Merck for all such Rebates paid by Merck for Existing Products sold on or after the Closing Date. 

  

	 	7.4.8	Salix shall at all times have sole and exclusive responsibility for the processing and payment of any and all chargebacks and Rebates arising from or with respect to Products
bearing Salix’s NDC numbers. 

  

	7.5	Price Submissions and Certifications 

  

	 	7.5.1	Monthly Submissions to Merck. Beginning on the Closing Date, Salix shall submit to Merck on a monthly basis, within [*] days after the last day of the previous month,
the monthly Average Manufacturer Price (“AMP”) for each Existing Product that bears a Merck NDC number, calculated from sales of that Existing Product made by Salix (including, without limitation, sales made by Merck as distributor
for Salix under the Transition Services Agreement) in accordance with applicable law and regulatory guidance. 

  

	 	7.5.2	Quarterly Submissions to Merck. Beginning on the Closing Date, Salix shall submit to Merck on a quarterly basis, within [*] days after the last day of the previous
calendar quarter, the quarterly AMP, Best Price, and Non-Federal Average Manufacturer Price (“Non-FAMP”) for each Existing Product that bears a Merck NDC, calculated from sales of that Existing Product made by Salix (including,
without limitation, sales made by Merck as distributor for Salix under the Transition Services Agreement) in accordance with applicable law and regulatory guidance. 

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 32 

 

 
  

	 	7.5.3	Customary Prompt Pay Discounts and Nominally Priced Sales. Salix agrees to include with its quarterly AMP submissions to Merck information concerning all customary
prompt pay discounts on sales of each Existing Product that bears a Merck NDC that Salix provided to wholesalers during the preceding calendar quarter. Salix also agrees to include with its quarterly Best Price submissions to Merck information
concerning all nominally priced sales that occurred during the preceding calendar quarter and that Salix excludes from each Best Price calculation. 

  

	 	7.5.4	Representations and Warranties Concerning Price Submissions to Merck 

 Salix understands that Merck is reasonably relying on Salix for the timely and accurate submission of the information described in Subparagraphs 7.5.1 through 7.5.3. Accordingly, Salix represents and warrants that:
(a) any information submitted to Merck pursuant to those subparagraphs: is accurate, based on the best and most complete data available at the time each submission is made; and (b) each price is calculated pursuant to the appropriate price
calculation methodology. Salix further represents and warrants that each of its price calculation methodologies complies with applicable law, including without limitation all applicable regulations and agency guidance. 
  

	 	7.5.5	Certifications to Merck 

  

	 	(a)	Salix agrees that each AMP and Best Price submission to Merck shall be accompanied by the following certification, to be executed by the Salix official who executes the
certifications that accompany Salix’s Medicaid rebate-related price reports to the Centers for Medicare and Medicaid Services (“CMS”): 

 I, John Temperato, Vice President, Managed Markets, an authorized representative of Salix Pharmaceuticals LTD, certify that the information provided to Merck & Co., Inc. with this submission: (a) is
accurate based on the best information currently available; and (b) has been calculated pursuant to Salix’s Medicaid Drug Rebate Program calculation methodology. 
 I further certify that Salix’s Medicaid Drug Rebate Program calculation methodology fully complies with all applicable laws and regulations, and all
applicable guidance issued by the Centers for Medicare and Medicaid Services. 
  

 33 

 

 
  

	 	(b)	Salix agrees that each non-FAMP submission to Merck shall be accompanies by the following certification: 

 I, John Temperato, Vice President, Managed Markets, an authorized representative of Salix Pharmaceuticals LTD, certify that the information provided to
Merck & Co., Inc. with this submission: (a) is accurate based on the best information currently available; and (b) has been calculated pursuant to Salix’s non-Federal Average Manufacturer Price calculation methodology.

 I further certify that Salix’s non-Federal Average Manufacturer Price calculation methodology fully complies with all applicable laws
and regulations, and all applicable guidance issued by the Department of Veterans Affairs. 
  

	7.6	Audits and Price Submissions 

  

	 	7.6.1	Merck Audit Rights. Merck shall have the right to have an independent third party reasonably acceptable to Salix (“Third Party Auditor”) audit and
examine all relevant records of Salix as may be reasonably necessary to verify the accuracy and completeness of the prices and other information submitted to Merck pursuant to Paragraph 7.5 and to verify that each of Salix’s price calculation
methodologies complies with applicable law. Such Third Party Auditor shall execute a confidentiality agreement and shall report its conclusions to both Merck and Salix without disclosing to Merck any information about pricing or discounts for any of
the Products, except information that Salix is required to submit to Merck pursuant to Paragraph 7.5, including the correct figures if the auditor believes any price or other information submitted by Salix was incorrect. Payment for any audit
services rendered by the Third Party Auditor shall be made by [*]. 

  

	 	7.6.2	Representations and Warranties Concerning Information Furnished to the Third Party Auditor. Salix represents and warrants that all information required to be provided
to the Third Party Auditor: (a) will be made available for inspection and audit by the Third Party Auditor not later than seven (7) days after the close of each month; (b) will be complete and accurate; and (c) will be collected
and maintained in accordance with applicable law. 

  

	7.7	Restatements of Price Submissions 

  

	 	7.7.1	Routine Restatements. With respect to any information described in Subparagraphs 7.5.2 or 7.5.3 and submitted by Salix to Merck, Salix agrees, upon obtaining sales
data not available at the time the information was originally submitted to Merck but that renders the original submission incorrect, to revise the original information and to re-submit the information to Merck within five (5) days of obtaining
the new sales data. 

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

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	 	7.7.2	Restatements to Address Inaccuracies in Original Price Submissions. Upon discovery by Merck or Salix, either through their own efforts or those of the Third Party
Auditor, that any information was inaccurate at the time it was originally submitted, Salix agrees to correct the inaccurate information and to re-submit the information to Merck within five (5) days of its own discovery of the inaccuracy or
notification by Merck or the Third Party Auditor of the inaccuracy. 

  

	7.8	Indemnification Related to Price Submissions 

  

	 	7.8.1	Agreement to Indemnify. Salix shall reimburse and indemnify Merck for any liability that results from any inaccuracy in any price or related information submitted to
Merck pursuant to Paragraph 7.5. 

  

	 	7.8.2	Construction with Other Provisions. The indemnity obligation set forth above shall be separate from, in addition to, and not subject to, any indemnification
obligations arising under Article 10 of this Agreement. 

  

	7.9	Provision of Historical Pricing Information 

  

	 	7.9.1	Medicaid Drug Rebate Program. Within [*] days of the Closing Date, Merck shall provide to Salix the baseline information for the Existing Products that Merck submitted
to CMS in accordance with Paragraph II(f) of its Medicaid Rebate Agreement with the Secretary of Health and Human Services, including, but not limited to, base date AMP. 

  

	 	7.9.2	Federal Supply Schedule Listings. Within [*] days of the Closing Date, Merck shall provide to Salix the necessary information required by Salix to establish the
Products bearing Salix’s NDCs on Salix’s Federal Supply Schedule (“FSS”) contract, including, but not necessarily limited to, the Products’ Federal Ceiling Prices (“FCPs”), FSS prices that are in
effect as of the Closing Date, and any other historical information necessary for Salix to calculate the Products’ FCPs or FSS prices for the following calendar year. By the date Salix begins marketing or selling Products bearing Salix’s
NDCs, Salix agrees to execute with the Secretary of Veterans Affairs an FSS contract, a Master Agreement, and a Pharmaceutical Pricing Agreement, each covering the Products bearing Salix’s NDCs. 

  

	 	7.9.3	Section 340B Pricing. Within [*] days of the Closing Date, Merck shall provide to Salix the necessary information required by Salix to establish the Products
bearing Salix’s NDCs on Salix’s contract with the Secretary of Health and Human Services entered into pursuant to Section 340B of the Public Health Service Act, which such contract Salix will execute by no later than the date it
begins marketing or selling Products bearing Salix’s NDCs. 

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

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	8	ADDITIONAL COVENANTS 

  

	8.1	Covenants of Merck 

 Merck hereby covenants
and agrees that: 
  

	 	8.1.1	Non-Competition Relating to Products. During the period commencing on the Closing Date and ending on the [*] thereof, Merck and its Affiliates shall not:

  

	 	(a)	market, sell or distribute any prescription Oral Suspension pharmaceutical product containing Famotidine, Chlorothiazide, or any Derivative of either of the foregoing as the
sole active ingredient in the Field in the Territory except for (i) any sales or distribution of Existing Products or active ingredients to or on behalf of Salix pursuant to the Supply Agreement or Transition Services Agreement or (ii) any
sales of Products that are intended, at the time of sale, for use outside of the Territory; or 

  

	 	(b)	grant a license to any third Party to sell or distribute under the name “PEPCID” or “DIURIL”, as the case may be, any prescription Oral Suspension
pharmaceutical product containing Famotidine, Chlorothiazide, or any Derivative of either of the foregoing in the Field in Territory. 

  

	 	8.1.2	Limitation on Covenants of Merck. Nothing in this Agreement shall be construed as restricting the ability of Merck or its Affiliates: 

 

	 	(a)	to manufacture any Product for use by Salix in the Territory, for use by a Person outside of the Field in the Territory, or for use by a Person for any purpose outside of the
Territory; 

  

	 	(b)	to market, sell or distribute any Product intended for use outside of the Field in the Territory or for any use for any purpose outside of the Territory;

  

	 	(c)	to research Famotidine or Chlorothiazide, as the case may be, or any product or combination product containing Famotidine, Chlorothiazide or any of their respective
Derivatives for any purpose; 

  

	 	(d)	to manufacture, formulate and use Famotidine or Chlorothiazide, as the case may be, or any product or combination product containing Famotidine, Chlorothiazide or any of
their respective Derivatives thereof in the Field in the Territory solely for the purpose of using such compound as a comparator in one or more clinical studies; 

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

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	 	(e)	to use any information, data, or intellectual property contained in the Assets in a manner consistent with Section 2.2; and 

  

	 	(f)	to research, develop, manufacture, market, sell or distribute Famotidine or Chlorothiazide, as the case may be, or any product or combination product containing Famotidine,
Chlorothiazide or any of their respective Derivatives for any purpose anywhere in the world, other than any Oral Suspension pharmaceutical preparation containing Famotidine or Chlorothiazide, as the case may be, that is labeled or intended for use
in the Field in the Territory. 

  

	8.2	Covenants of Salix 

 Salix hereby covenants
and agrees that: 
  

	 	8.2.1	Notice of Litigation. Salix shall give prompt written notice to Merck of any litigation or regulatory proceeding (including, without limitation, any government
investigation) in which Salix is involved as a party that directly concerns, and might materially and adversely affect, the Products or Assets or Salix’s rights in the same or that might otherwise have a material adverse affect on the rights of
Merck and its Affiliates and Related Companies to Famotidine or Chlorothiazide, as the case may be, or any product or combination product containing Famotidine, Chlorothiazide or any of their respective hydrates, solvates, salts, polymorphic forms
(different crystal forms) or other Derivatives thereof outside the Field or outside the Territory.  

  

	 	8.2.2	Insurance 

  

	 	(a)	Salix shall at all times until [*] after the Closing Date (the “Insurance Term”) maintain at its own expense standard products liability/completed operations
insurance covering all claims against Salix whatsoever and howsoever arising from the manufacture, sale, distribution or use of the Products by Salix, its employees, agents and assigns, with coverage limits of not less than $[*] per occurrence and
not less than $[*] in the aggregate for all claims made within any year (the “Salix Insurance”). Without limitation of the foregoing, the Salix Insurance shall be effective commencing on the Closing Date and shall cover Merck as an
additional insured with respect to such claims and such insurers of Salix shall provide a waiver of subrogation against Merck. The Salix Insurance shall be with insurers having an AM Best (A-) or higher rating. Further, the Salix Insurance shall be
primary with no contribution by Merck’s insurance. 

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

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	 	(b)	Salix shall continue to make premium payments on the Salix Insurance for as long as necessary to keep the Salix Insurance in full force and effect during the above-required period.
If Salix fails for any reason to make such premium payments in a timely fashion, Merck shall have the right to make such payments at the expense of Salix. Salix shall request its insurer or its agent give Merck prompt written notice if Salix fails
to make a required premium payment in a timely fashion such that Merck shall have not less than ten (10) Business Days after receipt of such notice to make such premium payments. In the event that the Salix Insurance is not in full force and
effect and Merck, in its sole discretion, determines that it is able to apply its own insurance, Salix shall reimburse Merck for any premium or expense in connection therewith and Merck shall be entitled to off-set any such expense against any
payments or liabilities arising under this Agreement or the Ancillary Agreements. 

  

	 	(c)	Salix shall immediately notify Merck of any change in the status of the Salix Insurance and shall at Closing and from time to time thereafter, at Merck’s request,
provide Merck with a certificate of insurance attesting that the Salix Insurance policies providing the required coverage and limits of insurance are in full force and effect and with insurers having an AM Best (A-) or higher rating. Maintenance of
the Salix Insurance shall not relieve Salix of any responsibility under this Agreement, or the Ancillary Agreements for liability in excess of insurance limits or otherwise. 

  

	 	8.2.3	Taxes. Salix shall bear and be responsible for and pay all applicable Taxes related to (i) the transfer to Salix of the NDAs and the Assets to be transferred thereto
under this Agreement and (ii) the promotion, marketing, sale and distribution by Salix of the Products in the Territory after the Closing Date, and shall indemnify and hold Merck and its relevant Affiliates harmless from any liability relating
to such Taxes other than any income taxes imposed on Merck resulting from the transactions contemplated by this Agreement, including but not limited to, such transfers. 

  

	8.3	Mutual Covenants 

 Merck and Salix covenant
and agree as follows: 
  

	 	8.3.1	 Further Assurances. Each of Merck and Salix shall, at any time or from time to time after the Closing Date, at the request and expense of the other Party,
execute and deliver to the other Party all such instruments and documents or further assurances as the other Party may reasonably request in order to (i) sell, assign and transfer to Salix Merck’s right, title and interest in and to the
Assets as contemplated hereby, (ii) effectuate Salix’s assumption of the Assumed Liabilities, and (iii) grant Salix all rights licensed under this Agreement and the Ancillary Agreements; provided, however, that after the Closing Date,
apart from such customary further assurances, Merck shall have no other obligations except 

  

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as specifically set forth and described herein or in the Ancillary Agreements. Without limitation of the foregoing Merck shall have no obligation to
(i) assist or otherwise participate in the amendment or supplementation of the NDAs or otherwise to participate in any filings or other activities relating to the NDAs other than as necessary to effect the assignment thereof to Salix pursuant
to this Agreement (and which shall include, but not be limited to, transmitting the Merck FDA Letters as contemplated by Section 2.7.1 and the activities in Section 5.3 (except as specifically provided in the Supply Agreement
or the Transition Services Agreement)), or (ii) assist or otherwise participate in efforts to validate, continue or improve any process for or related to the manufacture of the Products (except as specifically provided in the Supply Agreement
or the Transition Services Agreement), or (iii) provide any assistance to Salix related to manufacture of the Products, after the Closing Date or at any time in the future, except, in each case, as specifically set forth herein or in the
Ancillary Agreements. 

  

	 	8.3.2	Publicity. Other than as expressly permitted herein, no press release, public announcement, confirmation or other information regarding this Agreement, the Ancillary
Agreements or related matters shall be made by either Party without the prior written consent of the other Party with respect to its form, content and means of dissemination (other than Products advertising); provided that in no event shall Salix
use the word “Merck” or the other words or the other words or names referred to in Section 7.2.2(c)). A public announcement substantially in the form attached hereto as Schedule 8.3.2 is hereby approved by both
Parties and may be released immediately upon the Closing Date. Notwithstanding the foregoing, Salix may make any (i) filings with the U.S. Securities and Exchange Commission as permitted under Section 8.3.4(e).

  

	 	8.3.3	Cooperation. From and after the Closing Date, each Party shall make available to the other Party during normal business hours and upon reasonable prior written notice, but
without unreasonably disrupting its business, all records as to the Products, Assets, Assumed Liabilities and Excluded Liabilities held by it and reasonably necessary to permit the defense or investigation of any litigation, hearing, regulatory
proceeding or investigation directly relating to the Products, Assets, Assumed Liabilities or Excluded Liabilities and shall preserve and retain all such records for the length of time contemplated by its standard record retention policies and
schedules; provided, however, that in no event shall Merck be required to assist Salix in any validation process or other regulatory process or proceeding related to the manufacture of the Products or any other product except as
specifically set forth herein or in the Ancillary Agreements. 

  

	 	8.3.4	Confidentiality 

 All Confidential Information
disclosed by one Party to the other Party hereunder shall be maintained in confidence by the receiving Party and its Affiliates and 

  

 39 

 

 
  

 
shall not be disclosed to any third party or used for any purpose except as set forth herein without the prior written consent of the disclosing Party,
except to the extent that such Confidential Information: 
  

	 	(a)	is known by the receiving Party at the time of its receipt, and not through a prior disclosure by the disclosing Party, as documented by the receiving Party’s business records;

  

	 	(b)	is in the public domain by use and/or publication before its receipt from the disclosing Party, or thereafter enters the public domain through no fault of the receiving Party;

  

	 	(c)	is subsequently disclosed to the receiving Party by a third party who may lawfully do so and is not under an obligation of confidentiality to the disclosing Party;

  

	 	(d)	is developed by the receiving Party independently and without benefit of Confidential Information received from the disclosing Party, as documented by the receiving Party’s
business records; 

  

	 	(e)	is reasonably necessary to disclose to Governmental Authorities to comply with disclosure obligations under applicable laws, rules or regulations, including, without limitation, the
rules and regulations of any stock exchange, provided, in the case of disclosure by Salix, that the receiving Party (i) gives the disclosing Party, to the extent reasonably practicable, a reasonable advance opportunity, in light of the time
reasonably required to prepare any such filing or disclosure and the required deadlines for such filing or disclosure, to review and comment on any proposed filing, (ii) in the case of any required filing by Salix of this Agreement or any
Ancillary Agreement with the Securities and Exchange Commission, Salix redacts and seeks confidential treatment for any portions of such agreements that Merck may identify to Salix as being competitively sensitive to Merck, which such portions Merck
shall identify to Salix within five (5) Business Days of notification by Salix that filing of such agreement is required, (iii) in the case of any other filing or disclosure, seeks or assists the disclosing Party, as reasonably requested,
in seeking protective or confidential treatment of such information, and (iv) minimizes any such disclosure to the extent permitted by applicable laws, rules or regulations; 

  

	 	(f)	is deemed necessary by counsel to the receiving Party to be disclosed to such Party’s attorneys, independent accountants or financial advisors for the sole purpose of enabling
such attorneys, independent accountants or financial advisors are subject to provide advice to the receiving Party, on the condition that such attorneys, independent accountants and financial advisors are subject to or agree to be bound by
confidentiality and non-use obligations at least as strict as those contained in this Agreement; 

  

 40 

 

 
  

	 	(g)	is deemed necessary by the receiving Party to be disclosed to a third party that has provided the receiving Party with a bona fide written offer to effect a Change of Control on the
condition that such third party and its attorneys, independent accountants and financial advisors agree to be bound by confidentiality and non-use obligations at least as strict as those contained in this Agreement; provided, however,
that the term of confidentiality for such third party and its attorneys, independent accountants and financial advisors shall be no less than ten (10) years; or 

  

	 	(h)	is required to be disclosed by judicial or administrative process to which the disclosing Party is subject. 

 Any combination of features or disclosures shall not be deemed to fall within the foregoing exclusions merely because individual features are published
or available to the general public or in the rightful possession of the receiving Party unless the combination itself and principle of operation are published or available to the general public or in the rightful possession of the receiving Party.

 If a Party is required by judicial or administrative process to disclose Confidential Information in accordance with
Section 8.3.4(h), such Party shall promptly, and, to the extent reasonably practicable, in advance, inform the other Party of the disclosure that is being sought in order to provide the other Party an opportunity to challenge or limit
the disclosure obligations and the receiving Party shall cooperate with the disclosing Party, as reasonably requested, in seeking confidential or protective treatment of such information. Confidential Information that is disclosed by judicial or
administrative process shall remain otherwise subject to the confidentiality and non-use provisions of this Section 8.3.4. 
  

