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On February 20, 2015, Valeant Pharmaceuticals International, Inc., a British Columbia corporation ("Valeant"), Valeant
Pharmaceuticals International, a Delaware corporation and wholly owned subsidiary of Valeant ("VPI"), Sun Merger Sub, Inc., a
Delaware corporation and wholly owned subsidiary of VPI ("Merger Sub"), and Salix Pharmaceuticals, Ltd., a Delaware corporation
("Salix"), entered into an Agreement and Plan of Merger (the "Merger Agreement").
Pursuant to the Merger Agreement, and upon the terms and subject to the conditions described thereof, VPI has agreed to cause
Merger Sub to commence a tender offer (the "Offer") for all of Salix's outstanding shares of common stock, par value $0.001 per
share (the "Shares"), at a purchase price of $158.00 per Share (the "Offer Price"), payable net to the holder in cash, without interest,
subject to any withholding of taxes. The Offer will be scheduled to expire on the 20th business day following the commencement of
the Offer unless extended in accordance with the terms of the Merger Agreement and applicable law. As soon as practicable
following the consummation of the Offer, and subject to the satisfaction or waiver of certain conditions set forth in the Merger
Agreement, Merger Sub will merge with and into Salix (the "Merger") pursuant to the provisions of Section 251(h) of the Delaware
General Corporation Law (the "DGCL"), with no stockholder vote required to consummate the Merger, and Salix will survive as a
wholly owned subsidiary of VPI.
The obligations of VPI and Merger Sub to consummate the Offer are subject to the condition that there be validly tendered and not
withdrawn prior to the expiration of the Offer a number of Shares that, considered together with all other Shares (if any) beneficially
owned by VPI and its subsidiaries immediately prior to the expiration date, represent at least one Share more than 50% of the sum of
(x) the total number of Shares outstanding at the time of the expiration of the Offer and (y) the aggregate number of Shares that Salix
would be required to issue upon conversion, settlement or exercise of all then outstanding options, benefit plans, obligations or
securities convertible or exchangeable into Shares, or other rights to acquire or be issued Shares (such condition, the "Minimum
Condition"). The Minimum Condition may not be waived by VPI or Merger Sub without the prior written consent of Salix.
Consummation of the Offer is also subject to customary closing conditions, each as set forth in the Merger Agreement, including,
among others, the expiration or termination of the applicable waiting period under the United States Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended. Neither the Offer nor the Merger is subject to a financing condition.
At the effective time of the Merger (the "Effective Time"), any Shares not purchased pursuant to the Offer, other than Shares owned
by stockholders who are entitled to demand and properly demand appraisal rights in accordance with Section 262 of the DGCL and
who have otherwise complied with all applicable provisions of Section 262 of the DGCL, and Shares held in the treasury of Salix or
owned of record by any subsidiary of Salix, and all Shares owned of record by Valeant, VPI, Merger Sub or any of their respective
wholly owned subsidiaries) will be automatically converted into the right to receive cash in an amount equal to the Offer Price,
payable net to the holder in cash, without interest, subject to any withholding of taxes.
At the Effective Time, each unexpired and unexercised option to purchase Shares (each, a "Salix Option") under any stock plan of
Salix, whether or not exercisable or vested, will be cancelled, and each holder thereof shall receive a single lump sum cash payment,
subject to any applicable withholding tax, without interest, equal to the product obtained by multiplying (i) the total number of Shares
previously subject to such Salix Option and (ii) the excess, if any, of the Offer Price over the exercise price per Share previously
subject to such Salix Option. At the Effective Time, Salix's restricted shares will be cashed out at the Offer Price in accordance with
the terms of the Merger Agreement.
The Merger Agreement contains representations, warranties and covenants of the parties customary for transactions of this type.
The Merger Agreement contains certain termination rights for VPI and Salix, including in the event that the Offer is not consummated
by August 20, 2015, and further provides that, upon termination of the Merger Agreement under certain circumstances relating to
competing acquisition proposals, including if Salix terminates the Merger Agreement to accept a superior proposal, or where Salix's
Board of Directors changes its recommendation in favor of the transaction, Salix may be required to pay Salix a termination fee of
$356.4 million and reimburse the documented out-of-pocket expenses of Valeant, VPI and Merger Sub in connection with the
transaction up to a maximum of $50 million in the aggregate. Each party also has rights to specific performance as set forth in the
Merger Agreement.
