Merriman will take an exit physical on Monday or Tuesday, according to Nix, who was happy to have the former Chargers linebacker signed even though he has been riddled by injuries and did not play a down for the Bills after he was claimed off waivers at midseason.
"We know the situation, we researched it, we did all our homework with Shawne," Nix said. "Everything you do is a little bit of a gamble. There's reward and upside to it and I think both sides are happy with the way the contract is structured."
A source said Merriman is guaranteed $2.5 million for the 2011 season and will make an average $5.25 million during the two years.
He has play-time and performance incentives that could boost the contract to $9.25 million a season but a more reasonable sum is $8.75 million if Merriman remains healthy and plays well.
"The prognosis is good for him to be healthy and ready to go by the time offseason workouts roll around," Nix said on the team's website. "I know he's a leader. He's been a Pro Bowler. He's only 26-years old and if he's healthy, he'll make plays for us and help us win games."
San Diego's 2005 first-round draft pick, Merriman is a three-time Pro Bowl selection. In 60 career games, he has 43½ sacks -- but only four in his past three seasons after his production was slowed by injuries.
He missed most of the 2008 season after undergoing reconstructive knee surgery, and had only four sacks last year. After sitting out most of this past year's offseason workouts and part of training camp to protest his contract status, Merriman was slowed by an Achilles tendon injury and then a calf injury.
The Bills acquired Merriman in a bid to strengthen their pass rush, which has struggled for much of this season in the absence of Aaron Schobel, who was released in August after he had difficulty making up his mind to retire.
Merriman has encountered his share of problems.
Merriman was suspended four games in 2006 after testing positive for steroids. He blamed the positive test on a tainted supplement, which he never identified.
He also brought unwanted attention off the field. He was arrested just before the 2009 season after reality television star Tila Tequila accused him of battery and false imprisonment at his suburban San Diego home. No charges were filed, and Merriman and Tequila settled dueling lawsuits.
Chris Mortensen is ESPN's senior NFL analyst. The Associated Press contributed to this report.