	9	INDEMNIFICATION 

  

	9.1	Indemnification 

  

	 	(a)	 Indemnification by Merck. Subject to Section 9.3, Merck shall indemnify, defend and hold harmless Salix and its Affiliates and their officers,
directors, employees and agents from and against any and all Losses, which directly or indirectly arise out of or relate to (i) any breach by Merck of any of the representations or warranties made by Merck in this Agreement; (ii) failure
by Merck to perform any of its covenants or agreements contained herein or in the Ancillary Agreements; (iii) failure by Merck to pay, perform or discharge when due, any of the Retained 

  

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Liabilities or (iv) waiver of compliance with any applicable bulk sales statutes pursuant to Section 10.12 hereof (other than with respect
to Assumed Liabilities). 

  

	 	(b)	Indemnification by Salix. Subject to Section 9.3, Salix shall indemnify and hold harmless Merck and its Affiliates, and their respective officers, directors,
employees and agents from and against any and all Losses which directly or indirectly arise out of or relate to (i) any breach by Salix of any of the representations or warranties made by Salix in this Agreement; (ii) failure by Salix to
perform any of its respective covenants or agreements contained herein or in the Ancillary Agreements; or (iii) failure by Salix to pay, perform or discharge when due, any of the Assumed Liabilities assumed by Salix pursuant to this Agreement.

  

	9.2	Third-Party Claim Procedure 

 If a claim by a
third party is made against an indemnified Party, and if such Party intends to seek indemnification with respect thereto under this Section 9.2, the indemnified Party shall promptly notify the indemnifying Party of such claim. The
indemnifying Party shall have thirty (30) days after receipt of such notice to undertake, conduct and control, through counsel of its own choosing (subject to the consent of the indemnified Party, such consent not to be unreasonably withheld)
and at its expense, the settlement or defense of such claim, and the indemnified Party shall cooperate with the indemnifying Party in connection therewith; provided, however, that (i) the indemnifying Party shall permit the indemnified Party to
participate in such settlement or defense through counsel chosen by the indemnified Party, provided that the fees and expenses of such counsel shall be borne by the indemnified Party, and (ii) the indemnifying Party shall promptly reimburse the
indemnified Party for the full amount of any loss resulting from such claim and all related expenses incurred by the indemnified Party (except as otherwise provided in the preceding clause) in accordance with Section 9.1, and
(iii) no settlement, consent judgment or other voluntary final disposition of the suit which (1) materially limits the indemnified Party’s rights with respect to Products, (ii) subjects the indemnified Party to any
non-indemnified liability or obligation, or (iii) admits fault or wrongdoing on the part of the indemnified Party may be entered into without the consent of the indemnified Party, which consent shall not unreasonably be withheld. The
indemnified Party shall, in such case, provide the indemnifying Party notice of its approval or denial of such approval within ten (10) Business Days of any request for such approval by the indemnifying Party, provided that (i) in the
event the indemnified Party wishes to deny such approval, such notice shall include a detailed written description of its reasonable objections to the proposed settlement, consent judgment, or other voluntary disposition and (ii) the
indemnified Party shall be deemed to have approved of such proposed settlement, consent judgment, or other voluntary disposition in the event it fails to provide proper, full notice within such ten (10) Business Day period in accordance
herewith. If the indemnifying Party does not notify the indemnified Party within thirty (30) days after receipt of the indemnified Party’s notice of a claim of indemnity 

  

 42 

 

 
  

 
hereunder that it elects to undertake the defense thereof, or so notifies the indemnified Party but fails to undertake such defense promptly and in good
faith, the indemnified Party shall have the right to contest, settle or compromise the claim in the exercise of its reasonable judgment at the expense of the indemnifying Party. 
  

	9.3	Limitations on Indemnification 

  

	 	(a)	The provisions for indemnity under Section 9.1(a)(i) or Section 9.1(b)(i) shall be effective only when the aggregate amount of all Losses for which
indemnification is sought from Merck or Salix, as the case may be, exceeds $[*], in which case the indemnified Party shall be entitled to indemnification of the indemnified Party’s Losses in excess thereof. In no event shall either indemnifying
Party have liability for indemnification under Section 9.1(a)(i) or Section 9.1.(b)(i), as applicable, together with liability for breach of any representations and warranties under any of the Ancillary Agreements, for any
amounts exceeding, in the aggregate, [*] percent ([*]%) (or, in the case of Merck’s liability with respect to any breach of Section 4.1.6, [*] percent ([*]%)) of the amount equal to (i) the Closing Payment less (ii) any
adjustments made pursuant to Section 2.4.1(c) or Section 2.4.1(d). Indemnification under this Article 9 shall be the exclusive remedy for any breach of representation or warranty under this Agreement.

  

	 	(b)	IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY PUNITIVE, SPECIAL, INDIRECT, CONSEQUENTIAL, INCIDENTAL OR EXEMPLARY DAMAGES OR SIMILAR DAMAGES OR LOSSES INCURRED BY THE OTHER
PARTY, INCLUDING BUT NOT LIMITED TO LOST PROFITS, REGARDLESS OF WHETHER ARISING FROM BREACH OF CONTRACT, WARRANTY, TORT, STRICT LIABILITY OR OTHERWISE, EVEN IF THE PARTY IS ADVISED OF THE POSSIBILITY OF SUCH LOSS OR DAMAGE OR IF SUCH LOSS OR DAMAGE
COULD HAVE BEEN REASONABLY FORESEEN; PROVIDED HOWEVER, THAT THE FOREGOING LIMITATION OF LIABILITY SHALL NOT APPLY TO (i) THE LIABILITIES ARISING FROM EITHER PARTY’S GROSS NEGLIGENCE OR WILLFUL MISCONDUCT AND (ii) THE LIABILITIES OF
THE PARTIES UNDER SECTION 9.1. 

  

	10	MISCELLANEOUS 

  

	10.1	Force Majeure 

 Neither Party shall be held
liable to the other Party nor be deemed to have defaulted under or breached this Agreement for failure or delay in performing any obligation under this Agreement, other than a payment obligation, to the extent that such failure or delay is

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 43 

 

 
  

 
caused by or results from causes beyond the reasonable control of the affected Party, potentially including, but not limited to, embargoes, war, acts of war
(whether war be declared or not), acts of terrorism, insurrections, riots, civil commotions, strikes, lockouts or other labor disturbances, fire, floods, or other acts of God, or acts, omissions or delays in acting by any governmental authority or
the other Party. The affected Party shall notify the other Party of such force majeure circumstances as soon as reasonably practical, and shall promptly undertake all reasonable efforts necessary to cure such force majeure circumstances. In no event
shall Salix’s inability to pay the amounts due under this Agreement be deemed a Force Majeure event and a Force Majeure event shall not excuse Salix from is obligation to make payments when due hereunder; provided, that the foregoing is not
intended to apply to a bank or financial institution’s failure to process a wire transfer transaction for any reason other than lack of sufficient Salix funds, a failure by Salix to give appropriate wire instructions, or other requirements to
wire transfer within the control of Salix. 
  

	10.2	Assignment/Change of Control 

  

	 	10.2.1	Except as provided in this Section 10.2, this Agreement may not be assigned or otherwise transferred, nor may any right or obligation hereunder be assigned or
transferred, by either Party without the written consent of the other Party. 

  

	 	10.2.2	Merck, may without Salix’s consent, assign this Agreement and its rights and obligations hereunder in whole or in part to a Merck Affiliate or in connection with a Change of
Control of Merck. 

  

	 	10.2.3	 Salix may, without Merck’s consent, assign this Agreement and its rights and obligations hereunder in whole or in part to a Salix Affiliate (provided that
Salix is not thereby relieved of any of its obligations hereunder) or in connection with a Change of Control of Salix; provided however, that Salix shall notify Merck at least thirty (30) days prior to completion of any Change of Control of
Salix, except that in the case of a Change of Control as set forth in Section 1.10(iii) only, Salix shall provide Merck such notice thirty (30) days after Salix becomes aware of such Change of Control. If Merck is notified of a
Change of Control of Salix pursuant to the foregoing sentence, that, in the reasonable judgment of Merck, will result in material harm to the PEPCID name or Licensed Trademark (which will continue to be used by Merck for other formulations), then
Merck shall notify Salix of such determination in writing within ten (10) Business Days of such notification (such notification by Merck to be accompanied by a reasonably sufficient explanation and description of the circumstances supporting
such determination) and at any time thereafter Merck shall have the right to terminate any one or more of the Ancillary Agreements or the Manufacturing Know-How License, provided that the Parties will negotiate in good faith provisions for
termination of such agreements over a reasonable time period, and provided further, that if Salix does not consummate any such proposed Change of Control after the delivery of the notification required by Merck pursuant to this 

  

 44 

 

 
  

	 	 
sentence then Merck shall not have the right to terminate any one or more of the Ancillary Agreements or the Manufacturing Know-How License as provided by
this Section 10.2.3 with respect to such proposed Change or Control. 

  

	 	10.2.4	Any permitted assignee shall assume all assigned obligations of its assignor under this Agreement. Any attempted assignment not in accordance with this Section 10.2
shall be void. 

  

	10.3	Survival 

 All representations, warranties,
covenants and indemnities of the Parties contained herein shall, except as otherwise expressly provided herein, survive until ten (10) years after the Closing Date. The covenants and agreements of Merck and Salix hereunder that require by their
terms performance or compliance on and after the Closing Date shall continue in force thereafter in accordance with their terms. In addition, the provisions of Sections 8.3.2 and 8.3.4 shall survive any expiration or termination of
this Agreement. 
  

	10.4	Exclusive Jurisdiction 

 Subject to the
provisions of Sections 10.5 and 10.10, each Party irrevocably submits to the exclusive jurisdiction of the courts of the State of New York and the Federal courts of the United States District Court for the Southern District of New York
for the purposes of any suit, action or other proceeding arising out of this Agreement or transactions contemplated hereby. Each Party irrevocably and unconditionally waives any objection to the laying of venue in the state and Federal courts of New
York as stated above and that any such action was brought in an inconvenient forum. 
  

	10.5	Equitable Remedies 

 The Parties recognize
that breach by a Party of any of the obligations set forth in Sections 6.4, 8.1.1 and 8.3.4 of this Agreement may require a remedy different from the remedy for other possible breaches of this Agreement. In the event that such a breach
occurs or is threatened, damages to the non-breaching Party will not be readily ascertainable, irreparable harm to such Party may occur, and such Party will not have an adequate remedy at law. The Parties therefore stipulate and agree that in the
event a breach of any of the obligations set forth under Section, 6.4, 8.1.1 or 8.3.4 o of this Agreement occurs or is threatened, the non-breaching Party may seek equitable relief from any competent court in New Jersey or in the
jurisdiction where the breach occurs or is threatened (including, without limitation, a temporary restraining order and/or preliminary and permanent injunction) notwithstanding the arbitration provisions set forth in Section 10.10. The
foregoing shall not limit the availability of equitable or other forms of injunctive relief, whether permanent or temporary, for any other threatened, possible or actual breach of this Agreement. 
  

 45 

 

 
  

	10.6	Notices 

 All notices, requests and other
communications to any Party hereunder or under the Ancillary Agreements shall be in writing and shall be sent by fax and by first class mail or nationally recognized overnight delivery service: 
 If to Merck, to: 
 Merck & Co., Inc. 
 [*] 
 [*] 
 Attn: [*] 
 Facsimile: [*] 
 with a copy to: 
 Merck & Co., Inc. 
 One Merck Drive
(WS 3A-65) 
 P.O. Box 100 
 Whitehouse Station, NJ 08889-0100 
 Facsimile: [*] 
 If to Salix, to: 
 Salix Pharmaceuticals, Ltd. 
 1700 Perimeter Park Drive 
 Morrisville, NC 27560 
 Attn: General Counsel 
 Facsimile: 919-862-1095 
 with a copy to: 
 Wyrick Robbins Yates & Ponton LLP 
 4101 Lake Boone Trail, Suite 300 
 Raleigh, NC 27607 
 Attn: Donald R. Reynolds 
 Facsimile: 919-781-4865 
 or
such other address as such Party may hereafter specify by written notice to the other Party. Each such notice, request or other communication shall be effective when received at the address specified in this Section 10.6. 
  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  
  

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	10.7	Entire Agreement 

 This Agreement, including,
without limitation, the Schedules hereto and the Ancillary Agreements, embodies the entire agreement of the Parties hereto with respect to the subject matter hereof and supersedes any and all prior agreements with respect thereto, except for any
prior confidentiality agreements, which shall survive. In the event of any conflict between this Agreement and any such prior confidentiality agreement, the agreement imposing stricter confidentiality shall govern. No waiver, amendment or
modification of any provision hereof or of any right or remedy hereunder shall be effective unless in writing and signed by the Party against whom such waiver, amendment or modification is sought to be enforced. 
  

	10.8	Section Headings 

 Captions herein are
inserted for convenience of reference only and shall be ignored in the construction or interpretation of this Agreement. Unless otherwise specified, the words “herein”, “hereof” and terms of like import shall be deemed to refer
to the Agreement as a whole and not merely to a single part thereof. 
  

	10.9	Applicable Law 

 This Agreement shall be
governed by, interpreted and construed, and all claims and disputes, whether in tort, contract or otherwise be resolved in accordance with the substantive laws of the State of New York without reference to any rules of conflict or laws or renvoi.

  

	10.10	 Dispute Resolution 

  

	 	10.10.1	The Parties shall negotiate in good faith and use reasonable efforts to settle any dispute, controversy or claim arising from or related to this Agreement or the breach thereof. If
the Parties do not fully settle, and a Party wishes to pursue the matter, each such dispute, controversy or claim that is not an “Excluded Claim” shall be finally resolved by binding arbitration in accordance with the Commercial
Arbitration Rules and Supplementary Procedures for Large Complex Disputes of the American Arbitration Association (“AAA”), and judgment on the arbitration award may be entered in any court having jurisdiction thereof.

  

	 	10.10.2	The arbitration shall be conducted by a panel of three independent, neutral persons experienced in the pharmaceutical business: within thirty (30) days after initiation of
arbitration, each Party shall select one person to act as arbitrator; and the two Party-selected arbitrators shall select a third arbitrator within thirty (30) days of their appointment. If one Party fails to select an arbitrator within the
thirty (30) day period provided therefor, the arbitrator selected by the other Party shall select such second arbitrator. If the first two arbitrators selected by the Parties are unable or fail to agree upon the third arbitrator, the third
arbitrator shall be appointed by the AAA. The place of arbitration shall be New York, New York, and all proceedings and communications shall be in English. 

  
  

 47 

 

 
  

	 	10.10.3	Either Party may apply to the arbitrators for interim injunctive relief until the arbitration award is rendered or the controversy is otherwise resolved. Either Party also may,
without waiving any remedy under this Agreement, seek from any court having jurisdiction any injunctive or provisional relief necessary to protect the rights or property of that Party pending the arbitration award. The arbitrators shall have no
authority to award punitive or any other type of damages not measured by a Party’s compensatory damages. Each Party shall bear its own costs and expenses and attorneys’ fees and an equal share of the arbitrators’ fees and any
administrative fees of arbitration, provided that the arbitrators shall be entitled to apportion such costs between the Parties unequally in a manner reasonably consistent with their decision on the dispute at issue. 

  

	 	10.10.4	Except to the extent necessary to confirm an award or as may be required by law, neither a Party nor an arbitrator may disclose the existence, content, or results of an arbitration
without the prior written consent of both Parties. In no event shall an arbitration be initiated after the date when commencement of a legal or equitable proceeding based on the dispute, controversy or claim would be barred by the applicable New
York statute of limitations. 

  

	 	10.10.5	The Parties agree that, in the event of a dispute over the nature or quality of performance under this Agreement, neither Party may terminate this Agreement by reason of such
dispute until a final resolution of the dispute through arbitration or other judicial determination and then only in accordance with the outcome of such dispute resolution. The Parties further agree that any payments made pursuant to this Agreement
pending resolution of the dispute shall be refunded if an arbitrator or court determines that such payments are not due. 

 As
used in this Section 10.10, the term “Excluded Claim” shall mean a dispute, controversy or claim that concerns (a) the validity or infringement of a patent, trademark or copyright; or (b) any antitrust,
anti-monopoly or competition law or regulation, whether or not statutory. 
  

	10.11	 Expenses 

 All legal and other costs
and expenses incurred in connection herewith and the transactions contemplated hereby shall (except as otherwise provided herein) be paid by the Party incurring such expenses. 
  

 48 

 

 
  

	10.12	 Bulk Sales Statutes 

 Salix hereby
waives compliance by Merck with any applicable bulk sales statutes in any jurisdiction in connection with the transactions under this Agreement. 
  

	10.13	 Waiver 

 No waiver by any Party in one
or more instances of any of the provisions of this Agreement or the breach thereof shall establish a precedent for any other instance with respect to that or any other provision. Furthermore, in case of waiver of a particular provision, all other
provisions of this Agreement will continue in full force and effect. 
  

	10.14	 Severability 

 If any provision of this
Agreement is held to be illegal, invalid or unenforceable under any present or future law, and if the rights or obligations of either Party under this Agreement will not be materially and adversely affected thereby, (a) such provision will be
fully severable, (b) this Agreement will be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom, and (d) in lieu of such illegal, invalid or unenforceable provision, there will be added automatically as a part of this Agreement
a legal, valid and enforceable provision as similar to such illegal, invalid or unenforceable provision as may be possible and reasonably acceptable to the Parties. 
  

	10.15	 Incorporation by Reference 

 The
Ancillary Agreements and Schedules hereto and thereto constitute integral parts of this Agreement and are hereby incorporated into this Agreement by this reference. A disclosure in a given Schedule shall be deemed a disclosure for the purposes of
any other representation, warranty and Schedule to which it may relate. In case of conflict of provisions between this Agreement and any Ancillary Agreement, the provisions of this Agreement shall govern. 
  

	10.16	 Assignment 

 This Agreement shall be
binding upon and shall inure to the benefit of the Parties and their respective successors and assigns; provided, however, that, except as expressly permitted by Section 10.2, and except for any merger, restructuring or corporate reorganization
of Merck, this Agreement may not be assigned by either Party without the prior written consent of the other Party hereto, and any other attempted assignment shall be void. 
  

	10.17	 Independent Contractors 

 It is
expressly agreed that Salix and Merck shall be independent contractors and that the relationship between the Parties hereto shall not constitute a partnership, joint venture or 

  

 49 

 

 
  

 
agency. Neither Salix nor Merck shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which
shall be binding on the other Party, without the prior written consent of the other Party. 
  

	10.18	  No Third Party Beneficiaries 

 Nothing in this Agreement, express or implied, is intended to confer upon any third Party (other than a permitted successor or assign of a Party hereto) any rights, remedies, obligations or liabilities. 
  

	10.19	  Waiver of Rule of Construction 

 There shall not be any presumption against either Party hereto on the ground that such Party was responsible for drafting or preparing the term sheet or this Agreement or any part of either of such documents. 
  

	10.20	  Counterparts 

 This Agreement may
be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute but one and the same instrument. Delivery of an executed counterpart signature page of this Agreement by facsimile
transmission shall be as effective as delivery of a manually executed signature page. 
  

	10.21	  Compliance with Laws and Regulations 

 In performing their obligations pursuant to this Agreement, the Parties hereto agree and covenant that they will comply with all applicable federal, state and local laws and regulations. 
 [SIGNATURE PAGE TO FOLLOW] 
  

 50 

 

 
  

 IN WITNESS WHEREOF, the undersigned have duly executed this Agreement, as of the day and year first
above written. 
  

			
	MERCK & CO., INC.
		
	By:	 	/s/ Judy C. Lewent
		 	Judy C. Lewent
		 	Executive Vice President & Chief Financial Officer

  

			
	SALIX PHARMACEUTICALS, LTD.
		
	By:	 	/s/ Carolyn J. Logan
		 	Carolyn J. Logan
		 	President and Chief Executive Officer

 Signature Page to Master Purchase and Sale and License Agreement 

 

 
  

 SCHEDULE 1.19 
 DOCUMENTS 
  

	1.	Purchase Orders 

  

	2.	Current customer lists 

  

	3.	An electronic copy of all legacy data of adverse events and experiences, both Serious and non-Serious, as maintained by Merck on its global safety database.