Valeant has guaranteed the performance by VPI and Merger Sub of their obligations under the Merger Agreement.
-2-
Item 1.01 Entry into a Material Definitive Agreement
The representations, warranties and covenants contained in the Merger Agreement were made solely for the benefit of the parties to
the Merger Agreement. In addition, such representations, warranties and covenants (i) are intended not as statements of fact, but
rather as a way of allocating the risk between the parties to the Merger Agreement, (ii) have been qualified by reference to
confidential disclosures made by the parties in connection with the Merger Agreement and (iii) may apply standards of materiality in
a way that is different from what may be viewed as material by stockholders of, or other investors in, Valeant or Salix. Accordingly,
the Merger Agreement is included with this filing only to provide investors with information regarding the terms of the Merger
Agreement, and not to provide investors with any other factual information regarding Salix or its business. Stockholders should not
rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or
condition of Valeant, VPI, Merger Sub, Salix or any of their respective subsidiaries or affiliates. Moreover, information concerning
the subject matter of the representations and warranties may change after the date of the Merger Agreement, which subsequent
information may or may not be fully reflected in public disclosures.
A copy of the Merger Agreement is attached hereto as Exhibit 2.1 and is incorporated herein by reference. The foregoing description
of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger
Agreement.
Commitment Letter
Valeant and VPI have entered into a commitment letter (the "Commitment Letter"), dated as of February 20, 2015, with Deutsche
Bank AG New York Branch, Deutsche Bank AG Cayman Islands Branch, Deutsche Bank Securities Inc., HSBC Bank USA, National
Association, HSBC Bank Canada, The Hongkong and Shanghai Banking Corporation Limited, HSBC Securities (USA) Inc., The
Bank of Tokyo-Mitsubishi UFJ, Ltd., DNB Capital LLC, DNB Markets, Inc., SunTrust Bank and SunTrust Robinson Humphrey, Inc.
(such financial institutions being referred to as the "Commitment Parties").
Pursuant to the Commitment Letter, the Commitment Parties have committed to provide (a) in the event certain amendments (the
"Amendments") to Valeant's Third Amended and Restated Credit and Guaranty Agreement, dated as of February 13, 2012 (as
amended, restated, amended and restated, modified or supplemented from time to time, the "Credit Agreement") are obtained within
30 days of the date of the Commitment Letter (the "Amendment Date"), (i) incremental term loans pursuant to the Credit Agreement
of up to $5,550 million, which will consist of (A) an incremental tranche A term loan facility of up to $1,000 million and (B) an
incremental tranche B term loan facility of up to $4,550 million and (ii) senior unsecured increasing rate bridge loans under a new
senior unsecured bridge facility of up to $9,600 million and (b) in the event the Amendments are not obtained on or prior to the
Amendment Date, Valeant will refinance its existing facilities under its Credit Agreement and obtain (i) a tranche A term loan facility
of up to $2,750 million, (ii) a tranche B term loan facility of up to $6,950 million, (iii) a tranche B term loan facility denominated in
dollars denominated in euros of up to the euro equivalent of $1,500 million, (iv) a revolving credit facility of up to $500 million; (v) a
new senior secured bridge facility providing for senior secured increasing rate bridge loans of up to $1,050 million and (vi) a new
senior unsecured bridge facility providing for senior unsecured increasing rate bridge loans of up to $9,750 million.
The loans provided under the Commitment Letter will be used for the purposes of funding (i) the transactions contemplated by the
Merger Agreement, (ii) Salix's obligation to repay all outstanding loans and termination of commitments under its and its
subsidiaries' existing credit facilities (other than under certain ordinary course local credit lines to be agreed), (iii) the contribution to
Salix of an amount necessary to redeem Salix's 6.00% Senior Notes due 2021, (iv) the payment of any cash consideration necessary
upon the conversion of Salix's 1.50% Convertible Senior Notes due 2019 and 2.75% Convertible Senior Notes due 2015, together
with any cash payments required to unwind any hedges or warrants related thereto (other than Salix's convertible notes that remain
outstanding because the holders thereof elected not to convert such notes) and (v) certain transaction expenses.
The financing commitments of the Commitment Parties are subject to various conditions set forth in the Commitment Letter.

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