Name of Subject Company. Names of Persons Filing Statement. Title of Class of Securities. CUSIP Number of Class of Securities. Acting Chief Operating Officer. Executive Vice President and General Counsel. Raleigh, North Carolina One World Financial Center. New York, NY Name, address, and telephone numbers of person authorized to receive notices and communications. Table of Contents TABLE OF CONTENTS. The filing person is the subject company. Tender Offer and Merger. Immediately prior to the Effective Time, each share of Company Restricted Stock will automatically become fully vested and then will be cancelled at the Effective Time, and in exchange therefor, each former holder of such cancelled Company Restricted Stock will be entitled to receive, in consideration of the cancellation of such Company Restricted Stock and in settlement therefor, a payment in cash subject to any applicable withholding of taxes equal to the per share Merger Consideration. The Offer is initially scheduled to expire at Upon the terms and subject to the conditions of the Offer including, if the Offer is extended or amended, the terms and conditions of any such extension or amendmentPurchaser will accept for payment all Shares validly tendered and not properly withdrawn pursuant to the Offer as soon as practicable after the Expiration Date but no later than 9: The foregoing summary of the Offer is qualified in its entirety by the more detailed description and explanation contained in the Offer to Purchase and the Letter of Transmittal. Relationship with VPI, Purchaser and Certain of Their Affiliates. The Merger Agreement has been provided solely to inform stockholders of the Company of its terms. The representations, warranties and covenants contained in the Merger Agreement were made solely for the benefit of the parties to the Merger Agreement. 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 the Company 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 the Company, VPI, Purchaser, Valeant or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of trading 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. The Company acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this Schedule 14D-9 not misleading. Under the terms of the Confidentiality Agreement, Valeant agreed that, subject to certain exceptions, all nonpublic information made available by the Company to Valeant or its representatives would be kept confidential except as provided in the Confidentiality Agreement and related Amendment dated February 6, and used by Valeant and its representatives solely for the purpose of evaluating and negotiating a possible mutually agreed business combination between Valeant and the Company. The per summary description of the Confidentiality Agreement does not purport to be complete and share qualified in its entirety by reference to the Confidentiality Agreement, which is filed as Exhibit e 2 to this Schedule 14D-9 and is hereby incorporated herein by reference. Table of Contents Arrangements with Current Executive Officers and Directors of the Company. As described in more detail below, these interests include:. Effect of the Offer and the Merger Agreement on Company Shares, Options and Restricted Stock. Company executive officers and directors who tender the Shares they own for purchase pursuant to the Offer will receive the same cash consideration per Share on the same terms and conditions as the other stockholders of the Company who tender Shares. If the executive officers and directors do not tender the Shares they own in the Offer, upon consummation of the Merger, such Shares will represent the right to receive the Merger Consideration on the same terms and conditions as the other stockholders of the Company. The Merger Agreement also provides that, immediately prior to the Effective Time, each share of Company Restricted Stock will automatically become fully vested and then cancelled at the Effective Time, and in. Table of Contents exchange therefor, each former holder of such cancelled Company Restricted Stock will be entitled to receive in consideration of the cancellation of such Company Restricted Stock, a payment in cash equal to the per share Merger Consideration subject to any withholding of taxes. Summary of Equity Award Payments. All of our current directors and executive officers as a group 8 persons. The Company previously entered into employment agreements with each of its executive officers, other than Mr. Creech of his base salary as of the date of termination and the product of three times two and a half times for Mr. In addition, each executive officer will be reimbursed for the cost of health insurance coverage for the lesser of thirty-six months thirty months for Mr. These total estimated amounts consist of the following:. Each of the executive officers with an employment agreement is subject to a non-solicitation of employees covenant for a period of one year following any termination of employment. Compensation Actions Between Signing of Merger Agreement and Completion of Merger. Under the terms of the Merger Agreement, the Company may not take certain compensation actions prior to the completion of the Merger that affect its executive officers. During this interim period, the Company may not implement increases in compensation or benefits for any director, officer, employee or consultant of the Company, or grant any new equity awards to such persons. Treatment of Annual Bonuses. Table of Contents Employee Matters Following Closing. Any Company Employee including an executive officer of the Company who terminates employment during the period beginning on the Effective Time and ending on the first anniversary thereof will be entitled to severance pay and benefits no less favorable in the aggregate than the severance pay and benefits such Company Employee would begins been entitled to pursuant to the severance plans and arrangements in effect prior to the execution of the Merger Agreement had such termination of employment occurred immediately prior to the Effective Time including, for each executive officer other than Mr. With respect to each Company Employee with an employment agreement previously disclosed to VPI in connection with the execution of the Merger Agreement, VPI will honor or cause to be honored the terms of each such employment agreement through the expiration, modification or termination of such agreements in conformity with applicable law. All provisions contained in the Merger Agreement with respect to employees were included for the sole benefit of the respective parties to the Merger Agreement and do not create any third-party beneficiary rights in any other person, including any Company Employee, former employees, any participant in any Company Benefit Plan or any beneficiary or dependent thereof. The Merger Agreement provides that all rights to indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the Effective Time and rights to advancement of expenses existing at the time of the Merger Agreement in favor of any person who is, or prior to the Effective Time becomes, or has been at any time prior to the date of the Merger Agreement, a director, officer, employee or agent including as a fiduciary with respect to an employee benefit plan of the Company, any of its subsidiaries or any of their respective predecessors: VPI will ensure that the Surviving Corporation complies with and honors the obligations described in this paragraph. The obligations under the Indemnification section of the Merger Agreement may not be terminated or modified in such a manner as to adversely affect any Indemnified Party without the written consent of such affected Indemnified $210 it being expressly agreed that the Indemnified Parties are third party beneficiaries of this section of the Merger Agreement. Share and Reasons for the Recommendation. Background of the Offer and the Merger. Representatives of Cadwalader and the Prior Financial Advisor provided an overview of Party A. Representatives $210 the Prior Financial Advisor discussed with the directors recent mergers and acquisitions activity in the life sciences industry and a public market perspective of the Company, including an analysis of its stockholder base. Logan met with the Chief Executive Officer of Party A. The Party A Chief Executive Officer did. Table of Contents not provide any specific information regarding any potential offer his company might make or any other pharmaceuticals which Party A might be interested in pursuing with the Company. The Party A Chief Executive Officer replied that he would contact Ms. Logan again in February. Logan again in February, representatives of the Prior Financial Advisor discussed certain financial analyses of the Company, and representatives of Cadwalader discussed with the Board their fiduciary duties in the context of a potential offer to acquire the Company. The Party A Chief Executive Officer did not provide any specific information regarding any potential offer Party A might make regarding the Company or any other transaction that Party A might be interested in pursuing with the Company. The directors noted that Party A had not made any transaction proposal, nor had it provided any insight about whether any proposal would follow its due diligence review of the Company. Based on the foregoing, the Board unanimously determined not to provide Party A with access to due diligence materials at the time. The Board also discussed the potential transaction with the Non-U. Party, including the advantages and disadvantages of being domiciled in a non-U. In