  

	4.	An electronic copy of certain Manufacturing Know-How as set forth in Schedule 1.40. 

  

	5.	Certificates of Analysis and Certificates of Compliance related to the Inventory. 

  

	6.	Quality Issues List related to the Inventory. 

  

	7.	The following documents related to the Inventory: 

  

	 	a.	[*] 

  

	 	b.	[*] 

  

	 	c.	[*] 

  

	 	d.	Batch records (paper copies only) 

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 i 

 

 
  

 SCHEDULE 1.38 
 LICENSED TRADEMARKS 
  

			
	 Trademark
	  	Registration Number
	 DIURIL® (limited to use with Oral Solution only)
	  	676884
	 PEPCID® (limited to use with Oral Solution only)
	  	1373383

  

 ii 

 

 
  

 SCHEDULE 1.40 
 MANUFACTURING KNOW-HOW 
  

	1.	Manufacturing Data 

  

	 	•	 	 Process Formula 

  

	 	•	 	 Process Description 

  

	 	•	 	 [*] 

  

	 	•	 	 [*] 

  

	 	•	 	 [*] 

  

	 	•	 	 Equipment Type 

  

	2.	Analytical Methods Information 

  

	 	•	 	 In process specifications/analytical methods 

  

	 	•	 	 Non-compendial specifications/analytical methods for excipients, raw materials, active pharmaceutical ingredients and/or finished product

  

	 	•	 	 Non-compendial specifications for packaging components 

  

	3.	DIURIL OS Product Active Pharmaceutical Ingredient Milling Parameters 

  

	4.	[*] 

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 iii 

 

 
  

 SCHEDULE 1.41 
 FORM OF MERCK FDA LETTERS 
  

			
	[*]	  	Merck & Co., Inc.
	[*]	  	P.O. Box 1000, UG2CD-48
	[*]	  	North Wales, PA 19454-1099
		  	Tel [*]
		  	Fax [*]
		  	[*]

 H 
 February 23, 2007 
 Brian E. Harvey, M.D., Ph.D., Director 
 Food and Drug Administration 
 Center for Drug Evaluation and Research 
 Division of Gastroenterology Products 
 5901-B Ammendale Road 
 Beltsville, MD 20705-1266 
 Dear Dr. Harvey: 
 NDA 19-527: PEPCIDTM Oral Suspension (Famotidine) 
 General Correspondence 
 Transfer of Ownership 
 This is to inform you that Merck & Co., Inc., holder of NDA 19-527 for PEPCIDTM Oral Suspension has ceased selling PEPCIDTM Oral Suspension and as of
February 22, 2007 has sold, assigned, and transferred NDA 19-527 and the licensed trademark name PEPCIDTM Oral Suspension to Salix Pharmaceuticals, Ltd. a Delaware corporation. Salix Pharmaceuticals, Ltd. will also notify the Division
of Gastroenterology Products of the transfer of NDA 19-527 and of the trademark license. A copy of the letter that Salix Pharmaceuticals, Ltd. sent to the Division of Gastroenterology Products is enclosed for your information. 
 In accordance with 21 CFR 314.72(a)(2)(iii), Merck & Co., Inc. has provided to Salix Pharmaceuticals, Ltd. a complete copy of the approved application,
including supplements and records that are required under 21 CFR 314.81 for PEPCIDTM Oral Suspension. 
  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 iv 

 

 
  

 Brian E. Harvey, M.D., Ph.D., Director 
 NDA 19-527: PEPCIDTM Oral Suspension (Famotidine) 
 Page 2 
 As of February 22, 2007, Merck will no longer market or sell PEPCIDTM Oral Suspension in the United States or its territories and possessions (including without limitation the Commonwealth of Puerto
Rico). The Merck listing of PEPCIDTM Oral Suspension in the Orange Book should be revised to reflect Salix Pharmaceuticals, Ltd. as the new owner. 
 All
future correspondences to NDA 19-527, PEPCIDTM Oral Suspension (famotidine), should be directed to: 
 Jill Kompa, M.S., RAC 

Director, Regulatory Affairs 
 Salix
Pharmaceuticals, Inc. 
 1700 Perimeter Park Drive 
 Morrisville, NC 27560 
 Tel (919) 862-1047; Fax (919) 228-4247 
 jill.kompa@salix.com 
 This application is formatted as
required in Title 21 paragraph 314.50 of the Code of Federal Regulations and is being submitted in accordance with the January 1999, Guidance for Industry – Providing Regulatory Submissions in Electronic Format – NDAs. 

As an attachment to this letter, Merck Research Laboratories (MRL), a Division of Merck & Co., Inc., is providing one Compact Disk (CD) which contains
the submission. All documents requiring signatures for certification are included as paper for archival purposes. 
 All of the information is contained on
one CD and is not more than 100MB. Merck has taken precautions to ensure that the contents of this media are free of computer viruses (Symantec AntiVirus Corporate Edition, Symantec Corporation) and we authorize the use of anti-virus software, as
appropriate. 
 A list of reviewers from the Division of Gastroenterology Products who should be provided access to this electronic submission on their
desktops may be obtained from Mr. Giuseppe Randazzo, Regulatory Health Project Manager, Division of Gastroenterology Products. 
 We consider the filing
of this letter to be a confidential matter, and request that the Food and Drug Administration not make its content, or any future communications in regard to it, public without first obtaining the written permission of Merck & Co., Inc.

  

 v 

 

 
  

 Questions concerning this supplemental application should be directed to [*] [*] or, in my absence, to [*] [*].

  

	
	Sincerely,
	
	[*]
	Associate Director
	Worldwide Regulatory Affairs

 Enclosure: CD 
  

			
	 Desk Copy:
	  	Giuseppe Randazzo, Regulatory Health Project Manager (cover letter)
		  	Division of Gastroenterology Products
		
		  	Mary A. Holovac
		  	Office of Generic Drugs, Orange Book Staff

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 vi 

 

 
  

 H 
 February 23, 2007 
 Norman Stockbridge, M.D., Ph. D., Director 
 Food and Drug Administration 
 Center for Drug Evaluation and Research 
 Division of Cardiovascular and Renal Products 
 5901-B Ammendale Road

 Beltsville, MD 20705-1266 
 Dear Dr. Stockbridge:

 NDA 11-870: DIURILTM Oral Suspension (Chlorothiazide) 
 General Correspondence 
 Transfer of Ownership 
 This is to inform you that Merck & Co., Inc., holder of NDA 11-870 for DIURILTM Oral Suspension, has ceased selling DIURILTM Oral Suspension and as of
February 22, 2007 has sold, assigned, and transferred NDA 11-870 and the licensed trademark name DIURILTM Oral Suspension to Salix Pharmaceuticals, Ltd., a Delaware corporation. Salix Pharmaceuticals, Ltd. will also notify the Division
of Cardiovascular and Renal Products of the transfer of NDA 11-870 and of the trademark license. A copy of the letter that Salix Pharmaceuticals, Ltd. sent to the Division of Cardiovascular and Renal Products is enclosed for your information.

 In accordance with 21 CFR 314.72(a)(2)(iii), Merck & Co., Inc. has provided to Salix Pharmaceuticals, Ltd. a complete copy of the approved
application, including supplements and records that are required under 21 CFR 314.81 for DIURILTM Oral Suspension. 
 As of February 22, 2007, Merck
will no longer market or sell DIURILTM Oral Suspension in the United States or its territories and possessions (including without limitation the Commonwealth of Puerto Rico). The Merck listing of DIURILTM Oral Suspension in the Orange Book
should be revised to reflect Salix Pharmaceuticals, Ltd. as the new owner. 
  

 vii 

 

 
  

 Norman Stockbridge, M.D., Ph. D., Director 
 NDA 11-870: DIURILTM Oral Suspension (Chlorothiazide) 
 Page 2 
 All future correspondence to NDA 11-870, DIURILTM Oral Suspension (chlorothiazide), should be directed to: 
 Jill Kompa, M.S., RAC 
 Director, Regulatory Affairs 
 Salix Pharmaceuticals, Inc. 
 1700 Perimeter
Park Drive 
 Morrisville, NC 27560 
 Tel (919) 862-1047; Fax (919) 228-4247 
 jill.kompa@salix.com 
 This application is formatted as required in Title 21 paragraph 314.50 of the Code of Federal Regulations and is being submitted in accordance with the January
1999, Guidance for Industry – Providing Regulatory Submissions in Electronic Format – NDAs. 
 As an attachment to this letter, Merck
Research Laboratories (MRL), a Division of Merck & Co., Inc., is providing one Compact Disk (CD) which contains the submission. All documents requiring signatures for certification are included as paper for archival purposes. 
 All of the information is contained on one CD and is not more than 100MB. Merck has taken precautions to ensure that the contents of this media are free of computer
viruses (Symantec AntiVirus Corporate Edition, Symantec Corporation) and we authorize the use of anti-virus software, as appropriate. 
 A list of reviewers
from the Division of Cardiovascular and Renal Products who should be provided access to this electronic submission on their desktops may be obtained from Quynh M. Nguyen, Pharm.D., Regulatory Health Project Manager, Division of Cardiovascular and
Renal Products. 
 We consider the filing of this letter to be a confidential matter, and request that the Food and Drug Administration not make its content,
or any future communications in regard to it, public without first obtaining the written permission of Merck & Co., Inc. 
  

 viii 

 

 
  

 Questions concerning this supplemental application should be directed to [*] [*] or, in my absence, to [*] [*].

  

	
	Sincerely,
	
	[*]
	Associate Director
	Worldwide Regulatory Affairs

 Enclosure: CD 
  

			
	 Desk Copy:
	  	Quynh M. Nguyen, Pharm.D., Regulatory Health Project Manager
		  	Division of Cardiovascular and Renal Products
		
		  	Mary A. Holovac
		  	Office of Generic Drugs, Orange Book Staff

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 ix 

 

 
  

 SCHEDULE 1.55 
 PURCHASE ORDERS 
  

									
	 CUSTOMER NAME
	  	 DATE OF
 PURCHASE
 ORDER
	  	 PRODUCT PURCHASED
	  	 QTY
 # Bottles
	  	 AMOUNT

					
	 [*]
	  	[*]	  	[*]	  	[*]	  	$ [*]
					
	 [*]
	  	[*]	  	[*]	  	[*]	  	$ [*]
					
	 [*]
	  	[*]	  	[*]	  	[*]	  	$ [*]
					
	 [*]
	  	[*]	  	[*]	  	[*]	  	$ [*]
					
	 [*]
	  	[*]	  	[*]	  	[*]	  	$ [*]
					
	 [*]
	  	[*]	  	[*]	  	[*]	  	$ [*]
					
	 [*]
	  	[*]	  	[*]	  	[*]	  	$ [*]
					
	 [*]
	  	[*]	  	[*]	  	[*]	  	$ [*]
					
	 [*]
	  	[*]	  	[*]	  	[*]	  	$ [*]
					
	 [*]
	  	[*]	  	[*]	  	[*]	  	$ [*]
					
	 [*]
	  	[*]	  	[*]	  	[*]	  	$ [*]
					
	 [*]
	  	[*]	  	[*]	  	[*]	  	$ [*]
					
	 [*]
	  	[*]	  	[*]	  	[*]	  	$ [*]
					
	 [*]
	  	[*]	  	[*]	  	[*]	  	$ [*]
					
	 Grand Total
	  		  		  	[*]	  	$ [*]

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 x 

 

 
  

 SCHEDULE 1.58 
 RELATED COMPANIES 
  

	[*]	

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 xi 

 

 
  

 SCHEDULE 1.60 
 FORM OF SALIX FDA LETTERS 
 February 23, 2007 
 Brian E. Harvey, M.D., Ph.D., Director 
 Food and Drug Administration

 Center for Drug Evaluation and Research 
 Division of
Gastroenterology Products 
 5901-B Ammendale Road 
 Beltsville,
MD 20705-1266 
  

	 	 Re:
	 NDA 19-527 PEPCIDTM Oral Suspension (Famotidine) Transfer of Rights to NDA 

 Dear Dr. Harvey:

 Effective February 22, 2007, Salix Pharmaceuticals, Ltd., hereby accepts
rights to NDA 19-527 for PEPCIDTM Oral Suspension. 
 Salix Pharmaceuticals, Ltd., has received a complete copy of the NDA, supplements and correspondence, including records required to be kept under 21 CFR
314.72. In accordance with 21 CFR 314.72(a)(2)(i), Salix Pharmaceuticals, Ltd., commits to all agreements, promises and conditions contained in the application or made by the former owner. 
 All issues regarding NDA 19-527 may be directed to: 
 Jill Kompa, M.S., RAC 
 Director, Regulatory Affairs 
 Salix Pharmaceuticals, Inc. 
 1700 Perimeter Park Drive 
 Morrisville, NC 27560 
 Telephone
(919) 862-1047; Fax (919) 228-4247 
 jill.kompa@salix.com 
 Written acknowledgment of the change in holder would be appreciated. Please contact me at (919) 862-1047 if you have any comments or questions
regarding this letter. 
  

	
	Sincerely yours,
	
	Jill Kompa, M.S., RAC
	Director, Regulatory Affairs

  

 xii 

 

 
  

 February 23, 2007 
 Norman Stockbridge, M.D., Ph. D., Director 
 Food and Drug Administration 
 Center for Drug Evaluation and Research 
 Division of Cardiovascular and Renal Products 
 5901-B Ammendale Road 
 Beltsville, MD 20705-1266 
  

	 	Re:	NDA 11-870: DIURILTM Oral Suspension (chlorothiazide) Transfer of Rights to NDA 

 Dear Dr. Stockbridge: 
 Effective
February 22, 2007, Salix Pharmaceuticals, Ltd., hereby accepts rights to NDA 11-870 for DIURILTM Oral
Suspension. 
 Salix Pharmaceuticals, Ltd., has received a complete copy of the NDA, supplements and correspondence, including records
required to be kept under 21 CFR 314.72. In accordance with 21 CFR 314.72(a)(2)(i), Salix Pharmaceuticals, Ltd., commits to all agreements, promises and conditions contained in the application or made by the former owner. 
 All issues regarding NDA 11-870 may be directed to: 
 Jill Kompa, M.S., RAC 
 Director, Regulatory Affairs 
 Salix Pharmaceuticals, Inc. 
 1700 Perimeter Park Drive 
 Morrisville, NC 27560 
 Telephone
(919) 862-1047; Fax (919) 228-4247 
 jill.kompa@salix.com 
 Written acknowledgment of the change in holder would be appreciated. Please contact me at (919) 862-1047 if you have any comments or questions
regarding this letter. 
  

	
	Sincerely yours,
	
	Jill Kompa, M.S., RAC
	Director, Regulatory Affairs

  

 xiii 

 

 
  

 SCHEDULE 2.5 
 PRICE OF INVENTORY 
  

							
	 PRODUCT
	  	 PRODUCT FORM
	  	 PACKAGE FORM
	  	 COST/UNIT*

	 Pepcid® OS
	  	Powder (suspension)	  	40mg/5ml	  	US $[*]
	 Diuril® OS
	  	Liquid (suspension)	  	250mg/5ml	  	US $[*]

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 xiv 

 

 
  

 SCHEDULE 2.7.2 
 THIRD PARTY CONSENTS 
 Astellas 
  

 xv 

 

 
  

 SCHEDULE 4.1.9 
 INVENTORY 
  

				
	 Product
	  	Bottles	 
	 Diuril® OS
	  	[	*]
	 Pepcid® OS
	  	[	*]

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 xvi 

 

 
  

 SCHEDULE 6.4 
 DIURIL MARKET HISTORY AND ANTICIPATED NEED 
 2005: 
 US – [*] units 
 Sweden – [*] unit 
 2006:  
 US – [*] units 
 Sweden – [*] units 
  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 xvii 

 

 
  

 SCHEDULE 8.3.2 
 APPROVED SALIX PRESS RELEASE 
 FOR IMMEDIATE RELEASE 
  

					
	 Contact:
	  	Adam C. Derbyshire	  	Mike Freeman
		  	Senior Vice President and	  	Executive Director, Investor Relations and
		  	Chief Financial Officer	  	Corporate Communications
		  	919-862-1000	  	919-862-1000

 SALIX PHARMACEUTICALS ACQUIRES PEPCID® ORAL SUSPENSION 
 Salix Secures $100 Million Senior Secured Credit Facility 
 RALEIGH, NC, February 28, 2007 - Salix
Pharmaceuticals, Ltd. (Nasdaq:SLXP) today announced that it has purchased the U.S. prescription pharmaceutical product rights to PEPCID® Oral Suspension and DIURIL® Oral Suspension from Merck & Co., Inc. PEPCID Oral Suspension is a widely-known prescription pharmaceutical product indicated for several
gastrointestinal indications including the treatment of duodenal ulcer, benign gastric ulcer and gastroesophageal reflux disease. Under the terms of the agreement, Salix will make a $55 million up-front payment and up to $6 million in
potential sales-based milestone payments to Merck. 
 Commenting on this development, Carolyn Logan, President and Chief Executive Officer, Salix, stated,
“The acquisition of such a trusted brand and revenue-producing product as PEPCID Oral Suspension reflects the ongoing execution of the Company’s strategy to expand and diversify revenue. These marketed products should generate immediate
revenue while requiring minimal promotional expense. PEPCID Oral Suspension achieved net sales in the U.S. of approximately $20 million in 2006. In the near term, this additional revenue should serve to fund ongoing strategic product
development efforts and, in the longer term, should contribute to growing EPS. 
 “PEPCID Oral
Suspension and DIURIL Oral Suspension, both liquid formulations of their solid dosage form counterparts, compete in an approximately $150 million market that is concentrated in pediatric and hospitalized patient populations. This acquisition builds
upon our recent acquisition of SANVAR®. If XIFAXAN® is approved for hepatic encephalopathy and C. difficile-associated diarrhea, these hospital-based indications,
together with PEPCID Oral Suspension and SANVAR, should create an institutional product portfolio that complements our current field-based business.” 
 Salix also announced today that it has entered into a credit facility with Bank of America, N.A. for up to $100 million to help finance the transaction and for working capital, capital expenditures, other permitted acquisitions and general
corporate purposes. Salix has borrowed approximately $15 million at this time. Outstanding amounts generally bear interest at the 

  

 xviii 

 

 
  

 
option of Salix at the British Bankers Association LIBOR Rate or a base rate, in each case plus an applicable margin of between 1.00 percent and
1.75 percent for LIBOR Rate loans and 0.00 percent and 0.75 percent for base rate loans, each based on consolidated leverage. The facility also includes standard covenants. A copy will be filed with the SEC as an exhibit to our Form 8-K.

