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MASTER PURCHASE AND SALE AND LICENSE AGREEMENT Between MERCK CO., INC. and SALIX PHARMACEUTICALS, LTD. Dated as of February 22, 2007

License Agreement

MASTER PURCHASE AND SALE AND LICENSE AGREEMENT Between MERCK  CO., INC. and SALIX PHARMACEUTICALS, LTD. Dated as of February 22, 2007 | Document Parties: Merck  Co, Inc | SALIX PHARMACEUTICALS, LTD You are currently viewing:
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Merck Co, Inc | SALIX PHARMACEUTICALS, LTD

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Title: MASTER PURCHASE AND SALE AND LICENSE AGREEMENT Between MERCK CO., INC. and SALIX PHARMACEUTICALS, LTD. Dated as of February 22, 2007
Governing Law: Delaware     Date: 5/10/2007

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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.

 

2


 

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-2 H -1,2,4-benzothiadiazine-7sulfonamide 1, 1-dioxide, having the empirical formula C 7 H 6 CIN 3 0 4 S 2 , 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.

 

4


 

1.26

Famotidine ” means N ´-(aminosulfonyl)-3-[[[2-[(diaminomethylene)amino]-4-thiazolyl]methyl]thio]propanimidamide, having the empirical formula C 8 H 15 N 7 O 2 S 3 , 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.

 

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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;

 

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(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

 

12


 

 

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.

 

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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.

 

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(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.

 

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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.

 

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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.

 

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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

 

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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.

 

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(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.

 

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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 Agree


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