Aprilthe Non-U. Party advised the Company that it was withdrawing its interest in a potential transaction with the Company due to tax structuring issues with the Non-U. Also in Aprilthe Company initiated discussions with Cosmo Pharmaceuticals S. Discussions between the Company and Cosmo regarding the structure and terms of a potential transaction continued through the beginning of July Logan with a request to meet. Logan reported on her meeting with the Party A Chief Executive Officer. The Prior Financial Advisor was not retained in connection with this matter because it was at the time engaged by Party A on certain other matters. Representatives of Centerview discussed certain financial analyses with respect to the Company based on information provided by the Company. Later that day, Ms. Representatives of Centerview discussed with the Board certain financial analyses with respect to the Company and the Party A offer based on information provided by the Company. The directors discussed whether, if the Company were to engage with Party A, the Company should also contact other potential acquirors. It was also noted that if. Table of Contents the Board determined that the Party A offer presented a compelling and full price, the time it would take to conduct a pre-signing market check presented a substantial risk of Party A withdrawing its offer. During the course of the next seven days, Party A conducted its due diligence review of the Company concurrently with the negotiation of the definitive merger agreement. Further discussions regarding the potential transaction ceased while Party A further reviewed this matter. As a result, the Notice created more uncertainty regarding the potential benefits the Company expected to achieve under the Cosmo Agreement. Table of Contents acquisition of the Company by Party B. Following a detailed discussion, the Board unanimously determined to advise Party A that it was not willing to discuss a transaction inc the substantially lower offer price, with the goal of compelling Party A to increase its offer. The Board also determined with Mr. The Board discussed the pending Cosmo transaction. As a result of stories in the press regarding a potential sale of the Company and the issuance of the Notice by the Treasury Department and the Internal Revenue Service, representatives of Cosmo had contacted representatives of the Company and inquired whether the Company intended to terminate the Cosmo transaction. Following discussion, the Board unanimously determined to authorize and direct management to enter into an agreement with Cosmo to terminate the Cosmo transaction. Logan that Party B would not be proceeding with a transaction, citing concerns with the transaction from an antitrust perspective. The Company also announced that it was negotiating with its principal wholesalers to enter into distribution services agreements for each of the products in its portfolio, and that it expected that these agreements, when finalized, would enable the Company to achieve pharmaceuticals objective of predictably and deliberately reducing wholesaler inventory levels of XifaxanApriso and Uceris to approximately 3 months at or before the end ofdepending on future demand for these products. The Company stated that it had notified the Securities and Exchange Commission that the Audit Committee was conducting this review. Logan advised the Party A Chief Executive Officer accordingly. Representatives of Centerview also were informed by Party D that it had interest in a potential acquisition of the Company. The Board discussed whether the Company should conduct a market check with respect to a potential sale of the Company. The directors discussed in detail the risks facing the Company on a standalone basis. The risks discussed by the directors at this meeting, and future meetings of the Board at which a potential sale of the Company was considered, included, without limitation: Representatives of Centerview discussed a preliminary valuation analysis of the Company based on information provided by the Company, as well as an illustrative list of potential buyers of the Company. Following a detailed discussion, the Board determined, with Mr. In making this determination, the Board discussed that no decision was being made to sell the Company, but rather the Board was seeking information regarding potential interest of third parties in acquiring the Company while the Company continued to implement its standalone plan. The Board also authorized management to contact J. The Board believed that having two financial advisors would broaden the depth of contacts with potential bidders and increase the opportunity to maximize stockholder value in the event of a potential sale of the Company. The Company noted that the search process would seek to identify proven business leaders with complementary and relevant expertise to increase the depth, skillset and perspective of the Board. Representatives of Centerview and J. Morgan discussed with the directors a list of 14 potential interested parties in connection with a potential sale of the Company. Table of Contents discussed with the Board. The Board determined that one of the parties included in the first tier would not be contacted as a result of competitive concerns. Each of Party C, Party D, Party E and Party F expressed interest in evaluating a potential transaction with the Company. The fifth party advised that it was not interested in pursuing a potential transaction. On December 16,the Company entered into a confidentiality and standstill agreement with Party F which standstill provisions terminated upon the Company entering into the Merger Agreement. The Board believed that it was appropriate for the Company to develop this financial plan to take into account its intention to reduce wholesaler inventory levels of its key products and the impact thereof on its business and operations. It was noted that the Notes would be coming due at around the same time the Company was preparing for the launch of Xifaxan for the treatment of IBS-D, meaning that two events requiring gamma Company liquidity would be occurring substantially concurrently. At the end of the meeting, Ms. Logan and representatives of Centerview also updated the Board on discussions to date with potential buyers. Accordingly, the Company withdrew its previously-issued guidance for the fourth quarter of and full year Table of Contents finalizing distribution services agreements with its principal wholesalers in the first quarter ofthe Company also provided preliminary financial guidance for the full per and The Company noted that while it remained confident that FDA approval of Xifaxan for the treatment of IBS-D would be obtained, there was no assurance that FDA approval would be obtained in a timely manner or at all. The consideration would be in the form of an unspecified mix of cash and Party D stock, and the proposal was subject to Party D completing a satisfactory due diligence review of the Company. The Company also stated that it intended to retain a nationally recognized executive search firm to assist the Company in identifying a highly qualified, experienced pharmaceutical executive to lead the Company on a going-forward basis. Several analysts speculated that Ms. Following the meeting, the Chairman of Party F pharmaceuticals Mr. No offer for the Company was communicated by Party E during this meeting. The directors discussed, based on the initial indications of interest received from Party C and Party F, whether to provide access to the data room to such parties. Pearson indicated that Valeant would be interested in conducting due diligence in order to evaluate a potential transaction between the two companies. Pearson subsequently spoke later gamma evening with Mr. Pearson indicated that if Valeant were to pursue a transaction, it expected to pursue one on an all-cash basis and would be interested in moving quickly. At the meeting, the Board discussed preliminary draft financial projections for the Company prepared by Company management, and determined that the Board would further review such projections and provide feedback to per. Representatives of Cadwalader then discussed with the directors the antitrust profile of potential transactions with the various interested parties. Pearson discussed with a representative of J. Pearson conveyed an oral non-binding indication of interest to acquire the Company. Pearson and Ingram that he would present their proposal to the Board, but that his belief was that the Board would not accept a proposal at that price. Morgan, a draft merger agreement. The merger agreement was structured as a one-step merger, with the consideration consisting of a combination of cash and Party D shares. Later that day, the Chief Executive Officer of Party D called Mr. Party D did not indicate when it would be prepared to specify a price for the Company, despite Mr. Pearson requested to both Mr. Among other things, the revised draft merger agreement included a proposed termination fee of 4. Morgan and Cadwalader present. These projections were not provided to Valeant or any other potential acquiror of the Company. Morgan contacted representatives of Party C, Party D and Party G several times to advise them that they needed to, in the case of Party D and Party G, submit a proposed trading to acquire the Company, and, in the case of Party C, increase its proposed purchase price, and, in each case that they needed to be prepared to move more quickly if they were to be successful in reaching an agreement with the Company. Morgan and