 Salix Pharmaceuticals, Ltd., headquartered in Raleigh, North Carolina, develops and markets prescription pharmaceutical products for the treatment of
gastrointestinal diseases. Salix’s strategy is to in-license late-stage or marketed proprietary therapeutic drugs, complete any required development and regulatory submission of these products, and market them through the Company’s
150-member gastroenterology specialty sales and marketing team. 
 Salix markets COLAZAL®, XIFAXAN®, OSMOPREPTM, MOVIPREP®, VISICOL®, AZASAN®, ANUSOL-HC® and
PROCTOCORT®. Balsalazide tablets, Granulated
Mesalamine, SANVAR® (600 mg vials vapreotide
acetate powder) and Xifaxan for additional indications are under development. 
 For full prescribing information on Salix products, please visit
www.salix.com. 
 Salix trades on the Nasdaq National Market under the ticker symbol “SLXP”. 
 For more information please contact the Company at 919-862-1000 or visit our web site at www.salix.com. Information on our web site is not incorporated in our SEC
filings. 
 Please Note: This press release contains forward-looking statements regarding future events. These statements are just predictions and are
subject to risks and uncertainties that could cause the actual events or results to differ materially. These risks and uncertainties include: competition, including from potential generic or over-the-counter products; management of rapid growth,
including the addition of these institutional products; market acceptance for approved products; risks of regulatory review and clinical trials; intellectual property risks; and the need to acquire additional products. The reader is referred to the
documents that the Company files from time to time with the Securities and Exchange Commission. 
  

 xixLicense Agreement between Salix Pharmaceuticals, Inc. and Dr. Falk Pharma GmbH

 Exhibit 10.59 
 Portions of this exhibit marked [*] are requested to be treated confidentially. 
 DATED 16 APRIL 2007

 SALIX PHARMACEUTICALS, INC. 
 and 
 DR. FALK PHARMA GmbH 
 LICENSE AGREEMENT 
  

 1 

 TABLE OF CONTENTS 
  

					
	 1.
	  	 DEFINITIONS
	  	4
			
	 2.
	  	 LICENSE GRANT
	  	10
			
	 3.
	  	 CONSIDERATION
	  	11
			
	 4.
	  	 MINIMUM ROYALTY PAYMENTS
	  	12
			
	 5.
	  	 PAYMENT: GENERAL
	  	13
			
	 6.
	  	 OBLIGATIONS OF FALK
	  	15
			
	 7.
	  	 OBLIGATIONS OF SALIX
	  	17
			
	 8.
	  	 PRODUCT DATA
	  	17
			
	 9.
	  	 TRADEMARKS
	  	18
			
	 10.
	  	 INTELLECTUAL PROPERTY OWNERSHIP AND INFRINGEMENT
	  	19
			
	 11.
	  	 CONFIDENTIALITY
	  	22
			
	 12.
	  	 REPRESENTATIONS AND WARRANTIES
	  	23
			
	 13.
	  	 INDEMNIFICATION AND LIABILITY
	  	26
			
	 14.
	  	 ADVERSE REACTIONS REPORTING
	  	28
			
	 15.
	  	 RESTRICTIONS
	  	28
			
	 16.
	  	 FORCE MAJEURE
	  	28
			
	 17.
	  	 OPTION COUNTRIES
	  	28
			
	 18.
	  	 TERMINATION
	  	29
			
	 19.
	  	 CONSEQUENCES OF TERMINATION
	  	30
			
	 20.
	  	 NOTICES
	  	32
			
	 21.
	  	 ENTIRE AGREEMENT
	  	33
			
	 22.
	  	 ASSIGNMENT
	  	33
			
	 23.
	  	 NON-WAIVER OF RIGHTS
	  	34
			
	 24.
	  	 AMENDMENT
	  	34

					
	25.	  	 INDEPENDENT CONTRACTORS
	  	34
			
	26.	  	 FURTHER ASSURANCES AND COOPERATION
	  	34
			
	27.	  	 SEVERABILITY
	  	34
			
	28.	  	 DISPUTE RESOLUTION
	  	34
			
	29.	  	 LAW AND ARBITRATION
	  	35
			
	30.	  	 COUNTERPARTS
	  	36
			
	31.	  	 INTERPRETATION
	  	36
		
	Schedule 1 Salix Patents	  	37
		
	Schedule 2 Trademark Registrations	  	39
		
	Schedule 3 Press Release	  	40
		
	Schedule 4 Summary of Product Characteristics	  	44
		
	Schedule 5 Market Assumptions	  	50

  

 3 

 This Agreement is made the 16th day of April 2007 
 B E T W E
E N: 
  

	(1)	SALIX PHARMACEUTICALS, INC. a company incorporated under the law of California whose principal place of business is at 1700 Perimeter Park Drive, Morrisville, NC 27560-8404, USA
(“Salix”); and 

  

	(2)	DR. FALK PHARMA GmbH a company incorporated in Germany having its registered office and principal place of business at Leinenweberstraße 5, 79108 Freiburg, Germany
(“Falk”). 

 W H E R E A S Salix has developed and owns rights in a pharmaceutical product and has agreed to grant Falk
an exclusive license in respect of such product for its development, use and exploitation in certain European countries upon the terms of this Agreement. 
 NOW IT IS HEREBY AGREED as follows:- 
  

	1.	DEFINITIONS 

  

	1.1	In this Agreement, unless the context otherwise requires: 

  

			
	 “Affiliate”
	  	shall mean in relation to either Party any person who directly or indirectly controls, is controlled by or is under common control with that Party or, with regard to Falk, is controlled by the
same group of persons controlling Falk. A person shall be regarded as in control of another person if it owns directly or indirectly more than 50% (fifty per cent) of the voting stock or other ownership or income interest of the other person or if
it directly or indirectly possesses the power to direct or cause the direction of the management and policies of any other person by any means whatsoever.
		
	 “Business Day”
	  	shall mean any day on which clearing banks within both the USA and Germany are open for business.
		
	“Change of Control”	  	shall mean any transaction or series of transactions in which in excess of 50% of a Party’s voting power is transferred or in which all or substantially all of the assets of the Party are
sold or otherwise conveyed.
		
	 “Compound”
	  	shall mean any sodium phosphate salt purgative that is the subject of any Valid Claim in any Salix Patent.
		
	 “Dossier”
	  	shall mean the dossier of Salix Product Data and other information filed with the relevant regulatory authority in the United Kingdom in respect of the UK MA and the UK MA
Product.
		
	“Effective Date”	  	shall mean 1 April 2007.

  

 4 

			
		
	 “EMEA”
	  	shall mean the European Medicines Evaluation Agency.
		
	“Exchange Rate”	  	shall mean the €/US $ exchange rate (and as applicable in connection with the Royalties, the €/other Territory currencies exchange rate), as published by Deutsche Bundesbank as at the
relevant date.
		
	 “Exploit”
	  	shall mean to keep, have kept, make, have made, import, have imported, use, have used, sell, have sold, offer for sale, or otherwise dispose of, including all discovery, research, development,
registration, modification, enhancement, improvement, manufacture, storage, formulation, exportation, transportation, distribution, promotion and marketing activities related thereto and “Exploitation” shall be construed
accordingly.
		
	 “Falk Study”
	  	shall mean any Study effected by and at the sole cost and expense of Falk.
		
	“Falk Trademarks”	  	shall mean any trademark(s) used by Falk in connection with the Product in the Territory under the terms of Clause 9.2.
		
	 “FDA”
	  	shall mean the United States Food and Drug Administration and any successor thereto.
		
	“Force Majeure”	  	shall mean in relation to either Party any circumstances beyond the reasonable control of that Party including without limitation any strike, lock-out, or other form of industrial action, act of
God, war, riot, accident, fire, flood, explosion or government action.
		
	 “Improvement”
	  	shall mean any discovery, development, invention or improvement relating to a Product made by Salix (or any Affiliate or licensee of Salix) during the Term and all Intellectual Property rights
existing therein provided that, for the avoidance of doubt, Improvement shall only include any such discovery, invention, development or improvement in respect of a Compound in the Indication.
		
	 “Indication”
	  	shall mean the human pharmaceutical indication of bowel cleansing only and for the avoidance of doubt shall not include any indication relating to prevention or treatment of
constipation.
		
	“Intellectual Property”	  	shall mean all Patents, claims in Patents, trade marks and trade names, service marks, registered designs, applications for any of the foregoing and the right to apply for any of the foregoing
in any part of the world, copyright, design right, inventions, confidential information (including without limitation Know-how) and any other similar right situated in any country in the world.
		
	“Joint Product Data”	  	shall mean all Product Data relating to the Product arising out of any Falk Study.

  

 5 

			
		
	“Know-How”	  	shall mean the information, procedures, instructions, knowledge, experience, data (including, without limitation, toxicological, pharmaceutical, clinical and medical data, health registration
data, marketing data and all other data), designs, dossiers (including, without limitation, manufacturing, assay and quality control dossiers), manufacturing formulae, processing specifications, sales and marketing materials and technology relating
to or concerning the Product, whether committed to writing or not including without limitation all Product Data and the Manufacturing Technology.
		
	 “Launch”
	  	shall mean in respect of each country in the Territory the commencement of commercial sale of a Product in such country after an MA in such country of such Product.
		
	“Manufacturing Technology”	  	shall mean all methods, processes, designs, data, procedures and other information relating to the manufacture of a Product including, without limitation, final quality assurance, quality
control procedures, manufacturing procedures, product and raw material specifications, formulation data and other technology related thereto.
		
	“Market Assumptions”	  	shall mean the assumption of Falk relating to the anticipated market for the UK MA Product in each country of the Territory during the Term as set out in Schedule 5.
		
	“Marketing Authorisation” or “MA”	  	shall mean in respect of any country in the Territory, the grant by the relevant regulatory authority in such country or the EMEA, in respect of such country, of all such approvals and
authorisations (including, if required, any pricing or reimbursement approvals) required to effect marketing and sale of a Product in such country.
		
	“MA Transfer Costs”	  	shall mean all costs, expenses and fees directly incurred in connection with the transfer of any MA or any application for an MA and the change of identity of the registered holder or applicant,
which costs shall include for example but without limitation the cost of changes to any patient information leaflet, Summary of product characteristics and/or labelling.
		
	“Minimum Royalty Payments”	  	shall mean the minimum, non-refundable royalty payments as specified in Clause 4.
		
	 “Net Sales”
	  	 shall mean gross amounts invoiced in respect of sales of the Product in the Territory by Falk, its Affiliates or Sublicensees, as appropriate, to
Third Parties, less the following items:
  
 (a) trade, quantity and cash discounts or
rebates actually allowed and taken and any other adjustments, provided that such discounts or rebates are not applied disproportionately to the Product as compared with other similar products (for example, Endofalk) of the selling entity, including,
without limitation, those granted on account of price adjustments, billing errors, rejected goods, damaged goods and recall returns;

  

 6 

			
		  	 (b) credits, rebates, charge-back and prime vendor rebates, fees, reimbursements or similar payments granted or given to wholesalers and other
distributors, buying groups, health care insurance carriers, pharmacy benefit management companies, health maintenance organizations or other institutions or health care organizations;
  
 (c) any tax, tariff, customs duties, excise or other duties or other governmental charge (other than
an income tax) levied on the sale, transportation or delivery of the Product;
  
 (d)
payments or rebates reasonably and customarily paid in connection with sales of Product to any governmental or regulatory authority;
  
 (e) any write offs for bad debt provided that in each Year the maximum sum which may be deducted in respect of bad debts shall not exceed [*]% ([*] per cent) of Net Sales
in such Year and further provided that in the event that any bad debt is written off and subsequently recovered by Falk, upon such recovery such debt shall be included in Net Sales for such Quarter in any statement under Clause 5 provided always
that:
  
 (i) Sales of a Product by and between Falk and its Affiliates
and Sublicensees are not sales to Third Parties (except where such Affiliate or Sublicensee purchasers are end users) and shall be excluded from Net Sales calculations for all purposes;
  
 (ii) Where a Product is sold otherwise than on arm’s length terms the price
that would have been charged on an arm’s length sale (calculated as above) shall be the invoice price for such Product and where a Product is disposed of for consideration other than cash, such consideration shall be valued at the fair market
value thereof;
  
 (iii) Where a Product is not sold on arm’s
length terms but is used or otherwise disposed of on a commercial basis by a Third Party, the price that would have been charged (after the deductions in Sub-Clauses (a) through (e) above) on an arm’s length sale in such country shall be deemed
the Net Sales for the sale of such Product, provided that reasonable quantities of Product supplied and used in clinical trials or for other research or development activities or reasonably and customarily supplied for promotional purposes as
samples shall not be treated as being disposed of on a commercial basis and shall be ignored for the purpose of calculating Net Sales.

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 7 

			
		
	“Option Countries”	  	shall mean Italy and France.
		
	“Patent Expiry Date”	  	shall mean the date on which a Product shall cease to be the subject of any Valid Claim in any Salix Patents in the Territory.
		
	“Patents”	  	shall mean all patents or letters patent, claims in any patent and applications for any patent and the right to apply for the same in any part of the world including, without limitation, all
reissues, re-examinations, extensions, substitutions, confirmations, registrations, revalidations, additions, confirmations, continuations in part and divisions thereof and any Supplementary Protection Certificates.
		
	“Product Data”	  	shall mean all data, information or results generated in the performance of any clinical studies, non-clinical studies (including pharmacological and toxicological studies) or chemistry,
manufacturing, control and analytical studies (including any Studies) in respect of a Product conducted by or on behalf of either party whether before or after the Effective Date during the Term, including the Manufacturing
Technology.
		
	“Product”	  	shall mean any human pharmaceutical product containing any Compound for use in the Indication, the Exploitation of which in the Territory falls within any Valid Claim of the Salix Patents in the
Territory and for the avoidance of doubt Product shall include the UK MA Product.
		
	“Quarter”	  	shall mean each three calendar-month period in any Year of the Term ending on 30th June, 30th September, 31st December and 31st March
in each Year and “Quarterly” has a corresponding meaning.
		
	“Royalties”	  	shall mean royalties payable by Falk to Salix under the terms of Clause 3.1.3.
		
	“Salix IP”	  	 shall mean all Intellectual Property of Salix relating to a Product (including any Improvement) which is at the Effective Date or subsequently during
the Term:
  
 (a)    vested in
Salix or any Affiliate of Salix; or
  
 (b)    licensed to Salix or any Affiliate of Salix
  
 including any Salix Patents.

		
	“Salix Patent”	  	shall mean any Patent in the name of Salix or any Salix Affiliate existing at any time during the Term relating in any manner to a Product in the Territory, including the Patents listed in
Schedule 1.
		
	“Salix Product Data”	  	shall mean all Product Data (excluding Joint Product Data) relating to a Product in the possession or control of Salix as at the Effective Date and thereafter during the Term (including without
limitation the Dossier and Manufacturing Technology and all Product Data generated in the conduct of any Salix Study).

  

 8 

			
		
	“Salix Territory”	  	shall mean the United States of America and its possessions and the Commonwealth of Puerto Rico.
		
	“Salix Study”	  	shall mean any Study effected at the sole cost and expense of Salix.
		
	“Study/ies”	  	shall mean all tests and studies necessary to support an application for and to obtain a Marketing Authorisation in any country of the Territory and all marketing studies (if any) effected post
MA in any part of the Territory.
		
	“Sublicense”	  	 shall mean a sublicense granted by Falk to a Third Party of the rights granted under Clause 2.1. For the avoidance of doubt:
  
 (a) the appointment by Falk of any distributor, wholesaler or dealer of the Product shall not be a
Sublicense; and
  
 (b) the appointment of a manufacturer to manufacture Product for and on
behalf of Falk, shall not be deemed a Sublicense.

		
	“Summary”	  	shall mean the Summary of product characteristics in respect of the UK MA Product, as set out in Schedule 3.
		
	“Term”	  	 shall commence on the Effective Date and continue until whichever is later of;
  
 (a) the Patent Expiry Date; or
  
 (b) the expiry of a period of seventeen years from the Effective Date,
  
 subject always to earlier termination under Clause 18.

		
	“Territory”	  	shall as at the Effective Date mean each of the following countries: Austria, Belarus, Belgium, Bulgaria, Croatia, Denmark, Estonia, Finland, Germany, Greece, Hungary, Ireland, Latvia,
Lithuania, Luxembourg, Norway, Poland, Portugal, Romania, Russia, Serbia, Slovakia, Slovenia, Spain, Sweden, Switzerland, the Czech Republic, the Netherlands, Turkey, Ukraine and the United Kingdom, and Territory shall during the Term be as amended
from time to time by the deletion of any country under Clause 6.2 or by the addition of any Option Country under Clause 17.
		
	“Third Party”	  	shall mean any third party and shall not include the Parties or any Affiliate of either Party.
		
	“Trademarks”	  	shall mean the tradenames “Diacol”, “Visicol” and “Osmoprep” registered as trademarks in the parts of the Territory and Option Countries as set out in Schedule
2.

  

 9 

			
	“UK MA Product”	  	shall mean the Product in the form specified in the Summary.
		
	“UK MA”	  	shall mean the Marketing Authorisation for a Product granted by the Medicines and Healthcare products Regulatory Agency (MHRA) in respect of the United Kingdom (on 7 January 2005 ref: PL
19147/0001) currently held by Inkine Pharmaceutical Company Ltd., a Salix Affiliate.
		
	“Valid Claim”	  	shall mean a claim of (i) any issued and unexpired Patent in the Territory, 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; and (ii) any application for a Patent during
the period from filing to date of grant, provided that the applicant shall be diligently pursuing the prosecution to grant of such application and that such period shall not exceed five years, without prejudice to the obligations of a party in
respect thereof on grant of any Patent pursuant to such application.
		
	“Year”	  	shall mean each period of twelve calendar months from the Effective Date and starting on each anniversary of the Effective Date during the Term.

  

	1.1	The expression “the Parties” shall mean together Falk and Salix and “Party” shall refer to one such Party; 

  

	1.2	Unless the context otherwise requires all references to a particular Clause sub-Clause schedule or paragraph shall be a reference to that Clause, sub-Clause, schedule or paragraph
in or to this Agreement as it may be amended from time to time pursuant to this Agreement; 

  

	1.3	Headings are for convenience only and shall be ignored in interpreting this Agreement; 

  

	1.4	Words importing the singular shall include the plural and vice versa and words importing the masculine gender shall include the feminine and vice versa; 

  

	1.5	The words “including” or “included” are to be construed without limitation to the generality of the preceding words. 

  

	1.6	Any reference to “writing” or any cognate expression includes a reference to any communication effected by facsimile transmission or similar means.

  

	2.	LICENSE GRANT 

  

	2.1	Salix grants to Falk from the Effective Date for the Term in respect of the Salix Patents, the Salix IP and the Salix Product Data the sole and exclusive royalty bearing right and
license to use the same and to develop, use and Exploit the Product throughout the Territory and a non-exclusive right and license to manufacture and have manufactured the Product in any part of the world for Exploitation in the Territory only and
Salix therefore undertakes; 

  

 10 

	 	2.1.1	not at any time during the Term to grant or purport to grant to any Third Party any rights to Exploit the Product in the Territory; and 

  

	 	2.1.2	not itself to Exploit the Product during the Term in the Territory; and 

  

	 	2.1.3	to maintain 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 the Territory in accordance with the terms of this Agreement. 

  

	2.2	Falk undertakes that it shall use the Salix IP and Product Data only in the development and Exploitation of the Product in the Territory under the terms of this Agreement and shall
not be entitled to use all or any part of the Salix IP or Product Data for any other purpose whatsoever. 

  

	2.3	The granting of Sublicenses by Falk with respect to all or any of the rights granted to Falk pursuant to Clause 2.1 shall be subject to the prior approval in writing of Salix.

  

	3.	CONSIDERATION 

  

	3.1	In consideration of the license granted under Clause 2.1, Falk shall pay to Salix; 

  

	 	3.1.1	the non-refundable and non-creditable sum of US$1,500,000 (one million five hundred thousand US dollars) within seven days of the date hereof; and 

  

	 	3.1.2	the non-refundable and non-creditable sum of US $[*] ([*] US dollars) within [*] days of the grant of an MA for a Product by the applicable regulatory authority in Germany; and

  

	 	3.1.3	a Royalty: 

  

	 	(a)	at the rate of [*]% ([*] per cent) of Net Sales where aggregate Net Sales in the Territory in any Year do not exceed €[*] ([*] Euros), 

  

	 	(b)	where aggregate Net Sales in any Year exceed €[*] ([*] Euros) at the rate of [*]% ([*] per cent) of all Net Sales in excess of €[*] ([*] Euros) in such Year.

  

	3.2	Falk shall notify Salix promptly of the grant of the German MA and Salix shall promptly invoice Falk for each payment under Clause 3.1. 

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 11 

	4.	MINIMUM ROYALTY PAYMENTS 

  

	4.1	In respect of the Royalties due on Net Sales, Falk shall pay to Salix in respect of each Year of the Term subject to Clause 4.3, a non-refundable Minimum Royalty Payment according
to the following schedule: 

  

			
	 Year
	  	 Minimum Royalty Payment
 Per Year

		
	 1
	  	US $ [*]
		
	 2
	  	US $ [*]
		
	 3
	  	US $ [*]
		
	 4
	  	US $ [*]
		
	 5
	  	US $ [*]
		
	 6 and thereafter
	  	US $ [*]

  

	4.2	The Minimum Royalty Payment shall be due and payable with the Statement delivered to Salix under Clause 5.1 within ninety (90) days of the end of the relevant Year provided
that all Royalties paid in such Year shall be credited against the Minimum Royalty Payment and such payment shall be made only in respect of the shortfall between the Minimum Royalty Payment and such Royalties based on actual Net Sales actually paid
in respect of such Year. 

  

	4.3	The obligation to effect the Minimum Royalty Payment shall cease on the Patent Expiry Date. For the period from 1 April to the Patent Expiry Date in such Year the Minimum
Royalty Payment for that Year shall be apportioned and any shortfall shall be calculated by reference to Royalties due in respect of Net Sales in such period from 1 April to the Patent Expiry Date only. 

  

	4.4	In the event that: 

  

	 	4.4.1	Falk exercises its option under Clause 17.2 in respect of the addition of an Option Country to the Territory; 

  

	 	4.4.2	the rights of Falk in respect of any country of the Territory are amended by the deletion of such country under Clause 6.2; 

 Falk shall promptly on exercise of such option or on such amendment under Clause 6.2 amend the Market Assumptions to reflect the addition to or
deletion from the Territory and the parties undertake to renegotiate in good faith the Minimum Royalty Payments due under Clause 4.1 for the following Years, to take account of such addition to or deletion from the Territory. Each party shall use
its best endeavours to procure that any such renegotiation shall be effected within a period of 60 (sixty) days from the date of notice by Falk of exercise of the option. 
  