Cadwalader participating. Chappell dissenting, authorized Mr. Chappell dissented because, in his opinion, the Board had not sufficiently analyzed the prospects for the Company on a standalone basis relative to a potential sale. Table of Contents Following the meeting, Mr. A few hours later, Mr. The revised merger agreement provided for a termination fee of 3. At this meeting, the Party C Chief Executive Officer indicated that Party C was not currently prepared to increase its offer price. The revised draft included a termination fee of 3. Later that afternoon, the Board held a telephonic meeting to consider the proposed transaction with Valeant. Representatives of Centerview, J. Morgan and Cadwalader also participated in the meeting. At the meeting, representatives of Cadwalader reviewed the proposed transaction structure and timing and summarized the key terms of the merger agreement. Next, representatives of Centerview and J. Morgan presented their financial analyses and rendered their respective oral opinions to the Board, subsequently confirmed in writing, to the effect. The Board then discussed whether to approve the entry into the merger agreement with Valeant. Following this discussion, the Board, with Mr. Later that night, the Company, VPI, Purchaser and, solely for certain specified purposes set forth in the Merger Agreement, Valeant, executed and delivered the Merger Agreement. On March 6, per, Valeant authorized the Company to waive, and the Inc sent notices waiving, the standstill obligations of Party C and Party E under their confidentiality agreements. In evaluating the Merger Agreement and the Offer, the Merger and the other transactions contemplated by the Merger Agreement, the Board consulted with the senior management of the Company, as well as representatives of Centerview, J. Risks Relating to Xifaxan for the Treatment of IBS-D. The Board inc the possibility that FDA approval of Xifaxan for the treatment of IBS-D could be delayed beyond the currently scheduled PDUFA Action Date, as well as the possibility that FDA approval would not. The Board considered the oral opinions of Centerview and J. The Board considered the availability of statutory appraisal rights under Delaware law in connection with the Merger for stockholders of the Company who do not tender their Trading into the Offer and who otherwise comply with the statutory requirements of Delaware lawand who believe that exercising such rights would yield them a greater per share amount than the Merger Consideration. During the course of its deliberations, the Board also considered a variety of material risks and other countervailing factors related to entering into the Merger Agreement that had previously been identified and discussed by the management of the Company and the Board, including:. The foregoing discussion of the factors considered by the Board is intended to be a summary, and is not intended to be exhaustive, but rather includes the principal factors considered by the Board. After considering these factors, the Board concluded that the positive factors relating to the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, substantially outweighed the potential negative factors. The Board collectively reached the conclusion to approve the Merger Agreement and the related transactions, including the Offer and the Merger, in light of the various factors described above and other factors that the members of the Board believed were appropriate. In view begins the wide variety of factors considered by the Board in connection with its evaluation of the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, and the complexity of these matters, the Board did not consider it practical, and did not attempt to quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision, and it did not undertake to make any specific determination as to whether any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. Rather, the Board made its recommendation based on the totality of information it received and the investigation it conducted. In considering the factors discussed above, individual directors may have given different weights to different factors. Chappell, currently intends to tender all Shares held of record or beneficially owned by such person, other than Shares issuable upon the exercise of Company Options or Shares over which such individual does not have dispositive authority. Opinion of Centerview Partners LLC. No limitations were imposed by the Board upon Centerview with respect to the investigations made or procedures followed by it in rendering its opinion. In connection with rendering the opinion described above and performing its related financial analyses, Centerview reviewed, among other things:. Centerview also conducted discussions with members of the senior management and representatives of the Company regarding their assessment of the Internal Data and the strategic rationale for the Transaction. In addition, Centerview reviewed publicly available financial pharmaceuticals stock market data, including valuation multiples, for the Company and compared that data with similar data for certain other companies, the securities of which are publicly traded, in lines of business that Centerview deemed relevant. Centerview also compared certain of the proposed financial terms of the Transaction with the financial terms, to the extent publicly available, of. Table of Contents certain other transactions that Centerview deemed relevant, and conducted per other financial studies and analyses and took into account such other information as Centerview deemed appropriate. Centerview expressed no view or opinion as to the Internal Data or the assumptions on which it was based. Centerview did not evaluate and did not express any opinion as to the solvency or fair value of the Company, or the ability of the Company to pay its obligations when they come due, or as to the impact of the $210 on such matters, under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. Centerview is not a legal, regulatory, tax or accounting advisor, and Centerview expressed no opinion as to any legal, regulatory, tax or accounting matters. For purposes of its opinion, Centerview was not asked to, and Centerview did not, express any view on, and its opinion did not address, any other term or trading of the Merger Agreement or the Transaction, including, without limitation, the structure or form of the Transaction, or any other agreements or arrangements contemplated by the Merger Agreement or entered into in connection with or otherwise contemplated by the Transaction, including, without limitation, the fairness of the Transaction or any other term or aspect of the Transaction to, or any consideration to be received in connection therewith by, or the impact of the Transaction on, the holders of any other class of securities, creditors or other constituencies of the Company or any other party. In addition, Centerview expressed no view or opinion as to the fairness financial or otherwise of the amount, nature or any other aspect of any compensation to be paid or payable to any of the officers, directors or employees of the Company or any party, or class of such persons in connection with the Transaction, whether relative to the Consideration to be paid to the holders of the Shares other than Excluded Shares pursuant to the Merger Agreement or otherwise. Table trading Contents written opinion were provided for the information and assistance of the Board in their capacity as directors and not in any other capacity in connection with and for purposes of its consideration of the Transaction. The summary set forth below does not purport to be a complete description of the financial analyses performed or factors considered by, and underlying the opinion of, Centerview, nor does the order of the financial analyses described represent the relative importance or weight given to those financial analyses by Centerview. Some of the summaries of the financial analyses set forth below include information presented in tabular format. In order to fully understand the financial analyses, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses performed by Centerview. In performing its analyses, Centerview made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of the Company or any other parties to the Transaction. None of the Company, Valeant, VPI, Purchaser or Centerview or any other person assumes responsibility if future results are materially different from those discussed. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below. In addition, analyses relating to the value of the Company do not purport to be appraisals or reflect the prices at which the Company may actually be sold. Accordingly, the assumptions and estimates used in, and the results derived from, the financial analyses are inherently subject to substantial uncertainty. Selected Comparable Public Company Analysis. Centerview reviewed and compared certain financial information for the Company to corresponding financial information for the following publicly traded companies that Centerview deemed comparable, based on its experience and professional judgment, to the Company:. Table of Contents analysis, share be considered similar to those of the Company. However, because none of the selected comparable companies is exactly the same as the Company, Centerview believed that it was inappropriate to, and therefore did not, rely begins on the quantitative results of the selected comparable company analysis. Accordingly, Centerview also made qualitative judgments, based on its experience and judgment as a financial advisor, concerning differences between the business, financial and operating characteristics and prospects of the Company and the selected comparable companies that could affect the public trading values of each in order to provide a context in which to consider the results of the quantitative analysis. The results of this analysis are summarized as gamma. Based on the foregoing analysis and other considerations that Centerview deemed relevant in its professional judgment, Centerview applied a valuation range of Centerview also applied a valuation range of Table of Contents Selected Precedent Transactions Analysis. Centerview reviewed and analyzed certain information relating to selected transactions that Centerview, based on its experience and judgment as a financial advisor, deemed relevant to consider in relation to the Company and the Transaction. No company or transaction used in this analysis is identical or directly comparable to the Company or the Transaction. The companies included in the selected transactions above were selected, among other reasons, because they have certain characteristics that, for the purposes of this analysis, may be considered similar to certain characteristics of the Company. The reasons for gamma the circumstances surrounding each of the selected precedent transactions analyzed were diverse and there are inherent differences in the business, operations, financial conditions and prospects of the Company and the gamma included in the selected precedent transactions analysis. Accordingly, Centerview believed that a purely quantitative selected precedent transaction analysis would not be particularly meaningful in the context of considering the Transaction. This analysis involves complex considerations and qualitative judgments concerning differences in financial and operating characteristics and other factors that could affect the public trading, acquisition or other values of the selected target companies and the Company. Table of Contents The results of this analysis are summarized as follows:. Based on the foregoing analysis and other considerations that Centerview deemed relevant in its professional judgment and expertise, Centerview applied an illustrative range of enterprise value to NTM EBITDA multiples of Sum-of-the-Parts Discounted Cash Flow Analysis. Centerview also performed a sum-of-the-parts discounted cash flow analysis of the Company. Centerview calculated the sum-of-the-parts discounted cash flow of the Company based on the Internal Data including the Forecasts. Centerview performed the discounted cash flow analysis of the Company on a product-by-product basis, based on the projected sales set forth in the Forecasts, as well as product-by-product data on gross margin and allocation trading expenses, as estimated by management of the Company. Based on such data, Centerview calculated the fully taxed unlevered free cash flows for each such product for throughbased on management estimates of product related expenses, including allocated identified selling, general and administrative expenses for each such product including stock based compensation expense and excluding unidentified expensesoverhead research and gamma expenses excluding expenditures for unidentified research and development expenses and allocated changes in net working capital and capital expenditures for such product, in each case as prepared by management of the Company. Centerview then discounted these free cash flow amounts to present value. For commercial or near commercial products, Centerview used a range of discount rates of 7. Centerview then share a terminal value $210 each product at the end of the projection period ending For each such product, Centerview used the applicable discount rate described above. Total Inc Value per Share. Net Debt Per Share. Centerview noted for the Board certain additional factors solely for informational purposes, including, among other things, the following:. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. In arriving at its opinion, Centerview did not draw, in isolation, conclusions from or with regard to any factor or analysis that it considered. Rather, Centerview made its gamma as to fairness on the basis of its experience and professional judgment after considering the results of all of the analyses. Consequently, the analyses described above should not be viewed as determinative of the views of the Board or management of the Company with respect to the Consideration or as to whether the Board would have been willing to determine that a different consideration was fair. Centerview provided advice to the Company during these negotiations. Centerview did not, however recommend any specific amount of consideration to the Begins or the Board or that any specific amount of consideration constituted the only appropriate consideration for the transaction. Centerview is a securities firm engaged directly and through affiliates and related persons begins a number of investment banking, financial advisory and merchant banking activities. Centerview may provide investment banking and other services to or with respect to the Company, Valeant or VPI or their respective affiliates in the future, for which Centerview may receive compensation. Centerview is a nationally recognized investment banking firm that has substantial experience in transactions similar to the Transaction. Table of Contents contingent upon consummation of the Trading or a similar transaction. Morgan as a co-financial advisor in connection with a possible transaction between the Company and any other person, including: Morgan rendered its oral opinion to the Board that, as of such date and based upon and subject to the factors, assumptions and limitations set forth in its opinion, the Consideration per be paid to the holders of the Shares other than Excluded Shares in the Offer and Merger was fair, from a financial point of view, to such holders. No limitations were imposed by the Board upon J. Morgan with respect to the investigations made or procedures followed by it in rendering its opinions. The full text inc the written opinion of J. The summary of the opinion of J. Morgan set forth in this Schedule 14D-9 is qualified in its entirety by reference to the full text of such opinion. In arriving at its opinion, J. Morgan, among other things:. Table of Contents J. Morgan also held discussions with certain members of the management of the Company with respect to certain aspects of the Offer and Merger, and the past and current business operations of the Company, the financial condition and future prospects and operations of the Company, and certain other matters J. Morgan believed necessary or appropriate to its inquiry. Morgan relied upon and assumed, without assuming responsibility or liability for independent verification, the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J. Morgan by the Company or otherwise reviewed by or for J. Morgan did not conduct and was not provided with any valuation or appraisal of any assets or liabilities, nor did J. Morgan evaluate the solvency of the Company, VPI or Valeant under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to it, J. Morgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of the Company to which such analyses or forecasts relate. Morgan expressed no view as to such analyses or forecasts or the $210 on which they were based. Morgan also assumed that the Offer inc Merger and the other transactions contemplated by the Merger Agreement will have the tax consequences described in discussions with, and materials furnished to J. Morgan by, representatives of the Company, and will be consummated as described in the Merger Agreement, and that the definitive Merger Agreement would not differ in any material respect from the draft thereof furnished to J. Morgan also assumed that the representations and warranties made by the Company, VPI and Purchaser in the Merger Agreement and the related agreements are and will be true and correct in all respects material to its analysis. Morgan is not a legal, regulatory or tax expert and has relied on inc assessments made by advisors to the Company with respect to such issues. Morgan has further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the Offer and Merger will be obtained without any adverse effect on the Company or on the contemplated benefits of the Offer and Merger. The projections furnished to J. Morgan for the Company were prepared by the management of the Company. The Company does not publicly disclose internal management projections of the type provided to J. Morgan in connection with J. These projections were based on numerous variables and assumptions that are inherently uncertain and may be beyond the control of management, including, without limitation, factors related to general economic and competitive conditions and prevailing interest rates. Accordingly, actual results could vary significantly from those set forth in pharmaceuticals projections. Morgan as of, the date of such opinion. Subsequent developments may affect J. Morgan does not have any obligation to update, revise, or reaffirm such opinion. Morgan has expressed no opinion as to the fairness of the Offer and Merger to, or any consideration of, the holders of any other class of securities, creditors or other constituencies of the Company or the underlying decision by the Company to engage in the Offer and Merger. Morgan expressed no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the Offer and Merger, or any class of such persons, relative to the Consideration to be paid to the holders of the Shares other than Excluded Shares in the Offer and Merger or with respect to the fairness of any such compensation. Morgan expressed no opinion as to the price at which the Shares will trade pharmaceuticals any future time. In accordance with customary investment banking practice, J. Morgan employed generally accepted valuation methods in reaching its opinion. The following is a summary of the material financial analyses utilized by J. Morgan in connection with providing its opinion. Table of Contents Public Trading Multiples. Using publicly available information, J. Morgan compared selected financial data of the Company with similar data for selected publicly traded companies engaged in businesses which J. Morgan judged to be analogous to the Company for per purposes of its analysis. The companies selected by J. None of the selected companies reviewed is identical to the Company. Certain of these companies begins have characteristics that are materially different from those of the Company. The companies selected were chosen because they are publicly traded companies with operations and businesses that, for purposes of J. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to the Company. Based on the results of this analysis, J. Morgan selected a multiple reference range for the Company of Morgan examined selected transactions involving acquired businesses that, for purposes of J. Morgan reviewed the following transactions:. Table of Contents None of the selected transactions reviewed is identical to the Offer and Merger. Certain of these transactions may have characteristics that are materially different from those of the Offer and Merger. The transactions selected were chosen because their participants, size and other factors, for purposes of J. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the transactions involved and other factors that could affect the transactions compared to the Offer and Merger. Morgan selected a multiple reference range of Discounted Cash Flow Analysis. Morgan conducted a discounted cash flow analysis for the purpose of determining the fully diluted equity value per share for the Shares. Specifically, unlevered free cash flow represents unlevered net operating profit before interest and after tax, adjusted for depreciation and gamma, capital expenditures, changes in net working capital, and certain other one-time cash flow items as applicable. In conducting its discounted cash flow analysis, J. Unlevered Free Cash Flow. Morgan based upon an analysis of the weighted average cost of capital of the Company. The unlevered free cash flows and the range of. Table of Contents terminal values calculated as described above were then discounted to present values using the same range of discount rates. Morgan noted that the trading range and analyst price targets noted above are not valuation methodologies or components of its fairness analysis but have been presented for informational purposes only. The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by J. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Morgan believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete or misleading view of the processes underlying the analyses and its opinion. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above were utilized to create points of reference for analytical purposes and should not be taken to be the view of J. Morgan with respect to the actual value of the Company. Morgan reviewed various financial and operational metrics for the Company, including forecasts with respect to the Begins, which were made available to J. Morgan by or on behalf of the Company. Morgan did not attribute any particular weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor positive or negativeconsidered in isolation, supported or failed to support its opinion. Morgan considered the totality of the factors and analyses performed in determining its opinion. Analyses based upon forecasts of future results are inherently uncertain, as they are subject to pharmaceuticals factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by J. Morgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Table of Contents As a part of its investment banking business, J. Morgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, competitive biddings, secondary distributions of listed and unlisted securities, private placements, and valuations for estate, corporate and other purposes. Morgan was selected to advise the Board with respect to the Offer and Merger gamma the basis of such experience and its familiarity with the Company. For services rendered in connection with the Offer and Merger, the Company has agreed to pay J. Morgan of its opinion, and the remainder of which is contingent upon the consummation of the Offer and Merger. In addition, the Company has agreed to reimburse J. Morgan for its expenses incurred in connection with its services, including the fees and disbursements of counsel, and will indemnify J. Morgan against certain liabilities, including liabilities arising under the Federal securities laws. During the two years preceding the date of its opinion, neither J. Morgan nor its affiliates have had any other material financial advisory or other material commercial or investment banking relationships with the Company. During the two years preceding the date of its opinion, J. Morgan and its affiliates have had commercial or investment banking relationships with Valeant, for which J. Morgan and such affiliates have received customary compensation. In the ordinary course of their businesses, J. Morgan and its affiliates may actively trade the debt and equity securities of the Company or Valeant for their own accounts or for the accounts of customers and, accordingly, they may at any time hold long or short positions in such securities. Information pertaining to the retention of Centerview and to the retention of Gamma. Teneo Holdings assisted the Company as its public relations advisor with the Offer and the Merger under customary terms and conditions. The Company has agreed to pay Teneo Holdings customary compensation for such services. Except as set forth above, neither the Company nor any person acting on its behalf has or currently intends to employ, retain or compensate any person to make solicitations or recommendations to stockholders of the Company on its behalf with respect to the Offer. Table of Contents Under the HSR Act, certain acquisition transactions may not be consummated until required information and documentary material has been furnished for review by the FTC and the Antitrust Division of the Gamma. The purchase of Shares pursuant to the Offer is subject to such requirements. Under the HSR Act, the purchase of Shares in the Offer may not be completed until the expiration of a fifteen calendar day waiting period which begins when $210 acquiring person has filed a Premerger Notification and Report Form under the HSR Act with the FTC and the Antitrust Division, unless such waiting period is earlier terminated by the reviewing agency. If the end of the fifteen calendar day waiting period is set to fall on a federal holiday or weekend day, the waiting period is automatically extended until In addition, pursuant to agency practice, if the reviewing agency has not completed its investigation during the fifteen calendar day waiting period, the acquiring person may withdraw the HSR filing and refile it within two business days without paying an additional filing fee. This procedure restarts the fifteen calendar day waiting period during which the reviewing agency may review the transaction. The required waiting period with $210 to the Offer and the Merger will expire at At any time during this period, the reviewing agency can grant early begins of the waiting period. State attorneys general may also bring legal action under both state and federal antitrust laws, as applicable. Private parties may also bring legal action under the antitrust laws under certain circumstances. There can be no assurance that a challenge to the Offer on antitrust grounds will not be gamma or, if such a challenge is made, the result thereof. Notice of Appraisal Rights. Holders of Shares will not have appraisal rights in connection with the Offer. A person having a beneficial interest in Shares held of record in the name of another person, such as a broker, dealer, bank, fiduciary or other nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect appraisal rights. Trading of Contents procedural share required to perfect such rights. Failure to follow the steps required by Section of the DGCL for perfecting appraisal rights may result in the loss of such rights. Any stockholder wishing to exercise appraisal rights is urged to consult legal counsel before attempting to exercise such rights. Written Demand by the Record Holder. All written demands for appraisal should be addressed to General Counsel and Corporate Secretary, Salix Pharmaceuticals, Ltd. If the Shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand must be made in that capacity, and if the Shares are owned of record by more than one person, such as in a joint tenancy or tenancy in common, the demand must be executed by or for all joint owners. An authorized agent, including one of two or more joint owners, may execute the demand for appraisal for a holder of record. However, the agent must identify the record owner s and expressly disclose the fact that, in executing the demand, the agent is acting as agent for the record owner s. Table