	4.5	In the event that at any time prior to the Patent Expiry Date any Market Assumption subsequently appears to be incorrect or ill founded (a “Revision Circumstance”)
and as a consequence of such Revision Circumstance the Royalties payable to Salix based on the actual Net Sales of the Product in the Year following the occurrence of the Revision Circumstance are less than the Minimum Royalties payable to Salix
during such Year, the parties undertake to renegotiate in good faith the Minimum Royalty Payments due under Clause 4.1 for the following Years. Each party shall use its best endeavours to procure that any such renegotiation shall be effected within
a period of 60 (sixty) days from the date of notice of either party to the other party notifying it of the Revision Circumstance 

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 12 

	 	 
and the effect thereof on Net Sales for such Year and requesting renegotiation. Any such renegotiations under this Clause 4.5 shall not in any circumstances
effect any increase in the Minimum Royalty Payments and shall effect only a reduction in the sums specified in Clause 4.1. Upon any such renegotiation, the parties shall review the manner in which any such Revision Circumstance affects the Market
Assumptions and shall consider the revised Market Assumptions arising from such Revision Circumstance. 

  

	4.6	In the event that the parties are unable to agree the Minimum Royalty Payments upon any such renegotiation under Clauses 4.4 or 4.5, in such 60 (sixty) day period (or any agreed
extended period) the parties agree that determination of any adjustment to the Minimum Royalty Payments shall be referred to an independent expert (experienced in the negotiation of the financial terms of commercial contracts in the pharmaceutical
field) appointed by the agreement of the parties, or in the event that the parties are unable to agree on the appointment of any independent expert, he shall be appointed, at the request of either party, by the President for the time being of the
Association of British Pharmaceutical Industries (ABPI) who shall have the authority to appoint such an independent expert. In determining any such adjustment to the Minimum Royalty Payments: 

  

	 	4.6.1	such expert shall act as an expert and not as an arbitrator; 

  

	 	4.6.2	the costs of such expert shall be borne as determined by the expert taking account of the position of the parties as at the date of referral to the expert and the expert
determination; 

  

	 	4.6.3	such expert shall make such determination in such manner as he reasonably considers appropriate taking account of the Market Assumptions and, in respect of renegotiation under
Clause 4.5, any adjustments thereto reasonably arising by reason of any Revision Circumstance; 

  

	 	4.6.4	such expert’s determination shall, in the absence of manifest error, be final and binding in respect of the Minimum Royalty Payments applicable after the date of such
determination; and 

 such expert shall be required to effect such determination within 45 (forty five) days of his appointment
and any adjusted Minimum Royalty Payments shall take effect, under Clause 4.4, from the date of the amendment to the Territory and under Clause 4.5, from the date of the request for renegotiation made under Clause 4.5 and the Minimum Royalty
Payments for such Year shall be adjusted pro rata from such date. 
  

	5.	PAYMENT: GENERAL 

  

	5.1	Falk shall prepare a statement (“Statement”) in respect of each Quarter which shall show in reasonable detail for the Quarter in question the calculation of
Royalties due to Salix with respect to aggregate Net Sales. Such Statement shall specify in reasonable detail the calculation of Net Sales (in accordance with the definition set out in Clause 1) and the applicable Royalties due to Salix and such
other information relating to the calculation of Net Sales as Salix may reasonably request from time to time. Such Statement shall be submitted to Salix within ninety (90) days of the end of the Quarter to which it relates together with
remittance for Royalties due to Salix under Clause 3.1.3 (as applicable). Promptly, on receipt of each such Statement, Salix shall issue an invoice in respect of the payments made with such Statement. 

  

 13 

	5.2	In respect of the first Quarter in each Year in which aggregate Net Sales for the relevant Year shall exceed €[*] ([*] euros) Falk shall in the Statement for such Quarter:

  

	 	5.2.1	account for Royalties on Net Sales in such Quarter and thereafter in such Year at the higher rate due under Clause 3.1.3(b); and 

  

	 	5.2.2	specify the additional Royalty due under Clause 3.1.3(b) for all Net Sales in the Year to date on which Royalty shall have been paid under Clause 3.1.3(a) and shall remit all such
additional Royalties due to Salix with such Statement. 

  

	5.3	Falk, its Affiliates and Sublicensees shall keep complete, true and accurate books of account and records for the purpose or determining the amounts payable or accountable
hereunder. Such books and records shall be kept at one of the principal places of business of Falk, its Affiliates and Sublicensees for at least seven (7) years following the end of the Quarter to which they pertain. Salix shall have the
following audit rights: 

  

	 	5.3.1	Upon the written request of Salix and, except with respect to an audit permitted by Clause 5.3.2, not more than once in each Year, Falk shall permit an independent certified public
accounting firm of recognized good standing in Europe, selected by Salix, at Salix’s expense, to have access during normal business hours, and upon reasonable prior written notice, to such of the records of Falk as may be reasonably necessary
to verify the accuracy of the calculations of royalties and other amounts due and payable under this Agreement for any Year ending, except as otherwise permitted under Clause 5.3.2, not more than [*] Years prior to the date of such request. If such
accounting firm concludes, as indicated by a written report delivered to each of the Parties, that additional Royalties or other amounts were owed during such period, Falk shall pay the additional Royalties or other amounts, as applicable, with
interest from the date originally due at the rate specified in Clause 5.4 within sixty (60) days after the date on which such accounting firm’s written report is delivered to Salix. Any overpayment of Royalties shall be fully creditable
against future royalties payable to Salix. 

  

	 	5.3.2	If, and only if, the amount of any underpayment discovered as the result of an audit conducted in accordance with Clause 5.3.1 is greater than [*] percent ([*]%) of the total amount
previously paid, then Falk shall reimburse Salix for all costs related to such audit and Salix shall be entitled to conduct an audit in accordance with Clause 5.3.1 for any Year ending not more than [*] years prior to the date of such audit,
provided that in no event shall Salix audit Falk more than twice in any Year. 

  

	5.4	Without prejudice to Salix’s rights under Clause 18.3 if any Royalty or any other amount due and payable under this Agreement is overdue, Falk shall pay interest thereon at an
annual rate (but with interest accruing on a daily basis) of [*] ([*]%) above the then-current U.S. prime rate, as published in The Wall Street Journal, Eastern U.S. Edition. Such interest shall run from the date on which payment of such sum became
due until payment thereof in full together with such interest by Falk. 

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 14 

	5.5	All sums due to Salix under this Agreement: 

  

	 	5.5.1	are, unless otherwise expressly stated, exclusive of any Value Added Tax or equivalent sales tax which shall be payable (if applicable) on submission by Salix of valid Value Added
Tax invoices in respect thereof; and 

  

	 	5.5.2	shall be paid in full subject to deduction for withholding taxes, charges and other duties that may be imposed in the Territory save insofar as Salix shall be capable of obtaining a
credit therefor. The Parties agree to co-operate in all respects necessary to take advantage of such double taxation agreements as may be available. If Falk is required to deduct or withhold it will (i) promptly notify Salix of such
requirement, (ii) pay to the relevant authorities the full amount to be deducted or withheld promptly upon the earlier of determining that such deduction or withholding is required or receiving notice that such amount has been assessed against
Salix, and (iii) promptly forward to Salix an official receipt (or certified copy) or other documentation reasonably acceptable to Salix and obtainable by Falk, evidencing such payments to such authorities. 

  

	5.6	All Royalties or other sums payable under this Agreement shall be paid in US Dollars by telegraphic transfer to such bank as Salix may designate for such purpose. For the purposes
of calculating: 

  

	 	5.6.1	the threshold on Net Sales under Clause 3.1.3, all Net Sales effected in currency other than Euros shall be converted into Euros at the Exchange Rate at the end of the relevant
Quarter; 

  

	 	5.6.2	payments due in US Dollars in respect of Royalties, the sum calculated as due shall be converted into US Dollars at the Exchange Rate three Business Days before the due date for
payment. 

 6. OBLIGATIONS OF FALK 
  

	6.1	Falk shall: 

  

	 	6.1.1	use all reasonable commercial efforts to obtain an MA for a Product at the earliest opportunity in Germany; and 

  

	 	6.1.2	without prejudice to the terms of Clause 6.1.1, use all reasonable commercial efforts to progress to grant MAs in all parts of the Territory and the Option Countries and Falk shall
not cease actively to pursue any MA pursuant to this Clause 6.1.2: 

  

	 	(a)	save as provided under the terms of Clause 6.2; or 

  

	 	(b)	in respect of any Option Country, otherwise than under the terms of Clause 17. 

  

	 	6.1.3	commit such resources to obtaining each MA as are reasonably required provided that Falk shall not be under any obligation under the terms of this Clause 6.1 or otherwise to effect
any Studies in connection with any application for any MA in the Territory; 

  

	 	6.1.4	on any MA being obtained in any Option Country, Falk acknowledges that it shall not have any rights in respect of the Product in such Option Country unless and until it exercises
its option under Clause 17. Falk undertakes to maintain any such MA in an Option Country at its sole expense, during the term of the Option under Clause 17, in respect of such Option Country; 

  

 15 

	 	6.1.5	use reasonable commercial efforts to effect Launch of a Product in each country of the Territory as soon as reasonably practicable after the MA in that country;

  

	 	6.1.6	use reasonable commercial efforts to manufacture or procure the manufacture of Product in quantities reasonably required to satisfy the anticipated demand for the Product in the
Territory; and 

  

	 	6.1.7	after Launch in each country, use reasonable commercial efforts throughout the Term and shall devote such financial resources, personnel and other resources as may reasonably be
required, to promote sales of Products throughout the Territory. Such reasonable commercial efforts shall in no event be less than used by Falk with respect to the commercialisation of its own products of comparable commercial significance and
market potential or than used by other companies with respect to the commercialisation of other products in the market of comparable commercial significance and market potential in the Territory. 

  

	6.2	If in order to obtain an MA in any country of the Territory the relevant regulatory authority requires Studies to be effected, Falk shall promptly notify Salix and shall supply to
Salix full details of the requirements of such regulatory authority. Notwithstanding that it is under no obligation to do so, Falk may on such notification notify Salix that it intends to effect such Studies at its sole cost and expense as Falk
Studies; if Falk so notifies Salix it will diligently pursue its obligations under Clause 6.1 and such Falk Studies in such country. If Falk does not notify Salix of its intent to effect Falk Studies, Salix may in its sole discretion by notice in
writing to Falk, served at any time after receipt of such notification: 

  

	 	6.2.1	where the notification is in respect of Studies required in Germany: 

  

	 	(a)	amend the definition of the Territory to refer to the United Kingdom only and Germany and all other countries shall be deleted from the definition of the Territory; and

  

	 	(b)	terminate the option under Clause 17 in respect of the Option Countries; 

 and this Agreement shall continue thereafter in respect of the United Kingdom only; and 
  

	 	6.2.2	where the notification is in respect of Studies required in any Option Country terminate the option granted under Clause 17 in respect of such Option Country; and

  

	 	6.2.3	where the notification is in respect of Studies required in any country of the Territory other than Germany, amend the definition of the Territory such that such country is removed
from the definition for all purposes under this Agreement from the date of such notice from Salix and in such circumstances all rights of Falk in respect of the Product in such country shall cease and this Agreement shall continue in all respects
unamended save only for the deletion of that country from the definition of the Territory. 

  

 16 

	6.3	Falk shall keep Salix regularly informed of its progress in obtaining MAs for the Product and in the performance of its obligations under Clause 6.1. Such information shall be made
available to Salix in the form of reasonably detailed written reports every three months. In immediate subsequence to the furnishing of a report the Parties shall discuss its content in telephonic meetings (including video conferencing).
Furthermore, Salix may call additional personal meetings as deemed necessary or appropriate in order to review and discuss the progress in seeking and obtaining MAs in respect of all parts of the Territory and each Option Country.

  

	6.4	Salix shall assist Falk as reasonably required in the event that Falk wishes to use a Third Party manufacturer identified by Salix for manufacture of Product for use in the
Territory provided that Falk undertakes not to use such Salix Third Party manufacturer without the prior consent in writing of Salix. Falk acknowledges that in the event of any limited capacity of any such Salix Third Party manufacturer Salix shall
be entitled at all times to obtain from such manufacturer all such quantities of Product as it may require for Exploitation in the Salix Territory in priority to any supplies of Product required by Falk. 

  

	7.	OBLIGATIONS OF SALIX 

  

	7.1	Within 30 days of the Effective Date Salix shall deliver to Falk: 

  

	 	7.1.1	the Salix IP; and 

  

	 	7.1.2	the Salix Product Data, which for clarity shall include the Dossier. 

  

	7.2	Thereafter during the Term Salix shall (at its sole cost and expense) provide to Falk such assistance as Falk may reasonably require in connection with the performance of its
obligations under Clause 6 and shall promptly deliver any further Salix IP or Salix Product Data coming into the possession or control of Salix. 

  

	7.3	Salix shall as soon as practicable after the Effective Date take all such actions as may reasonably be required to effect a transfer of the UK MA to Falk and to effect a transfer to
Falk of all applications for MAs for the Product in the Territory as may have been commenced as at the Effective Date provided that: 

  

	 	7.3.1	Falk shall provide to Salix all such assistance as it may reasonably require in effecting such transfers; and 

  

	 	7.3.2	Falk shall pay all MA Transfer Costs incurred in connection with any such transfers. 

  

	8.	PRODUCT DATA 

  

	8.1	Falk may at its sole discretion and at its sole cost conduct Falk Studies provided that save only in respect of any Falk Study effected pursuant to a notice served by Falk under
Clause 6.2: 

  

	 	8.1.1	Falk Studies shall be only marketing studies effected post MA in a part of the Territory and Falk shall not conduct any Falk Studies in respect of any application for an MA in any
country of the Territory; and 

  

 17 

	 	8.1.2	Falk shall not effect any Falk Study without the prior consent in writing of Salix and any such Falk Study shall be effected only in accordance with a protocol therefor approved by
Salix. 

 For the avoidance of doubt, where Falk notifies Salix under Clause 6.2 that it intends to effect Falk Studies in
respect of any part of the Territory the conduct of such Falk Studies shall not require any further approval or consent of Salix. 
  

	8.2	All Joint Product Data in respect of any Falk Studies shall promptly be made available to Salix. Falk shall keep Salix informed as to conduct, progress and results of any Falk
Studies. Salix acknowledges that in respect of any Joint Product Data supplied to it by Falk, it shall comply in all material respects with data privacy requirements applicable to such Joint Product Data. 

  

	8.3	All right, title and interest in all Joint Product Data 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: 

  

	 	8.3.1	Salix acknowledges that during the Term it shall not and shall not authorise or permit any Third Party to, use any Joint Product Data in the Territory; 

  

	 	8.3.2	Falk acknowledges that during the Term it shall not and shall not authorise or permit any Third Party to use any Joint Product Data outside the Territory. 

 

	8.4	Falk shall assign into the joint names of Salix and Falk its rights in all such Joint Product Data as reasonably required by Salix from time to time. Each Party undertakes to
provide such assistance as may reasonably be required by the other Party in connection with the protection of the Joint Product Data from unauthorised use or disclosure and acknowledges that the Joint Product Data shall be deemed Confidential
Information of both Parties under the terms of Clause 11. 

  

	9.	TRADEMARKS 

  

	9.1	Salix hereby grants to Falk an exclusive license to the Trademarks in the Territory for use on and in connection with the Product only. Falk undertakes to enter into such registered
user and other agreements as may reasonably be required by Salix from time to time to evidence such license and further undertakes to use the Trademarks in the form and manner only as specified by Salix from time to time. 

 

	9.2	Falk shall have the sole right and responsibility for developing any trademark(s) for the Product in the Territory (in substitution for the Trademarks) (“Falk
Trademarks”), including product names and distinctive artwork and logos, and for seeking registration or other protection of such Falk Trademarks in the Territory. Such Falk Trademarks may be the subject of trademark application(s) in the
Territory (effected by Falk) and shall be registered and maintained in the name of Falk at the sole expense of Falk. However, Falk Trademarks to be used from time to time in the commercialization of the Product in the Territory so selected by Falk
shall be notified to Salix and such Falk Trademarks shall be subject to the prior approval in writing of Salix, such approval not to be unreasonably withheld or delayed. 

  

 18 

	9.3	Insofar as permitted by law and regulation in the Territory and subject to the MAs, all packaging and printed literature for the Product offered for sale in the Territory shall, if
so and as long as so requested by Salix, display that the Product is an innovation of Salix and that it is distributed under a license granted by Salix. 

  

	9.4	Each Party shall notify the other, in writing, in the event of any infringement of the Trademarks or the Falk Trademarks or potential infringement of the Trademarks or the Falk
Trademarks in the Territory or the Salix Territory coming to such Party’s attention. Falk shall be entitled to take such action against any infringers or potential infringers in the Territory as Falk may in its sole discretion determine.

  

	9.5	Salix undertakes that it shall not use or register any tradename or trademark confusingly similar to the Falk Trademarks without the prior consent of Falk which may withhold consent
in its absolute discretion in the event that it reasonably considers that any such use may prejudice or otherwise affect the marketing of the Product in the Territory. 

  

	10.	INTELLECTUAL PROPERTY OWNERSHIP AND INFRINGEMENT 

  

	10.1	Salix shall retain all rights, title and interest in and to the Salix IP and the Salix Product Data, including any improvement, amendment, modification, enhancement, discovery or
invention to the Product or the use of the Product, together with all Intellectual Property therein. In the event that Falk develops, creates or identifies any improvement, amendment, modification, enhancement, discovery or invention in connection
with a Compound in the Indication or otherwise relating to the Product (“an Invention”), Falk shall promptly disclose the Invention to Salix and shall take all such actions and execute all such documents as may reasonably be
required to procure the sole ownership thereof by Salix, provided that such Invention shall be licensed back to Falk for Falk to use and exploit the Invention under the terms of this Agreement in such manner as it considers appropriate within the
Territory free of any payment in addition to the payments due under Clauses 3 and 4. Except as otherwise expressly provided in this Agreement, Falk has no right, title or interest in any Invention, provided that ownership rights to Joint Product
Data resulting from any Falk Studies shall be as described in Clause 8.3. All rights not expressly granted to Falk under this Agreement are reserved by Salix. Falk shall not (and shall not attempt or purport to) file or prosecute in any country any
patent application which claims, discloses or uses or purports to claim, disclose or use any Invention, without the prior express written consent of Salix. Additionally, Falk shall not, directly or indirectly prevent or attempt to prevent Salix from
filing or prosecuting in any country any patent application which claims, discloses or uses or purports to claim, disclose or use any Invention. 

  

	10.2	Salix shall at its own cost prosecute to grant all subsisting Patent applications within the Salix Patents and shall maintain (including payment of all renewal fees) and defend all
such Patents granted pursuant to the Patent rights existing as at the date hereof in respect of the Salix Patents in force for the full term thereof Provided Always that Salix shall be released from its obligation to maintain and defend the Salix
Patents under this Clause 10.2 where it is advised by appropriately experienced patent counsel in the relevant jurisdiction that the prospects for success or otherwise the merits of its case and the cost of maintaining and defending the Salix
Patents do not justify commercially the relevant expenditure by Salix. 

  

	10.3	 In the event that Falk at any time during the Term becomes aware of any misappropriation or infringement or alleged misappropriation or infringement by a Third

  

 19 

	 	 
Party (the “Infringer”) of any part of the Salix IP in the Territory, Falk shall give prompt written notice thereof to Salix and (save only
in respect of the Joint Product Data, under Clause 10.4); 

  

	 	10.3.1	Salix shall have the first right (but not the obligation) to take such steps against an Infringer including all injunctive, compensatory and other remedies and relief (collectively
“Remedies”), as may be necessary or desirable to prevent such infringement and preserve the Salix IP. Salix shall permit any such Remedies to be brought in its name if permitted or required by law. Salix may compromise or settle any
of the Remedies in its sole discretion provided that Salix shall not make any settlement or compromise that adversely affects the interests of Falk in respect of the Products in the Territory without the prior consent in writing of Falk, such
consent not to be unreasonably withheld or delayed. 

  

	 	10.3.2	In the event that Salix elects not to pursue Remedies with respect to the Salix IP within the Territory within ninety (90) days after notice in writing from Falk requesting
Salix to do so, Salix shall provide full details of advice obtained under Clause 10.2 to Falk. Thereafter, and in any event if Salix fails to pursue Remedies against such Infringer Falk shall have the right (but not the obligation) to pursue
Remedies against such Infringer provided that Falk shall not make any settlement or compromise that adversely affects the interests of Salix in the Products outside the Salix Territory without the prior consent of Salix, such consent not to be
unreasonably withheld or delayed and provided that if Salix has commenced negotiations with an Infringer for discontinuance of such Infringement within such ninety (90) day period, Salix shall have an additional ninety (90) day period to
conclude its negotiations before Falk may bring suit for such Infringement. 

  

	10.4	In the event that Falk at any time during the 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 Territory, Falk shall give prompt written notice thereof to Salix and Falk 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. Falk shall permit any such Remedies to be brought in its name if permitted or required by law. Falk may compromise or settle any of the Remedies in its sole discretion provided that Falk shall not make any settlement
or compromise that adversely affects the interests of Salix in respect of the Joint Product Data outside the Territory without the prior consent in writing of Salix, such consent not to be unreasonably withheld or delayed. 

 

	10.5	In the event that either Party shall pursue Remedies under Clauses 10.3 or 10.4; 

  

	 	10.5.1	the other Party shall use all reasonable efforts to assist and cooperate with the Party pursuing such Remedies, including providing access to relevant documents and other evidence;
and 

  

	 	10.5.2	each Party shall bear its own costs and expenses relating to its pursuit of Remedies or in providing assistance and cooperation; and 

  

	 	10.5.3	 any damages or other amounts collected by either Party shall be used, (i) by the Party that pursued Remedies, to cover its costs and expenses incurred,
(ii) by the other Party to cover its costs and expenses, if any, relating to the pursuit of such Remedies and (iii) the remaining amount, shall be allocated between Falk and 

  

 20 

	 	 
Salix equitably as appropriate to reflect the loss suffered by each Party in connection with the actions of the Infringer and as appropriate to reflect the
basis on which such damages were awarded in any such action to compensate for the loss of each Party. 

  

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

  

	 	10.6.1	Save as specified in Clause 10.6.2, Falk shall have the exclusive right to defend and control the defence of any such Action using counsel of its own choice, and the Action, subject
to Clause 13, shall be at Falk’s own expense; provided that Salix may participate in the defence and/or settlement of such Action at its own expense with counsel of its choice and provided that Falk shall not enter into any settlement to the
extent that such Action and/or the settlement of such Action is the subject of any claim made by Falk against Salix for indemnification under Clause 13.1 except as agreed in writing between the Parties, such agreement not to be unreasonably withheld
and delayed. Falk acknowledges that any such agreement of Salix to any such settlement shall be without prejudice to the right of Salix to dispute any claim for indemnification in respect thereof. Falk further acknowledges that in the event that
Falk enters into any settlement, without the agreement of Salix, in circumstances where such Action and/or the settlement of such Action is not as at the date of such settlement, the subject of any claim made by Falk against Salix for
indemnification under Clause 13.1, Falk shall not subsequently make any claim for indemnification against Salix under Clause 13.1 in respect of such Action or settlement. 

  

	 	10.6.2	In the event that Salix shall have acknowledged its obligation to indemnify Falk in respect of any such Action under Clause 13, Salix shall have the exclusive right to defend and
control the defence of any such Action using counsel of its own choice and the Action shall be at Salix’s own expense; provided that Falk may participate in the defence and/or settlement of such Action at its own expense with counsel of its
choice and provided that Salix shall not enter into any settlement relating to the Product in the Territory if such settlement admits the invalidity or unenforceability of any of the Salix IP except as agreed in writing between the Parties, such
agreement not to be unreasonably withheld and delayed. 

  

	 	10.6.3	In any such Action under Clauses 10.6.1 or 10.6.2, the Parties shall cooperate with each other in connection with any such claim, suit or proceeding and shall keep each other
reasonably informed of any material developments in connection with any such claim, suit or proceeding, including providing access to relevant documents and other evidence. 

  

	 	10.6.4	It is agreed by the Parties that if by reason of any such Action or any settlement or other resolution of the same, Falk is obliged to effect payment of a royalty or other monetary
compensation to the relevant Third Party in respect of its use of rights in any Third Party Intellectual Property in the Exploitation of the Products in the Territory, the Royalties due to Salix under Clause 3.1 shall continue unamended and Falk
shall not make any deduction in respect of any payment to any such Third Party provided that the foregoing shall not affect any liability of Salix under Clause 13, arising out of or in connection with any Action. 

  

 21 

	11.	CONFIDENTIALITY 

  

	11.1	Each Party undertakes that in relation to all confidential information of the other Party which may be within or come into its possession in connection with or arising from this
Agreement (including confidential information disclosed by the parties in confidence in the negotiations relating to this Agreement, prior to the Effective Date) or which it may generate in reliance on any confidential information so disclosed (such
confidential information of Salix to include all information relating to the Salix IP, the Salix Product Data, any Improvement, any Invention under Clause 10.1 or any Joint Product Data and such confidential information of Falk to include all
information relating to the Joint Product Data, marketing and development information and other information delivered to Salix under Clauses 6.2 and 6.4 (collectively “Confidential Information”, comprising respectively
“Salix Confidential Information” or “Falk Confidential Information”, as applicable) it will keep the same secret and confidential and will not at any time for any reason whatsoever disclose or permit the same to be
disclosed to any Third Party (save as provided in Clauses 11.3, 11.5 and 11.7 below). 

  

	11.2	The obligations of confidentiality contained in this Clause 11 shall not extend to any part of the Confidential Information of the disclosing Party which the recipient Party can
show by documentary evidence: 

  

	 	11.2.1	shall (otherwise than by reason of any default by the recipient Party) become freely available to the general public; or 

  

	 	11.2.2	was legally in its possession or control free of any obligation of confidentiality prior to the date upon which it was received from the other Party; or 

  

	 	11.2.3	came into its possession or control legally from a Third Party free of any obligation of confidentiality and otherwise than by reason of any breach of any obligation of
confidentiality by such Third Party; or 

  

	 	11.2.4	was generated from research and development efforts by the non-disclosing Party, its Affiliates or sublicensees independent of disclosure by the disclosing Party.

  

	11.3	Either Party shall be permitted to disclose the other Party’s Confidential Information at such times and in such manner as may be required by law or any relevant regulatory
authority or any relevant Stock Exchange regulation provided that in such circumstances it shall notify the other Party of such disclosure, shall limit such disclosure to what is strictly required and shall endeavour (insofar as is appropriate) to
preserve the confidentiality of any such Confidential Information so disclosed. 

  

	11.4	In the event that either Party is required at any time whilst it shall retain any Confidential Information under the terms of this Agreement by any relevant law or regulation to
disclose all or any part of the Confidential Information: 

  

	 	11.4.1	it shall forthwith notify the other Party of such part of the Confidential Information as may be required to be disclosed by law, the extent to which such disclosure is required and
the circumstances in which such disclosure is required or effected pursuant to any applicable law; and 

  

 22 

	 	11.4.2	it shall keep the other Party informed of the extent and nature of such disclosure; and 

  

	 	11.4.3	it shall ensure that any Party to whom all or any part of the Confidential Information is disclosed by reason of any disclosure required by law is made fully aware of the
confidentiality obligations attaching to the Confidential Information and shall (insofar as is possible) procure an equivalent obligation of confidentiality from any such Party. 

  

	11.5	It is acknowledged that notwithstanding the provisions of Clause 11.1 above each Party shall be entitled to disclose any Confidential Information of the other Party to its agents,
representatives, employees and consultants (collectively “Third Party Recipients”) to the extent necessary to facilitate the performance of its obligations in connection with this Agreement provided that any such disclosure shall be
limited to what is necessary in order to facilitate the performance of such obligations and the disclosing Party shall procure that any Third Party recipient shall be bound by obligations of confidentiality substantially similar to the provisions of
this Clause 11. 

  

	11.6	Subject to the provisions of Clause 11.9 neither Party shall issue any press release or communication to be published by or in the media in any manner concerning the subject matter
of this Agreement without the prior written consent of the other Party (such consent not to be unreasonably withheld or delayed). 

  

	11.7	For the avoidance of doubt it is acknowledged that subject to the terms of Clauses 11.3, 11.4 and 11.5 Salix may disclose the Joint Product Data to the extent reasonably required in
connection with Exploitation of the Product outside the Territory and Falk may use and disclose the Joint Product Data as may reasonably be required in connection with its Exploitation of the Product in the Territory. It is further acknowledged
that, subject to Clauses 11.3, 11.4 and 11.5 the terms of this Agreement and the contents of its Schedules shall constitute Confidential Information of each Party under the terms of this Clause 11. 

  

	11.8	The obligations of both Parties under Clauses 11.1 to 11.7 (inclusive) shall remain in force for the Term and continue thereafter for a period of five (5) years.

  

	11.9	The Parties agree that each Party may within the period of ten days following the Effective Date issue a press release substantially in the form of Schedule 3.

  

	12.	REPRESENTATIONS AND WARRANTIES 

 12.1 Falk hereby represents and
warrants to Salix as at the Effective Date as follows: 
  

	 	12.1.1	Falk is a company duly organized, validly existing and in good standing under the laws of Germany; 

  

	 	12.1.2	Falk has full power, authority and legal right to execute and deliver this Agreement and to perform its obligations hereunder; 

  

	 	12.1.3	the execution and delivery of this Agreement by Falk has been duly authorized by all necessary actions of Falk; 

  

 23 

	 	12.1.4	this Agreement is a legal and valid obligation of Falk, binding upon Falk and enforceable in accordance with its terms; 

  

	 	12.1.5	The execution, delivery and performance of this Agreement do not and will not violate any provision of any indenture, agreement or other instrument or document to which Falk is
a Party or by which any of its assets or properties is bound or affected or be in conflict with or result in a breach of or constitute a default under any such indenture, agreement, instrument or document; and 

  

	 	12.1.6	other than consents, authorizations, filings, notices and other acts that have been obtained or anticipated in this Agreement, no consent or authorization of, filing with, notice to
or other act by or in request of, any governmental authority or any other person, in the name of Falk, is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement. 

 12.2 Salix hereby represents and warrants to Falk as at the Effective Date as follows: 
  

	 	12.2.1	Salix is a corporation duly organized and in good standing under the laws of California; 

  

	 	12.2.2	Salix has the full power and legal right to execute and deliver this Agreement, grant the rights granted to Falk hereby and perform Salix’s obligations hereunder;

  

	 	12.2.3	the execution and delivery of this Agreement by Salix has been duly authorised by all necessary actions on the part of Salix; 

  

	 	12.2.4	this Agreement is a legal and valid obligation of Salix, binding upon Salix and enforceable in accordance with its terms; 

  

	 	12.2.5	the execution, delivery and performance of this Agreement do not and will not violate any provision of any indenture, agreement or other instrument or document to which Salix
is a Party or by which any of its assets or properties is bound or affected or be in conflict with or result in a breach of or constitute a default under any such indenture, agreement, instrument or document; 

  

	 	12.2.6	other than consents, authorizations, filings, notices and other acts that have been obtained or anticipated in this Agreement, no consent or authorization of, filing with, notice to
or other act by or in request of, any governmental authority or any other person, in the name of Salix, is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement. 

  

	 	12.2.7	there is no action or proceeding nor, so far as Salix is aware (due inquiry having been made), any threat of an action or proceeding that would materially and adversely affect the
rights granted to Falk under the terms of this Agreement in respect of the Product; 

  

	 	12.2.8	Salix is not aware of any Patents or Patent applications that may in Salix’s reasonable opinion, interfere in any material manner with the Exploitation by Falk of the Product
under the terms of this Agreement; 

  

	 	12.2.9	 the Salix IP and Salix Product Data includes all Intellectual Property, Know-how and Confidential Information in the possession, custody or control of Salix 

  

 24 

	 	 
which is to the best of the scientific judgement of Salix reasonably required for the Exploitation of the Product by Falk under the terms of this Agreement;

  

	 	12.2.10	to the best of Salix’s scientific judgment, the Salix IP and Salix Product Data (including all documents recording or embodying the same) supplied to Falk by Salix under Clause
7 are true, accurate and up to date; 

  

	 	12.2.11	there are in respect of any part of the Territory: 

  

	 	(a)	no outstanding orders, judgments, injunctions, awards or decrees of any court or arbitrator or any other governmental regulatory body relating to the Product;

  

	 	(b)	no challenges, oppositions, actions, suits, personal injury or product liability or other claims, legal, administrative or arbitral proceedings or investigations against Salix, its
Affiliates or sublicensees pending or threatened against or relating to the Product which have had or in the reasonable opinion of Salix may have a material adverse effect on the Exploitation of the Product in the Territory; and

  

	 	(c)	Salix is not aware of any written communication from or to the EMEA or any relevant regulatory authority in any part of the Territory which indicates that any application for an MA
in such part of the Territory is likely to be rejected; 

  

	 	12.2.12	there are in respect of any part of the Salix Territory so far as Salix is aware having made diligent enquiry; 

  

	 	(a)	no outstanding orders, judgments, injunctions, awards or decrees of any court or arbitrator or any other governmental regulatory body relating to the Product;

  

	 	(b)	no challenges, oppositions, actions, suits, personal injury or product liability or other claims, legal, administrative or arbitral proceedings or investigations against Salix, its
Affiliates or sublicensees pending or threatened against or relating to the Product which have had or in the reasonable opinion of Salix may have a material adverse effect on the Exploitation of the Product in the Territory; and

  

	 	(c)	Salix is not aware of any written communication from or to the FDA or other regulatory authorities which indicates that any marketing authorisation or product approval in respect of
the Product in the Salix Territory granted are likely to be invalid or subject to challenge, revocation or withdrawal or that applications for any of the same are likely to be rejected; 

  

	 	12.2.13	Salix is either the sole legal and beneficial owner or is the licensee of the sole legal beneficial owner of all right title and interest in and to the Salix Patents free of any
lien, charge or encumbrance; and 

  

	 	12.2.14	so far as Salix is aware having made diligent enquiry, the Salix Patents are valid and enforceable and no act or omission has occurred whereby any of the Salix Patents has ceased to
be valid and enforceable and no circumstance exists which might cause any of the Salix Patents to cease to be valid and enforceable. 

  

 25 

	12.3	The warranties expressly set forth in this Clause 12 by each Party are exclusive and no other warranty, written or oral, is expressed or implied. Other than as expressly set forth
in this Clause 12, Salix makes no warranty to Falk of any kind whether express, implied or statutory, regarding the Product and expressly disclaims all warranties and terms of non-infringement of third party rights, quality, fitness for a particular
purpose or merchantability and Falk acknowledges and agrees that there are known and unknown inherent risks involved in developing and marketing a pharmaceutical product in the Territory. Furthermore, save in respect of any breach of warranty by
Salix, Salix will not be liable to Falk in any amount in the event that Falk does not obtain an MA in any part of the Territory. 

  

	12.4	Each party acknowledges that in entering into this Agreement it does not do so on the basis of and does not rely on any representation or warranty or other provision (except as
expressly provided herein) and all conditions, warranties or other terms implied by statute or common law are hereby excluded to the fullest extent permitted by law. 

  

	12.5	Falk acknowledges that in respect of the exercise by it of the rights granted under this Agreement it is not authorised to and shall not make any warranty, express or implied, on
behalf of Salix. 

  

	13.	INDEMNIFICATION AND LIABILITY 

  

	13.1	Salix shall defend, indemnify and hold Falk, its Affiliates and Sublicensees (the “Falk Indemnitees”) harmless from any claim, liability, damage or loss (including
reasonable attorneys’ fees and disbursements) (“Losses”) arising out of: 

  

	 	13.1.1	any breach by Salix of the representations, warranties given under Clause 12.2; or 

  

	 	13.1.2	the manufacture and/or Exploitation of the Product by Salix, its Affiliates or licensees outside the Territory 

 save to the extent that the event giving rise to such Losses is an event which would give rise to an indemnification obligation of Falk under Clause 13.2
and provided that Salix shall have no obligation to indemnify any Falk Indemnitee against any Losses in connection with any product liability claim arising solely out of the manufacture, use or sale of the Product by Falk and its Affiliates and
Sublicensees, regardless of whether such claim arises in tort, contract, strict liability, product liability or any other legal theory. 
 13.2 Falk shall
defend, indemnify and hold Salix and its Affiliates harmless from any Losses arising out of: 
  

	 	13.2.1	any breach by Falk of the representations and warranties given under Clause 12.1; or 

  

	 	13.2.2	 the manufacture and/or Exploitation of the Product by Falk, its Affiliates or Sublicensees in the Territory; 

  

 26 

	 	 
save to the extent that the event giving rise to such Losses in respect of Falk’s or its Affiliates’ or Sublicensees’ Exploitation of such
Product is an event which would give rise to an indemnification obligation of Salix under Clause 13.1. 

  

	13.3	Each indemnified Party agrees to give the indemnifying Party prompt written notice of any Losses or the discovery of a fact upon which such indemnified Party intends to base a
request for indemnification hereunder. 

  

	13.4	Each Party shall furnish promptly to the other copies of all papers and official documents received in respect of any Losses. The indemnified Party shall co-operate as reasonably
requested by the indemnifying Party in the defence against any Losses. 

  

	13.5	With respect to Losses relating to all matters as to which the indemnifying Party shall have acknowledged in writing the obligation to indemnify the indemnified Party hereunder, the
indemnifying Party shall have the sole right to control the defence of such matter; provided that the indemnifying Party shall obtain the written consent of the indemnified Party, prior to ceasing to defend, settling or otherwise disposing of any
Losses if as a result thereof: 

  

	 	13.5.1	the indemnified Party would become subject to injunctive or other equitable relief or any remedy other than the payment of money by the indemnifying Party; or

  

	 	13.5.2	the business of the indemnified Party would be adversely affected. 

 The indemnified Party shall have the right to control the defence of all other matters; provided that the indemnifying Party shall not be liable for any settlement or other disposition of a Loss by the indemnified Party which is reached
without the written consent of the indemnifying Party, which consent shall not be unreasonably withheld. 
  

	13.6	Except as provided above, the costs and expenses, including reasonable fees and disbursements of counsel, incurred by any indemnified Party in connection with any claim shall be
reimbursed on a Quarterly basis by the indemnifying Party, without prejudice to the indemnifying Party’s right to contest the indemnified Party’s right to indemnification and subject to refund in the event the indemnifying Party is
ultimately held not to be obligated to indemnify the indemnified Party. 

  

	13.7	Except in circumstances of gross negligence or wilful misconduct by a Party or its Affiliates and save as may be required in connection with any indemnity under this Clause 13;

  

	 	13.7.1	neither Falk or Salix shall be liable to the other for special, exemplary, indirect, incidental, punitive or consequential damages, whether in contract, warranty, negligence, tort,
strict liability or otherwise; 

  

	 	13.7.2	the aggregate liability of Salix for damages in connection with any claim or action arising under the terms of or in connection with this Agreement, whether in contract, warranty,
negligence, tort, strict liability or otherwise, shall not exceed [*] US dollars (US $[*]). 

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 27 

	14.	ADVERSE REACTIONS REPORTING 

  

	14.1	Salix and Falk agree to exchange adverse event information in such manner and following such procedure as may be agreed between the Parties after the Effective Date.

  

	15.	RESTRICTIONS 

  

	15.1	Each of Falk and Salix agrees that during the Term, neither of them shall directly or indirectly solicit or encourage any employee or consultant of the other to leave or terminate
such employment or consultancy for any reason, including without limitation, becoming employed or otherwise engaged in any capacity by such Party (or any person or entity associated with such Party) nor shall it assist others in doing so.

  

	16.	FORCE MAJEURE 

  

	16.1	In the event that the performance of the obligations of either Party is prevented, restricted or hindered by any event of Force Majeure such Party: 

  

	 	16.1.1	shall not be liable to the other Party for any damages arising from any breach of the terms of this Agreement caused by Force Majeure; and 

  

	 	16.1.2	shall immediately serve notice in writing on the other Party specifying the nature of the Force Majeure event, its effect upon its performance of this Agreement and the period of
time in which it is anticipated to apply; and 

  

	 	16.1.3	shall use its reasonable endeavours to overcome the Force Majeure event and resume its proper performance of its obligations under this Agreement. 

  

	17.	OPTION COUNTRIES 

  

	17.1	It is acknowledged that as at the Effective Date the Option Countries do not form part of the Territory and notwithstanding the obligations of Falk to seek MAs for each of the
Option Countries under the provisions of Clause 6.1.2, Falk has no rights under this Agreement or otherwise to Exploit the Product in an Option Country. 