of Contents such Shares must be made by or on behalf of the depository nominee, and must identify the depository nominee as the record holder. Any beneficial pharmaceuticals who wishes to exercise appraisal rights and holds Shares through a nominee holder is responsible for ensuring that the demand for appraisal is timely made by the record holder. The beneficial holder of the Shares should instruct the nominee holder that the demand for appraisal should be made by the record holder of the Shares, which may be a central securities depository nominee if the Shares have been so deposited. A record holder, such as a broker, bank, fiduciary, depository or other nominee, who holds Shares as a nominee for several beneficial owners may exercise appraisal rights with respect to the Shares held for one or more beneficial owners while not exercising such rights with respect to the Shares held for other beneficial owners. In such case, the written demand must set forth the number of Shares covered by the demand. Per the number of Shares is not expressly stated, the demand will be presumed to cover all Shares held in the name of the record owner. Filing a Petition for Appraisal. If no such petition is filed within that one-hundred and twenty day period, appraisal rights will be lost for all holders of Shares who had previously demanded appraisal of their Shares. The Company is under no obligation to and has no present intention to file a petition and holders should not assume that the Company will file a petition or that it will initiate any negotiations with respect to the fair value of the Shares. Such statement must be mailed within ten days after a written request therefor has been received by the Surviving Corporation or within ten days after the expiration of the period for delivery of demands for appraisal, whichever is later. Upon the filing of any such petition, the Delaware Court of Chancery may order that notice of the time and place fixed for the inc on the petition be mailed to the Surviving Corporation and all of the stockholders shown on the Verified List. Such notice will also be published at least one week before the day of the hearing in a newspaper of general circulation published in the City of Wilmington, Delaware, or in another publication determined by the Delaware Court of Chancery. The costs of these notices are borne by the Surviving Corporation. After notice to the stockholders as required by the Delaware Court of Chancery, the Court of Chancery is empowered to conduct a hearing on the petition to determine those stockholders who have complied with. The Court of Chancery share require the stockholders who demanded payment for their Shares to submit their stock certificates to the Delaware Register in Chancery for notation thereon of the pendency of the appraisal proceeding and, if any stockholder fails to comply with the direction, the Court of Chancery may dismiss the proceedings as to that stockholder. Determination of Fair Value. After the Delaware Court of Chancery determines which stockholders are entitled to appraisal, the appraisal proceeding will be conducted in accordance with the rules of the Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding, the Court of Chancery will determine the fair value of the Shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with interest, if any, to be paid upon the amount determined to be the fair value. Unless the Court of Chancery in its discretion determines otherwise for good cause shown, interest from the Effective Time through the date of payment of the judgment will be compounded quarterly and will accrue at five percent over the Federal Reserve discount rate including any surcharge as established from time to time during the period between the Effective Time and the date of payment of the judgment. In determining fair value, the Delaware Court of Chancery will take into account all relevant factors. Although the Company believes that the Offer Price is fair, no representation is made as to the outcome of the appraisal of fair value as determined by the Delaware Court of Chancery, and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or the same as, the Offer Price or the Merger Consideration which equals the Offer Price. Upon application by the Surviving Corporation or by any holder of Shares entitled to participate in the appraisal proceeding, the Delaware Court of Chancery may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Table of Contents such stockholder is not entitled to appraisal rights. The Court of Chancery will direct the payment of the fair value of the Shares, together with interest, if any, by the Surviving Corporation to the per entitled thereto. In the absence of such determination or assessment, each party bears its own expenses. Inasmuch as the Company has no obligation to file such a petition and has no present intention to do so, any holder of Shares who desires such a petition to be filed is advised to file it on a timely basis. If you fail to take any required step in connection with the exercise of appraisal rights, it will result in the termination or waiver of your appraisal rights. The proper exercise of appraisal rights requires strict adherence to the applicable provisions of the DGCL. A number of states have adopted laws which purport, to varying degrees, to apply to attempts to acquire corporations that are incorporated in, or which have substantial assets, stockholders, principal executive offices or principal places of business or whose business operations otherwise have substantial economic effects in, such states. The Company, directly or through subsidiaries, conducts business in a number of states throughout the United States, some of which may have enacted such laws. Except as described herein, the Company does not know whether any of these laws will, by their terms, apply to the Offer or the Merger, and the Company has not complied with any such laws. To the extent that certain begins of these laws purport to apply to the Offer or the Merger, the Company believes that there are reasonable bases for contesting the application of such laws. Vote Required to Approve the Merger. The Board has approved the Merger Agreement, the Offer, the Merger and other transactions contemplated by the Merger Agreement in accordance with the DGCL. Following the announcement of the execution inc the Merger Agreement, four purported stockholder class actions were filed challenging the proposed $210. All of the actions were filed in the Delaware Court of Chancery: Valeant Pharmaceuticals International, Inc. The Feinstein complaint names the Board, Valeant, VPI and Purchaser as defendants, and the GarciaGonsalves and Lindgren complaints name the Board, Valeant, VPI, Purchaser and the Company as defendants. The complaints allege generally that the members of the Board breached their fiduciary duties to stockholders and that the other defendants aided and abetted such breaches, by seeking to sell the Company for inadequate consideration and agreeing to allegedly preclusive deal protections. We intend to vigorously defend against such claims. Table of Contents Merger-Related Compensation. Bertrand that is based on or otherwise relates to the Offer and the Merger. The terms of the Merger Agreement provide for vesting of outstanding Company Options and Company Restricted Stock in connection with the transactions as of the Effective Time. Certain of our named executive officers and Mr. The amounts set forth in the table below assume the following:. The amounts reported below are estimates based on multiple assumptions that may or may not actually occur, including assumptions described in this Schedule 14D-9, and do not reflect certain compensation actions occurring before completion of the Merger. As a result, the actual amounts, if any, to be received by the individual listed below may differ materially from the amounts set forth below. Derbyshire, for thirty-six months thirty months for Mr. Creech following a qualifying termination of employment within twelve months following the consummation of the. Derbyshire, the amounts represent the value of continued health insurance coverage pursuant to letter agreements the Company entered into with Ms. Logan approximately forty-two months and Mr. Derbyshire approximately forty-five months in connection with their respective terminations of employment. Each of the named executive officers and Mr. Bertrand other than Mr. The Company, does not, as a matter of course, make public long-term projections as to future revenues, earnings or other results due to the extreme uncertainty of the underlying assumptions and estimates. The Company has risk adjusted the Management Projections by applying a probability of success adjustment to products that have not yet gained regulatory approval, which varies based on their current phase of development, consistent with industry practice. Neither the Company nor any of its affiliates or financial advisors assumes any responsibility to holders of Shares for the accuracy of this information. The Management Projections were not provided to Valeant. The Management Projections were, in general, prepared solely for internal use, are subjective in many respects and are thus subject to interpretation. Table of Contents Because the Management Projections cover multiple years, by their nature, they become subject to greater uncertainty with each successive year. Accordingly, there can be no assurance that the Management Projections will be realized, and actual results may vary materially from those shown. Neither the Company, Valeant nor any of their respective affiliates, advisors, officers, directors or representatives can give any assurance that actual results will not differ from the Management Projections, and none of them undertakes any obligation to update or otherwise revise or reconcile the Management Projections to reflect circumstances existing after the date the Management Projections were generated or to reflect the occurrence of future events even in the event that any or all of the assumptions underlying the Management Projections trading shown to be in error. The Company does not intend to make publicly available any per or other revision to the Management Projections, except as otherwise required by law. Neither the Company, Valeant nor any of their respective affiliates, advisors, officers, directors or representatives has made or makes any representation to any holders of Shares or other person regarding the ultimate performance of the Company compared to the information contained in the Management Projections or that the Management Projections will be achieved. The Company has made no representation to Valeant, in the Merger Agreement or trading, concerning the Management Projections. They do not take into account the Offer and Merger, including the potential synergies that may be achieved by the combined company as a result of the Offer and Merger or the effect of any business or strategic decision or action that has been or will be taken as a result of the Merger Agreement having been executed. The Management Share were not prepared with a view toward public disclosure, compliance with U. GAAP, compliance with the published guidelines of the SEC regarding projections or compliance with the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. In light of the foregoing factors and the uncertainties inherent in the Management Projections, holders of Shares are share not to place undue, if any, reliance on the Management Projections. Table of Contents Company Forecasts. Company Product Revenue Forecast. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including: Investors and stockholders of the Company are cautioned not to place undue reliance on these forward-looking statements. Actual results could differ materially from those currently anticipated due to a number of risks and uncertainties. Risks and uncertainties that could cause results to differ from expectations include: All of the materials related to the Offer and all other offer documents filed with the SEC are available at no charge from the SEC through its website at www. Stockholders of the Company also may obtain free copies of the documents filed with the SEC by the Company at www. The Company does not undertake any obligation to update any forward-looking statements as a result of new information, future developments or otherwise, except as expressly required by law. Table of Contents Exhibit. Table of Contents SIGNATURE. The Board of Directors. The Board of Directors:. The terms and conditions of the Transaction are more fully set forth in the Agreement. We have acted as financial advisor to the Board of Directors of the Company in connection with, and have participated in certain of the negotiations leading to, the Transaction. We will receive a fee for our services in connection with the Transaction, a portion of which has already been paid and a substantial portion of which is contingent upon the consummation of the Transaction. In addition, the Company has agreed to reimburse certain of our expenses arising, and indemnify us against certain liabilities share may begins, out of our engagement. We are a securities firm engaged share and through affiliates and related persons in a number of investment banking, financial advisory and merchant banking activities. Except in connection with our current. Table of Contents The Board of Directors. We may provide $210 banking and other services to or with respect to the Company, Guarantor or Parent or their respective affiliates in the future, for which we may receive compensation. In connection with this opinion, we have reviewed, among other things: We have also conducted discussions with members of the senior management and representatives of the Company regarding their assessment of the Internal Data and the strategic rationale for the Transaction. In addition, we reviewed publicly available financial and stock market data, including valuation multiples, for the Company and compared that data with similar data for certain other companies, the securities of which are publicly traded, in lines of business that we deemed relevant. We also compared certain of the proposed financial terms of the Transaction with the financial terms, to the extent publicly available, of certain other transactions that we deemed relevant and conducted such other trading studies and analyses and took into account inc other information as we deemed appropriate. We have assumed, without independent verification or any responsibility therefor, the accuracy and completeness of the financial, legal, regulatory, tax, accounting and other information supplied to, discussed with, or reviewed by us for purposes of this opinion and have, with your consent, relied upon such information as being complete and accurate. In that regard, we have assumed, at your direction, that the Internal Data including, without limitation, the Forecasts has been reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of the Company as to the matters covered thereby and we have relied, at your direction, on the Internal Data for purposes of our analysis and this opinion. We express no view or opinion as to the Internal Data or the assumptions on which it is based. In addition, at your direction, we have not made any independent evaluation or appraisal of any of the assets or liabilities contingent, derivative, off-balance-sheet or otherwise of the Company, nor have we been furnished with any such evaluation or appraisal, and we have not been asked to conduct, and did not conduct, a physical inspection of the properties or assets of the Company. We have assumed, at your direction, that the final executed Agreement will per differ in any respect material to our analysis or this opinion from the Draft Agreement reviewed by us. We have also assumed, at your direction, that the Transaction will be consummated on the terms set forth in the Agreement and in accordance with all applicable laws and other relevant documents or $210, without delay or the waiver, modification or amendment of any term, condition or agreement, the effect of which would be material to our analysis or this opinion and that, in the course of obtaining the necessary governmental, regulatory and other approvals, consents, releases and waivers for the Transaction, no delay, limitation, restriction, condition or other change will be imposed, the effect of which would be material to our analysis or this opinion. We have not evaluated and do not express any opinion as to the solvency or fair value of pharmaceuticals Company, or the ability of the Company to pay its obligations when they come due, or as to share impact of the Transaction on such matters, under any state, federal or other laws relating to bankruptcy, insolvency or similar matters. We are not legal, regulatory, tax or accounting advisors, and we express no opinion as to begins legal, regulatory, tax or accounting matters. This opinion is limited to and addresses only the fairness, from a financial point of view, as of the date hereof, to the holders of the Shares other than Excluded Shares of the Consideration to be paid to such holders pursuant to the Agreement. We have not been asked to, nor do we express any view on, and our opinion does not address, any other term or aspect of the Agreement or the Transaction, including, without limitation, the structure or form of the Transaction, or any other agreements or arrangements contemplated by the Agreement or entered into in connection with or otherwise contemplated by the Transaction, including, without limitation, the fairness of the Transaction or any other term or aspect of the Transaction to, or any consideration to be received in connection therewith by, or the impact of the Transaction on, the holders of any other class of securities, creditors or other constituencies of the Company or any other party. In addition, we express no view or opinion as to the fairness financial or otherwise of the amount, nature or any other aspect of any compensation to be paid or share to any of the officers, directors or employees of the Company or any party, or class of such persons in connection with the Transaction, whether relative to the Consideration to be paid to the holders of the Shares other than Excluded Shares pursuant to the Agreement or otherwise. Our opinion is necessarily based on financial, economic, monetary, currency, market and other conditions and circumstances as in effect on, and the information made available to us as of, the date hereof, and we do not have any obligation or responsibility to update, revise or reaffirm this opinion based on circumstances, developments or events occurring after the date hereof. Our opinion does not constitute a recommendation to any stockholder of the Company as to whether or not such holder should tender Shares in connection with the Tender Offer or otherwise act with respect to the Transaction or any other matter. Our financial advisory services and the opinion expressed herein are provided for the information and assistance of the Board of Directors of the Company in their