  

	17.2	Salix hereby grants to Falk an option to amend the Territory by the addition of an Option Country, such option to be exercised (on one or two occasions) at any time by service of
notice in writing by Falk on Salix and, subject to Clause 17.4, on receipt of such notice, the Parties shall negotiate in good faith and execute as soon as reasonably practicable thereafter an amendment to this Agreement amending the Territory to
include for all purposes with effect from the date of execution of such amendment, the Option Country designated in such notice provided that on execution of such amendment, in consideration of the grant of rights by Salix to Falk under the terms of
this Agreement in respect of an Option Country, Falk shall pay to Salix the sum of US $[*] ([*] US dollars) in respect of such Option Country. 

  

	17.3	Salix may in its sole discretion terminate the option granted under Clause 17.2 in respect of an Option Country in the circumstances specified in and under the terms of Clause 6.2.

  

	17.4	If Salix commences negotiations with any Third Party who wishes to acquire rights in respect of the Salix IP and the Product, to enable it to have manufactured and to Exploit any
Products in an Option Country, Salix shall by notice in writing to Falk, notify Falk that the option granted under Clause 17.2 shall be suspended from the date of such notice. 

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 28 

	17.5	In the event that Salix grants rights in respect of the Salix IP and the Product to any Third Party in respect of an Option Country after service of any suspension notice under
Clause 17.4 it shall forthwith by notice in writing to Falk terminate the option granted under Clause 17.2 and thereafter Falk shall have no further rights or obligations under this Clause 17 or otherwise under this Agreement in respect of such
Option Country. 

  

	17.6	If notwithstanding service of a suspension notice under Clause 17.4, Salix terminates its negotiations with any Third Party, Salix may by subsequent notice in writing to Falk lift
the suspension of the option and with effect from the date of receipt of any such further notice, the option granted under Clause 17.2 shall be fully reinstated and effective, unless and until service of a subsequent suspension notice under Clause
17.4. 

  

	17.7	If Salix serves notice on Falk under Clause 17.5 terminating the option under Clause 17.2 in respect of any Option Country Falk shall: 

  

	 	17.7.1	be released from any further obligation under Clause 6.1 in connection with any MA for such Option Country; and 

  

	 	17.7.2	promptly on receipt of any such notice requiring the same, take all such steps as may reasonably be required to effect a transfer to Salix (or as it may require) of any application
for an MA or any MA granted in respect of such Option Country. Salix or its nominee shall: 

  

	 	(a)	pay all MA Transfer Costs in connection with any such transfer; and 

  

	 	(b)	reimburse Falk all third party costs reasonably and necessarily incurred by Falk prior to such date in connection with the application and grant of such MA in such Option Country as
evidenced by copy third party invoices, such reimbursement not to exceed €[*] in respect of each Option Country. 

 18. TERMINATION

  

	18.1	This Agreement shall become effective as of the Effective Date and unless earlier terminated pursuant to the other provisions of this Clause 18, shall continue in full force and
effect for the Term. 

  

	18.2	Falk may terminate this Agreement at any time after the Effective Date if Falk reasonably considers that the continued Exploitation of the Products in the Territory by Falk is no
longer in the commercial interests of Falk, provided that Falk shall have discussed such circumstance and consulted fully with Salix and the Parties shall have discussed and if appropriate amended the Minimum Royalty Payments under Clause 4, prior
to Falk effecting any such termination. Such termination shall be made by providing twenty four months written notice to Salix provided that Salix may in its sole discretion reduce such notice period or permit termination during such notice period.
During such notice period all obligations of Falk under this Agreement shall continue in full force and effect (including in particular all payment obligations) and the obligation to effect payment of Minimum Royalties shall be apportioned over the
relevant part Years up to the date of expiry of such notice period (or earlier termination permitted by Salix) and any shortfall shall be calculated by reference to Royalties due in respect of Net Sales in such period to the date of expiry of such
notice or earlier termination. 

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 29 

	18.3	In the event there shall have occurred a material adverse breach of this Agreement or a material adverse default in the observance or performance of any provision of this Agreement
by a Party (the “Defaulting Party”), the Party claiming the same (the “Non Defaulting Party”) shall promptly provide detailed notice thereof to the Defaulting Party. The Defaulting Party shall have sixty
(60) days from the date of receipt of such notice to cure the material adverse breach or material adverse default detailed in such notice and, if the same is timely cured within such sixty (60) day period the provisions of this Agreement
shall remain in full force and effect. In the event that the material adverse breach or material adverse default detailed in such notice cannot with due diligence be cured within such sixty (60) day period, and the Defaulting Party promptly
notifies the Non Defaulting Party of the period (not exceeding 120 days) in which it anticipates that it can be cured, the time to cure such material adverse breach or material adverse default shall be extended for such period (up to a maximum
of 120 days) as may be necessary to cure the same with all due diligence. This Agreement may be terminated forthwith by service of notice in writing by the Non Defaulting Party in the event that the Defaulting Party shall fail to cure such
material adverse breach or material adverse default within such initial or extended period. The right of a Party to terminate this Agreement, under this Clause 18.3 shall not be affected in any way by its waiver or failure to take action with
respect to any prior breach or default and shall be without prejudice to any other rights of the Non Defaulting Party in connection with any such material adverse breach or material adverse default. 

  

	18.4	In the event that Falk suffers a Change of Control it shall promptly notify Salix of such event and Salix may within a period of thirty (30) days after the date of such notice
terminate this Agreement by service of four (4) months notice of termination to Falk provided that this Agreement shall not terminate upon the expiry of such notice period, if on or before the expiry of such four (4) month notice period
Falk shall pay to Salix a sum (the “Non Termination Payment”); 

  

	 	18.4.1	In the event that such Change of Control occurs at any time prior to the sixth anniversary of the Effective Date, the Non Termination Payment shall be US $[*] ([*] US dollars); and

  

	 	18.4.2	In the event that such Change of Control occurs at any time after the sixth anniversary of the Effective Date, the Non Termination Payment shall be a sum equal to the Royalties
payable in a single Year under Clause 3.1.3 (calculated as the average of all Royalties actually paid by Salix to Falk under Clause 3.1.3 in each complete Year after Year 5, preceding the date of Change of Control); and 

 any such Non Termination Payment shall creditable against Royalties due under clause 3.1.3 in the one Year following the date of the Non Termination
Payment only and for the avoidance of doubt any part of the Non Termination Payment not offset during such Year following the date of payment shall not thereafter be creditable against Royalties. 
  

	19.	CONSEQUENCES OF TERMINATION. 

  

	19.1	Upon the effective date of termination of this Agreement howsoever caused or arising under Clause 18: 

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 30 

	 	19.1.1	all rights and licenses of Falk under this Agreement with respect to the Territory shall immediately terminate and Falk shall; 

  

	 	(a)	cease all use of the Salix IP and the Salix Product Data; and 

  

	 	(b)	cease development and Exploitation of the Product; and 

  

	 	(c)	immediately return to Salix all relevant records and materials in its possession or control containing or comprising Salix’s Know-How and Confidential Information (except one
copy of which may be retained in Falk’s confidential files for archival purposes); and 

  

	 	(d)	provide Salix with copies of all Joint Product Data (if any) not previously provided to Salix; and 

  

	 	(e)	at the terminating party’s cost, take all such actions as may reasonably be required to effect a transfer to Salix (or as it may direct) of all MAs for the Product in the
Territory or any Option Country and any applications for any such MAs; and 

  

	 	(f)	at the terminating party’s cost, transfer to Salix or as it may direct, any Falk Trademark used on the Products in the Territory under the provisions of Clause 9, provided that
Salix shall not acquire any rights in the tradename “Falk” or any part of any Falk Trademark containing the name “Falk” or any other tradename of Falk applied to other Falk products in addition to being used in connection with
the Products. 

  

	 	19.1.2	Falk shall, and shall cause its Affiliates and Sublicensees to, immediately cease all Exploitation of the Product. However, Falk shall be entitled to sell all stock of the Product
in its possession or control during a period of three (3) months after the effective date of termination provided that if so required by notice in writing served by Salix on Falk within 30 days of the effective date of termination Falk shall
sell and Salix shall purchase all such stock of Product at a price calculated as the cost to Falk incurred in respect of the manufacture of such stock of Product. 

  

	 	19.1.3	Save only as provided in Clause 19.2 or otherwise in respect of Royalties and other sums accrued due to Salix prior to the effective date of termination, no further payment shall be
due from Falk either upon such termination or otherwise under the terms of this Agreement after the effective date of termination. 

  

	19.2	Termination of this Agreement for any cause shall not bring to an end: 

  

	 	19.2.1	the confidentiality obligations of the Parties hereunder; 

  

	 	19.2.2	Falk’s obligation to pay Royalties or other sums which have accrued due to Salix up to and including the effective date of termination, in accordance with Clauses 3 and 4; and

  

	 	19.2.3	any provision of this Agreement which in order for full effect to be given thereto needs to survive termination of this Agreement. 

  

 31 

	19.3	Any termination of this Agreement shall be without prejudice to the rights and remedies of either Party with respect to any of the provisions of this Agreement or arising out of
breaches prior to such termination and shall not relieve either Party of any obligations or liability accrued hereunder prior to such termination including, without limitation, indemnity obligations and confidentiality obligations, nor rescind or
give rise to any right to rescind anything done or payments made or other consideration given hereunder prior to the time of such termination. 

  

	19.4	If this Agreement expires on the expiration of the Term, the licenses granted hereunder shall continue thereafter on a non exclusive basis and shall be fully paid-up and perpetual
and for the avoidance of doubt; 

  

	 	19.4.1	Falk shall thereafter be entitled to Exploit the Product in the Territory free of any further payment to Salix; and 

  

	 	19.4.2	Salix shall be entitled either itself or by a Third Party to exploit the Product in the Territory. 

  

	20.	NOTICES 

  

	20.1	All notices, statements or other documents that either Party shall be required or shall desire to give to the other hereunder shall be in writing and shall be given by the Parties
only as follows: 

  

	 	20.1.1	by personal delivery; or 

  

	 	20.1.2	by addressing it as indicated below or to such other address as such Party shall have last given by notice to the other Party, and by depositing it certified mail, postage prepaid,
in the mail, airmail; or 

  

	 	20.1.3	by addressing it as indicated below or to such other address as such Party shall have last given by notice to the other Party, and by delivering it prepaid to a recognized courier
service (e.g., Federal Express or DHL). 

  

	20.2	If so delivered, mailed, or couriered, each such notice, statement or other document shall, except as herein expressly provided, be conclusively deemed to have been given when
personally delivered during a Business Day, or on the fifth Business Day after the date of mailing, or on the second Business Day after delivery to a courier service, as the case may be. The address of a Party shall be the address at which the other
Party actually receives written notice pursuant to this Clause 20 and until further notice is: 

  

			
	If to Falk:	  	Leinenweberstraße 5, 79108 Freiburg, Germany
		
	Facsimile:	  	+49/761/1514-356
		
	Attention:	  	CEO
		
	If to Salix:	  	1700 Perimeter Park Drive, Morrisville, NC 27560-8404, USA
		
	Facsimile:	  	+1 919 862 1095
		
	Attention:	  	CEO, with a copy to General Counsel

  

 32 

	20.3	Either Party may also deliver a copy of any such notice by facsimile to the fax numbers specified above. 

  

	21.	ENTIRE AGREEMENT 

  

	21.1	This Agreement contains the entire agreement between the Parties with respect to the transactions contemplated herein or effected hereby in respect of the Product and supersedes all
prior written agreements, all previous communications, either oral or written, and all negotiations and oral understandings, if any, between the Parties hereto in respect of the Product prior to the Effective Date. 

  

	21.2	The parties acknowledge and undertake that nothing contained in this Agreement shall affect in any manner whatsoever the rights and obligations of the parties under an agreement
dated July 15, 2002 (“the 2002 Agreement”) pursuant to which Salix was granted rights in respect of the Salix Territory to a Falk Product provided that the Parties expressly acknowledge that the provisions of Clause 5.3 of the
2002 Agreement shall cease to apply in respect of any payments due under this Agreement and each party acknowledges and undertakes that there shall be no right of set off between the Parties: 

  

	 	21.2.1	under this Agreement, in respect of any sums due under the 2002 Agreement; or 

  

	 	21.2.2	under the 2002 Agreement, in respect of any sums due under this Agreement. 

  

	22.	ASSIGNMENT 

  

	22.1	Subject only to Clause 22.2, each Party may assign its rights and obligations under this Agreement to its Affiliates, provided that save where this entire Agreement is assigned to
an Affiliate whose identity shall have previously been approved in writing by the other Party (such approval not to be unreasonably withheld or delayed), the assigning Party shall remain liable for the due and proper performance of its obligations
hereunder. In the event a Party assigns all or any of its rights hereunder to an Affiliate whose identity shall have been previously approved by the other Party, such other Party agrees to enter into such supplemental agreements not inconsistent
herewith with such Affiliate as may be necessary or advisable to permit such Affiliate to avail itself of or perform any right or obligation of the assigning Party hereunder. 

  

	22.2	Notwithstanding the provisions of Clause 22.1, Salix undertakes that this Agreement shall be assigned only to an Affiliate or Third Party to whom Salix has assigned all right title
and interest in the Salix IP and the Joint Product Data and that its rights under this Agreement and its rights in the Salix IP and Joint Product Data, shall at all times be held in common ownership by a single entity. 

  

	22.3	Either Party may assign any or all of its rights or obligations under this Agreement in connection with a Change of Control, merger or acquisition of such Party or its Affiliates or
of substantially all of the assets thereof, which such assignment shall not require the consent of the other Party (subject always to the provisions of Clause 18.4 in the event of a Change of Control of Falk). 

  

	22.4	Save as expressly provided in Clauses 22.1 and 22.3 neither Party shall assign, charge or transfer this Agreement to a Third Party without the written consent of the other.

  

 33 

	23.	NON-WAIVER OF RIGHTS 

 Failure of a Party to enforce
any of the provisions or any rights with respect to this Agreement shall in no way be considered a waiver of such provisions or rights or in any way affect the validity of this Agreement. The failure of either Party to enforce any of such provisions
or rights shall not preclude or prejudice such Party from later enforcing or exercising the same or any other provisions or rights which it may have under this Agreement. 
  

	24.	AMENDMENT 

 This Agreement may not be revised,
amended, supplemented or varied except by an instrument in writing signed by Falk and Salix. 
  

	25.	INDEPENDENT CONTRACTORS 

 Nothing in this Agreement
shall create or imply an association, partnership or joint venture between the Parties hereto, it being agreed and understood that the Parties are independent contractors and neither Party, with respect to a Third Party, shall have the power or
authority to bind or obligate the other Party in any way. 
  

	26.	FURTHER ASSURANCES AND COOPERATION 

 Each Party
agrees that after the date hereof it will execute and deliver, or cause the execution and delivery of, such further documents and instruments as may be reasonably necessary or proper to fully effectuate this Agreement and the transactions
contemplated thereby. 
  

	27.	SEVERABILITY 

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

	28.	DISPUTE RESOLUTION 

  

	28.1	Within ten (10) days of either Party becoming aware of any dispute relating in any manner to this Agreement or the terms hereof it shall prepare and submit to the Chief
Executive Officer or such other senior manager as may be nominated from time to time for such purpose (“CEOs”) of each of the Parties a memorandum or statement setting out its position in respect of the matter in dispute and its
reasons for adopting that position. The other Party shall within ten (10) Business Days of receipt of the memorandum or statement prepare and submit to the other Party a memorandum or statement setting out like particulars on its own behalf and
the CEOs shall consider the dispute in the light of those statements. 

  

 34 

	28.2	If the CEOs agree upon the resolution of the dispute they shall issue a joint statement setting out the agreed terms and shall exercise and powers available to them to procure that
the agreed terms are fully and promptly carried into effect. 

  

	28.3	If the dispute is not resolved or disposed of in accordance with this Clause 28, within thirty (30) days of compliance with the terms of Clause 28.1, or if either Party shall
fail to comply with the terms of Clause 28.2, either Party may by notice in writing request mediation in accordance with the provisions of Clause 28.4. 

  

	28.4	If either Party by notice in writing under Clause 28.3 invokes mediation, the CEOs shall agree upon a mediator in England. Each Party shall propose a list of up to five names within
10 Business Days of the date of the written notice invoking mediation. Each such name proposed shall be of an independent Third Party with appropriate experience and expertise. If any of the names are the same the Parties shall agree upon a mediator
from the names they have jointly proposed. If none of the names are the same the Party who initiates mediation shall select a mediator from the list provided by the non-initiating Party. All lists of mediators shall include a full
résumé for each mediator named on the list. The Parties shall complete the process of selecting a mediator within 20 days of the date of the written notice invoking mediation. If the Parties are unable to reach a mediated resolution
within 60 days after selection of the mediator, the provisions of Clause 29 shall apply. 

  

	29.	LAW AND ARBITRATION 

  

	29.1	Any controversy or claim of whatsoever nature arising out of or relating in any manner whatsoever to this Agreement or any breach of any terms of this Agreement 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 Agreement to the substantive law of another jurisdiction.

  

	29.2	If the Parties are unable to reach a mediated resolution according to Clause 28.4, either Party may submit any dispute or other claim arising out of or in connection with this
Agreement for resolution by binding arbitration in London, United Kingdom under the rules of arbitration of the London Court of International Arbitration (“LCIA”) before a single independent arbitrator with relevant business,
financial, scientific or other experience based on the subject matter of the dispute. The Parties shall seek to agree the sole arbitrator and in the absence of agreement the arbitrator shall be appointed as determined by the LCIA rules. All costs
incurred in the arbitration shall be borne as directed by the arbitrator. Judgment on the award rendered by the arbitrator shall in the absence of manifest error or failure of the arbitrator to conduct the arbitration in accordance with said LCIA
Rules be binding on the Parties with no right of appeal to any court and such judgement may be entered by either Party in any court having jurisdiction thereof. 

  

	29.3	Nothing in either Clause 28 or this Clause 29 shall be construed to limit or preclude a Party from bringing an action in any court of competent jurisdiction for injunctive or other
equitable relief as may reasonably be appropriate to protect the Intellectual Property of such Party. 

  

 35 

	29.4	Each Party shall be entitled to recover from the other Party any costs (including reasonable legal fees) reasonably incurred by such Party in enforcing any payment or other
obligation under the terms of this Agreement. 

  

	30.	COUNTERPARTS 

 This Agreement may be executed
simultaneously or in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 
  

	31.	INTERPRETATION 

 In the event of a dispute
hereunder, this Agreement shall be interpreted in accordance with its fair meaning and shall not be interpreted for or against a Party hereto on the ground that such Party drafted or caused to be drafted this Agreement or any part thereof.

 IN WITNESS WHEREOF, the Parties have executed this Agreement with effect from the date first above written. 
  

 36 

 Schedule 1 
 Salix Patents 
 NON-AQUEOUS COLONIC PURGATIVE FORMULATIONS – 63771 
  

													
	 Country
	  	Application
Status	  	Application
Number	  	 Filing
 Date
	  	Patent
Number	  	 Issue
 Date
	  	 Expiration
 Date

	Austria	  	Granted	  	96915636.3	  	08-May-1996	  	858326	  	02-Apr-2003	  	08-May-2016
	Belgium	  	Granted	  	96915636.3	  	08-May-1996	  	858326	  	02-Apr-2003	  	08-May-2016
	Canada	  	Granted	  	2241445	  	08-May-1996	  	2241445	  	31-Jul-2001	  	08-May-2016
	Denmark	  	Granted	  	96915636.3	  	08-May-1996	  	858326	  	02-Apr-2003	  	08-May-2016
	European Patent Convention	  	Granted	  	96915636.3	  	08-May-1996	  	858326	  	02-Apr-2003	  	08-May-2016
	Finland	  	Granted	  	96915636.3	  	08-May-1996	  	858326	  	02-Apr-2003	  	08-May-2016
	France	  	Granted	  	96915636.3	  	08-May-1996	  	858326	  	02-Apr-2003	  	08-May-2016
	Germany	  	Granted	  	96915636.3	  	08-May-1996	  	858326	  	02-Apr-2003	  	08-May-2016
	Greece	  	Granted	  	96915636.3	  	08-May-1996	  	858326	  	02-Apr-2003	  	08-May-2016
	Ireland	  	Granted	  	96915636.3	  	08-May-1996	  	858326	  	02-Apr-2003	  	08-May-2016
	Italy	  	Granted	  	96915636.3	  	08-May-1996	  	858326	  	02-Apr-2003	  	08-May-2016
	Luxembourg	  	Granted	  	96915636.3	  	08-May-1996	  	858326	  	02-Apr-2003	  	08-May-2016
	Monaco	  	Granted	  	96915636.3	  	08-May-1996	  	858326	  	02-Apr-2003	  	08-May-2016
	Netherlands	  	Granted	  	96915636.3	  	08-May-1996	  	858326	  	02-Apr-2003	  	08-May-2016
	Patent Cooperation Treaty	  	Published	  	US96/06563	  	08-May-1996	  		  		  	
	Portugal	  	Granted	  	96915636.3	  	08-May-1996	  	858326	  	02-Apr-2003	  	08-May-2016
	Spain	  	Granted	  	96915636.3	  	08-May-1996	  	858326	  	02-Apr-2003	  	08-May-2016
	Sweden	  	Granted	  	96915636.3	  	08-May-1996	  	858326	  	02-Apr-2003	  	08-May-2016
	Switzerland	  	Granted	  	96915636.3	  	08-May-1996	  	858326	  	02-Apr-2003	  	08-May-2016
	United Kingdom	  	Granted	  	96915636.3	  	08-May-1996	  	858326	  	02-Apr-2003	  	08-May-2016
	United States of America	  	Abandoned	  	08/411,350	  	31-Mar-1995	  		  		  	
	United States of America	  	Granted	  	08/669,834	  	26-Jun-1996	  	5616346	  	01-Apr-1997	  	21-May-2013

  

 37 

 COLONIC PURGATIVE COMPOSITION WITH SOLUBLE BINDING AGENT - 63770 
  

											
	 Country Name
	  	Application
Status	  	Application
Number	  	 Filing
 Date
	  	 Issue
 Date
	  	Expiration
Date
	Argentina	  	Published	  	P040104289	  	19-Nov-2004	  		  	
	Australia	  	Pending	  	2004292428	  	17-Nov-2004	  		  	17-Nov-2024
	Brazil	  	Pending	  	PI0416702-3	  	17-Nov-2004	  		  	
	Canada	  	Pending	  	2546637	  	17-Nov-2004	  		  	17-Nov-2024
	Chile	  	Published	  	2975-2004	  	18-Nov-2004	  		  	
	China (Peoples Republic)	  	Pending	  	2.0048E+11	  	17-Nov-2004	  		  	17-Nov-2024
	European Patent Convention	  	Published	  	4819530.9	  	17-Nov-2004	  		  	17-Nov-2024
	Japan	  	Published	  	2006-541302	  	17-Nov-2004	  		  	17-Nov-2024
	Korea, Republic of	  	Pending	  	1-2006-7011762	  	17-Nov-2004	  		  	17-Nov-2024
	Patent Cooperation Treaty	  	Published	  	US2004/038220	  	17-Nov-2004	  		  	
	United States of America	  	Published	  	10/988,693	  	16-Nov-2004	  		  	
	United States of America	  	Expired	  	60/523,142	  	19-Nov-2003	  		  	19-Nov-2004

  

 38 

 Schedule 2 
 Trademark Registrations 
  

							
	 Mark
	 	 Territory
	 	 Number
	 	 Renewal Date

	DIACOL	 	Norway	 	200915	 	30/12/09

  

 39 

 Schedule 3 
 Press Release 
  

 40 

 FOR IMMEDIATE RELEASE 
  

					
	Contact:	  	Adam C. Derbyshire	  	Mike Freeman
		  	Senior Vice President and	  	Executive Director, Investor Relations and
		  	Chief Financial Officer	  	Corporate Communications
		  	919-862-1000	  	919-862-1000

 SALIX PHARMACEUTICALS LICENSES DIACOLTM 
 TO DR. FALK PHARMA IN EUROPE 
 RALEIGH, NC,
April 16, 2007 - Salix Pharmaceuticals, Ltd. (Nasdaq:SLXP) today announced that it has licensed exclusive rights to market DIACOLTM 1500 mg Tablets in 28 territories in Europe to Dr. Falk Pharma GmbH of Freiberg, Germany. DIACOL, or,
sodium phosphate monobasic monohydrate, USP, and sodium phosphate dibasic anhydrous, tablets, USP, are marketed in the United States under the trade name OSMOPREPTM Tablets. As part of the agreement, Falk also has a non-exclusive option to
market DIACOL in Italy and France. Under the terms of the agreement, Salix may receive up to $4 million in milestone payments, as well as royalty payments based on product sales. Falk made the first milestone payment of $1.5 million upon execution
of the agreement. Falk is obligated to use all reasonable efforts to obtain Marketing Authorization by means of the Mutual Recognition Procedure in the territories and option countries noted above. 
 DIACOLTM 1500 mg Tablets are indicated for cleansing of the bowel when required as a preparation for certain diagnostic procedures such as colonoscopy. DIACOLTM
was granted Marketing Authorization in the United Kingdom in December 2006. DIACOL has patent protection in Europe to May 2016. 
 Dr. Falk Pharma GmbH,
based in Freiburg, Germany, specializes in the development and marketing of products used in hepatology and gastroenterology. Falk currently markets its products by means of subsidiary companies in selected European countries and a network of

  

 41 

 
sales partners within Europe and other geographic areas. The Falk Foundation, an independent organization associated with Dr. Falk, is well-known
internationally for its symposia, forums, postgraduate courses and educational literature in hepatology and gastroenterology. 
 Salix Pharmaceuticals, Ltd.,
headquartered in Raleigh, North Carolina, develops and markets prescription pharmaceutical products for the treatment of gastrointestinal diseases. Salix’s strategy is to in-license late-stage or marketed proprietary therapeutic drugs, complete
any required development and regulatory submission of these products, and market them in the United States through the Company’s 150-member gastroenterology specialty sales and marketing team. 
 Salix markets COLAZAL® (balsalazide) Capsules, XIFAXAN® (rifaximin) Tablets, OSMOPREPTM (sodium phosphate monobasic monohydrate, USP, and sodium phosphate dibasic anhydrous, USP) Tablets, MOVIPREP® (PEG-3350, sodium sulfate, sodium chloride, potassium chloride, sodium ascorbate and
ascorbic acid for Oral Solution), VISICOL® Tablets
(sodium phosphate monobasic monohydrate, USP, and sodium phosphate dibasic anhydrous), PEPCID® (famotidine) for Oral Suspension, DIURIL® (chlorothiazide) Suspension, AZASAN® (Azathioprine Tablets, USP), ANUSOL-HC® (Hydrocortisone Cream, USP) and PROCTOCORT® (Hydrocortisone Cream, USP). Balsalazide disodium tablets, Granulated Mesalamine, SANVAR® (600 ug vials vapreotide acetate powder) and Xifaxan are under development for additional indications. 
 OsmoPrep Tablets are indicated for cleansing of the colon as a preparation for colonoscopy in adults 18 years of age or older. Considerable caution should be advised
before OsmoPrep Tablets are used in patients with severe renal insufficiency, congestive heart failure, ascites, unstable angina, gastric retention, ileus, acute obstruction or pseudo-obstruction of the bowel, severe chronic constipation, bowel
perforation, acute colitis, toxic megacolon, gastric bypass or stapling surgery, or hypomotility syndrome. Use with caution in patients with impaired renal function, patients with a history of acute phosphate nephropathy, patients with a history of
seizures or at higher risk of seizure, patients with higher risk of cardiac arrhythmias, known or suspected electrolyte disturbances (such as dehydration), or people taking drugs that affect electrolyte 

  

 42 

 
levels. Patients with electrolyte abnormalities such as hypernatremia, hyperphosphatemia, hypokalemia, or hypocalcemia should have their electrolytes
corrected before treatment with OsmoPrep Tablets. OsmoPrep is contraindicated in patients with a known allergy or hypersensitivity to sodium phosphate salts or any of its ingredients. In clinical trials, the most commonly reported adverse reactions
(reporting frequency >3%) were transient and self-limited abdominal bloating, nausea, abdominal pain, and vomiting. It is recommended that patients receiving OsmoPrep Tablets be advised to adequately hydrate before, during, and after the use of
OsmoPrep. 
 For full prescribing information on Salix products, please visit www.salix.com. 
 Salix trades on the Nasdaq National Market under the ticker symbol “SLXP”. 
 For more information please contact
the Company at 919-862-1000 or visit our web site at www.salix.com. Information on our web site is not incorporated in our SEC filings. 
 Please Note: This press release contains forward-looking statements regarding future events. These statements are just predictions and are subject to risks and uncertainties that could cause the actual events or results to differ
materially. These risks and uncertainties include: reliance on third parties for international sales; risks of regulatory review and clinical trials; intellectual property risks; market acceptance for approved products; competition, including from
potential generic or over-the-counter products; management of rapid growth; and the need to acquire additional products. The reader is referred to the documents that the Company files from time to time with the Securities and Exchange Commission.

  

 43 

 Schedule 4 
 Summary of Product Characteristics 
 03 May 2006 
  

	(a)	PART I B SUMMARY OF PRODUCT CHARACTERISTICS 

  

	1.	NAME OF THE MEDICINAL PRODUCT 

 DiacolTM 1500 mg
Tablets 
  

	2.	QUALITATIVE AND QUANTITATIVE COMPOSITION 

 Each
tablet contains 1102 mg of sodium phosphate monobasic monohydrate and 398 mg of disodium phosphate anhydrous. 
 For excipients, see
6.1. 
  

	3.	PHARMACEUTICAL FORM 

 Tablet 
 White to off-white modified oval compressed tablets. The upper half bisected with a monogram “INKP” on the left and “1.5” on the
right, and the lower half plain. 
  

	4.	CLINICAL PARTICULARS 

  

	4.1	Therapeutic indications 

 DiacolTM Tablets are
indicated for cleansing of the bowel when required as a preparation for certain diagnostic procedures such as colonoscopy. 
  

	4.2	Posology and method of administration 

 The usual adult
dosage of DiacolTM Tablets is 32 tablets. On the day prior to colonoscopy, patients may have a light, low-fiber breakfast prior to 12 noon. After 12 noon, patients should be placed on a clear liquid diet. The total dose of phosphate is 32.79g.

 Adults (over 18 years of age): 
 DiacolTM Tablets should be administered orally in the following manner: 
 The evening before the colonoscopy procedure, take 4
DiacolTM. Tablets with 250mL of clear liquids every 15 minutes for a total of 20 tablets. The day of the colonoscopy procedure, (starting 3-5 hours before the procedure) take 4 DiacolTM Tablets with 250mL of clear liquids every 15 minutes
for a total of 12 tablets. 
 Patients should be advised of the importance of following the recommended fluid regimen. 
  

 44 

 The Elderly: 
 As for adults. It may be useful to assess renal function before use in the elderly. 
 Children:

 DiacolTM Tablets are not recommended for use in children. 
 Renal Insufficiency: 
 Patients with
renal disease may have difficulty excreting the large amounts of phosphates consumed in this medication. DiacolTM Tablets should be used with caution in patients with impaired renal function. 
 Patients should not repeat this dosage for at least seven days. No additional agents are necessary when taking DiacolTM Tablets, particularly those
agents containing sodium phosphate. 
  

	4.3	Contraindications 

 DiacolTM Tablets are not to be used
in patients with uncontrolled heart failure, ascites, unstable angina pectoris, gastric retention, bowel perforation, acute colitis, ileus or acute obstruction or pseudo-obstruction, severe chronic constipation, hypomotility syndrome (such as
hypothyroidism, scleroderma) or toxic megacolon. 
 DiacolTM Tablets are contraindicated in patients with a known allergy or
hypersensitivity to sodium phosphate salts or to any of the other ingredients. 
  

	4.4	Special warnings and special precautions for use 

 Patients
should be advised that undigested or partially digested DiacolTM Tablets may be seen in the watery diarrhoea stool or during colonoscopy. Undigested tablets of other medications may also be seen. 
 Patients should be advised to drink sufficient quantities of clear liquids or water when taking DiacolTM Tablets. Inadequate fluid intake, as with any
effective purgative, may lead to dehydration. 
 DiacolTM Tablets should be used with caution in patients experiencing an acute
exacerbation of chronic inflammatory bowel disease or within three months of an acute myocardial infarction or cardiac surgery, including coronary artery bypass graft surgery. 
 Rarely, administration of other sodium phosphate-containing products, such as enemas or non-prescription liquid purgatives, to patients with renal
insufficiency or bowel obstruction, has been reported to have serious clinical consequences including fatalities. 
 Administration of this
product to a patient with bowel obstruction or impaired renal function could lead to exaggerated absorption of sodium and phosphate with severe serum 

  

 45 

 
electrolyte aberrations as well as significant fluid shifts. Rarely, profound alterations in electrolyte levels could occur, which could theoretically cause
severe complications including death. Prolongation of the QT interval has been observed in some patients who were dosed with DiacolTM Tablets. This effect has been seen in patients treated with other purgatives. QT prolongation has been
associated with electrolyte imbalances. DiacolTM Tablets should be used with caution in patients who are taking medications known to prolong the QT interval. Electrolyte abnormalities such as hypernatraemia, hyperphosphataemia, hypokalaemia, or
hypocalcaemia should be corrected before treatment with DiacolTM Tablets. 
 DiacolTM Tablets should be used with caution in patients
with risk factors for hyponatremia, e.g., SIADH, a history of electrolyte abnormalities, inadequately treated hypothyroidism, use of other drugs associated with hyponatremia, e.g., thiazide diuretics, or adrenal insufficiency, or with risk factors
for development of tonic-clonic seizures, e.g., a history of seizures, use of drugs that lower the seizure threshold such as tricyclic antidepressants, or withdrawal from alcohol or benzodiazepines. 
 DiacolTM 1500 mg Tablets contain 313 mg of sodium per tablet. This should be taken into consideration by patients on a controlled sodium diet.

  

	4.5	Interaction with other medicinal products and other forms of interaction 

 No drug interaction studies have been conducted for DiacolTM Tablets. As with other purgatives the absorption of other orally administered medicines (e.g. oral contraceptives, antibiotics, antidiabetics) may be
delayed or completely prevented. 
 Care should be taken with patients taking calcium channel blockers, diuretics, lithium treatment or other
medications that might affect electrolyte levels as hyperphosphataemia, hypocalcaemia, hypernatraemic dehydration or acidosis may occur. 
  

	4.6	Pregnancy and lactation 

 No animal reproductive studies
have been conducted. It is not known whether DiacolTM Tablets can cause harm to the unborn foetus if administered to a pregnant woman, or interfere with reproductive capacity. 
 DiacolTM Tablets should not be used during pregnancy or by lactating mothers. 
  

	4.7	Effects on ability to drive and use machines 

 There is no
known effect on the ability to drive and use machines. 
  

	4.8	Undesirable effects 

 In clinical studies very common
adverse reactions included abdominal bloating, abdominal pain and nausea. Common side effects included vomiting, headache and dizziness. These adverse reactions are generally transient and subside rapidly. 
  

 46 

 There have been reports of generalised tonic-clonic and/or loss of consciousness associated with use of
the active ingredient in patients with no prior history of seizures. Cases of seizure were associated with electrolyte abnormalities (e.g. hyponatraemia, hypokalaemia, hypochloraemia, hypocalcaemia, hypomagnesaemia) and low serum osmolality.

  

	4.9	Overdose 

 Purposeful or accidental ingestion of more than
the recommended dosage of DiacolTM Tablets may result in severe electrolyte disturbances as well as dehydration and hypovolaemia. Certain severe electrolyte disturbances may lead to cardiac arrhythmias and death. The patient should be monitored
carefully and treated symptomatically (e.g. rehydration therapy) for complications until stable. 
  

	5.	PHARMACOLOGICAL PROPERTIES 

  

	5.1	Pharmacodynamic properties 

 The primary mode of action of
sodium phosphate is thought to result from the osmotic action of sodium which causes large amounts of water to be drawn into the bowel. The influx of water stimulates bowel evacuation, rapidly and effectively cleansing the entire colon. 

 

	5.2	Pharmacokinetic properties 

 Approximately 60-65% of
ingested dietary phosphate is absorbed from the gastro-intestinal tract via an active energy-dependent process. 
 Phosphate distributes into
plasma and extracellular fluid, cell membranes and intracellular fluids. More than 90% of plasma phosphate is filtered and 80% of the filtered phosphate is actively reabsorbed in the steady state. 
 Clinical studies with a higher dose of a previous formulation of DiacolTM Tablets have demonstrated that maximum peak plasma concentrations of serum
inorganic phosphorous are achieved at approximately three hours after the administration of the first 30 g dose of DiacolTM Tablets, where serum inorganic phosphorous levels are increased by a mean of 1.21 ± 0.53 mmol/L.
Following a second 30 g dose of DiacolTM Tablets a maximum peak plasma concentration of serum inorganic phosphorous is obtained at approximately four hours and the serum inorganic phosphorous levels are increased by a mean of 1.42 ± 0.60
mmol/L. The dosing instructions for DiacolTM Tablets recommend a first dose of 30 g and a second dose of 18 g. 
  

	5.3	Preclinical safety data 

 Published preclinical studies
provide evidence that sodium phosphate (mono and dibasic) has no significant toxicity potential. 
  

 47 

 An LD50 of 19.93 g/kg in rats has been identified for sodium phosphate dibasic. Studies have demonstrated that monobasic sodium phosphate exhibits no tumour
producing activity. 
  

	6.	PHARMACEUTICAL PARTICULARS 

  

	6.1	List of excipients 

 Macrogol 8000 
 Magnesium Stearate 
  

	6.2	Incompatibilities 

 Not applicable 
  

	6.3	Shelf life 

 24 months. 
  

	6.4	Special precautions for storage 

 Do not store above
30°C. Keep the bottle tightly closed. 
  

	6.5	Nature and contents of container 

 High-density
polyethylene (HDPE) bottles with child-resistant polypropylene cap, containing a silica gel desiccant. 
 There are 32 DiacolTM Tablets in
each bottle. 
  

	6.6	Instructions for use and handling and disposal 

 Not
applicable. 
  

	7.	UK MA HOLDER 

 InKine Pharmaceutical Company, Ltd.

 The Coach House 
 The Grove

 Pipers Lane 
 Harpenden

 Hertfordshire 
 AL5 1AH

 United Kingdom 
  

	8.	MARKETING AUTHORISATION NUMBER 

 PL 19147/0001

  

 48 

	9.	DATE OF FIRST AUTHORISATION/RENEWAL OF THE AUTHORISATION 

 7th January 2005 
  

	10.	DATE OF REVISION OF THE TEXT 

 3rd May 2006 
  

 49 

 Schedule 5 
 Market Assumptions 
  

	1)	[*] 

  

	2)	Product presentation is a bottle containing 32 tablets which equals one prescription (all to be taken during one course of bowel cleansing). 

  

	3)	Price to wholesaler excl. VAT, per prescription is at least € [*] (in Germany, Netherlands, Austria, Turkey, Greece, Lithuania) but not higher than market leader and at least
€ [*] (in all other countries in the Territory). 

  

	4)	Market for bowel cleansing preparations (PEG- and sodium-phosphate–based preparations and bisacodyl-based Prepacol) will be more than [*] (in Germany), [*] (in UK) and about
[*] (in each of Spain, Netherlands, Belgium, Austria, Portugal) and approx. [*] each or less (in all other countries in the Territory) prescriptions/bowel cleaning courses per year. 

  

	5)	At the time of launch and thereafter the following products will be on the market: 

 -    [*] 
 -    [*] 
 -    [*] 
 -    [*] 
 All these products can only be labelled as drugs with the exception of Germany and Slovenia, where [*] products can also be registered as medical devices, such as [*] and [*] in Germany. 
  

	6)	[*] have a relatively small market share in the Territory. 

  

	7)	All Products are reimbursed by the health insurance funds in the following countries: [*]. They are not reimbursed in all other countries (mostly [*]). 

  

	8)	[*] 

  

	9)	[*] 

  

	10)	Colon cleansing will be the standard procedure before colonic diagnostics. 

  

	[*]	Confidential treatment requested; certain information omitted and filed separately with the SEC. 

  

 50 

			
	DR FALK PHARMA GmbH
		
	By:	 	/s/ Ursula Falk
	Name:	 	Ursula Falk
	Title:	 	Owner

  

			
	SALIX PHARMACEUTICALS, INC.
		
	By:	 	/s/ Carolyn J. Logan
	Name:	 	Carolyn J. Logan
	Title:	 	President and Chief Executive Officer

  

 51

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