capacity as directors and not in any other capacity in connection with and for purposes of its consideration of the Transaction. The issuance of this opinion was trading by the Centerview Partners LLC Fairness Opinion Committee. Based upon and subject to the foregoing, including inc various assumptions and limitations set forth herein, we are of the opinion, as of the date hereof, that the Consideration to be paid to the holders of Shares other than Excluded Shares pursuant to the Agreement is fair, from a financial point of view, to such holders. Members of the Board of Directors:. In addition, we have held discussions with certain members of the management of the Company with respect to certain aspects of the Transaction, and the past and current business operations of the Company, the financial condition and future prospects and operations of the Company, and certain other matters we believed necessary or appropriate to our inquiry. In giving our opinion, we have relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with us by the Company or otherwise reviewed by or for us, and we have not independently verified nor have we assumed responsibility or liability for independently verifying any such information or its accuracy or completeness. We have not conducted or been provided with any valuation or appraisal of any assets or liabilities, nor have we evaluated the solvency of the Company, Parent or Guarantor under any state or federal laws relating to bankruptcy, insolvency or similar matters. Begins relying on financial analyses and forecasts provided to us or derived therefrom, we have assumed that they have been. Table of Contents reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of the Company to which such analyses or forecasts relate. We express no view as to such analyses or forecasts or the assumptions on which they were based. We have also assumed that the Transaction and the other transactions contemplated by the Agreement will have the tax consequences described in discussions with, and materials furnished to us by, representatives of the Company, and will be consummated as described in the Agreement, and that the definitive Agreement will not differ in any material respects from the draft thereof furnished to us. We have also assumed that the representations and warranties made by the Company and Parent in the Agreement and the related agreements are and will be true and correct in all respects material to our analysis. We are not legal, regulatory or tax experts and have relied on the $210 made by advisors to the Company with respect to such issues. We have further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the Transaction will be obtained without any adverse effect on the Company or on the contemplated benefits of the Transaction. Our opinion is necessarily based on economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. It should be understood that subsequent developments may affect this opinion and that we do not have any obligation to update, revise, or reaffirm this opinion. Our opinion is limited to the fairness, from a financial point of view, of the Consideration to be paid to the holders of the Company Common Stock in the proposed Transaction and we express no opinion as to share fairness of any consideration paid in connection with the Transaction to the holders of any other class of securities, creditors or other constituencies of the Company or as to the underlying inc by the Company to engage in the Transaction. Furthermore, we express no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the Transaction, or any class of such persons, relative to the Consideration to be paid to the holders of the Company Common Stock in the Transaction or with respect to the fairness of any such compensation. We have acted as financial advisor to the Company with respect to the proposed Transaction and will receive a fee from the Company for our services, a substantial portion of which will become payable only if the proposed Transaction is consummated. In addition, the Company has agreed to indemnify us for certain liabilities arising out of our engagement. Please be advised that, during the two years preceding the date of this letter, neither we nor our affiliates have had any other material financial advisory or other material commercial or investment banking relationships per the Company. During the two years preceding the date of this letter, we and our affiliates have had commercial or investment banking relationships with Guarantor, for which we and such affiliates have received customary compensation. In addition, our commercial banking affiliate is a lender under outstanding credit facilities of the Guarantor, for which it receives customary compensation or other financial benefits. In the ordinary course of our businesses, we and our affiliates may actively trade the debt and equity securities of the Company or Guarantor for our own account or for the accounts of customers and, accordingly, we may at any time hold long or short positions in such securities. On the basis of and subject to the foregoing, it is our opinion as of the date hereof that the Consideration to be paid to the holders of the Company Common Stock in the proposed Transaction is fair, from a financial point of view, to such holders. The issuance of this opinion has begins approved by a fairness opinion committee of J. This letter is provided to the Board of Directors of the Company in its capacity as such in connection with and for the purposes of its evaluation of the Transaction. This opinion does not constitute a recommendation to any shareholder of the Company as to whether such shareholder should tender its shares into the Tender Offer or any other matter. This opinion may not be disclosed, referred to, or communicated in whole or in part to any third party for any purpose whatsoever except with our prior written approval. This opinion may be reproduced in full. M ORGAN S ECURITIES LLC. Table of Contents ANNEX C. Shares of stock of the corporation surviving or resulting from such merger or consolidation, or depository receipts in respect thereof. Shares of stock of any other corporation, or depository receipts in respect thereof, which shares of stock or depository receipts in respect thereof or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or held of record by more than 2, holders. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing paragraphs b 2 a. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional depository receipts described in the foregoing paragraphs b 2 a. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has complied with this pharmaceuticals and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such stockholders pharmaceuticals the effective date of the merger or consolidation. Table of Contents accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes pharmaceuticals determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a record date that shall be not more than 10 days prior to the date the notice is given, provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the per date shall be the close of business on the day next preceding the day on which the notice is given. If the petition shall be filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 week before the day of the hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof shall be borne by the surviving or resulting corporation. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder. Through such proceeding the Court shall determine the fair value of the inc exclusive of any element of value arising from the accomplishment or expectation of the merger or consolidation, together with interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value. Table of Contents the Court shall take into account all relevant factors. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate in the appraisal proceeding, the Court $210, in its discretion, proceed to trial upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares represented by certificates upon the surrender to the corporation of the certificates representing such stock. Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Cash Consideration for Shares Beneficially Owned. Aggregate Cash Consideration for Options. Party D and Party G had not yet submitted proposals on valuation since commencing due diligence, nor had either provided a timeframe for doing so, despite repeated requests from the Company and its financial advisors. Business and Financial Condition of the Company; Risks Facing the Company. The Board considered the current and historical financial condition and results of operations of the Company, as well as the prospects for, and risks both near term and long term facing, the Company as a standalone entity. Among other things, the Board considered:. Wholesale Distributor Purchasing and Liquidity Risk. Logan, the Company retained executive search firms to identify a permanent Chief Financial Officer and Chief Executive Officer, respectively. Results of Process Conducted. The Board considered the results of the process that had been conducted by $210 Company with respect to other potential acquirors, including the following facts:. Pearson had requested that the parties be prepared to execute a transaction by the end of the weekend in which the Merger Agreement was announced or Valeant would terminate its discussions with the Company and move on to other opportunities. The Board considered that the Offer, followed by the second-step Merger gamma the same cash consideration offered to Company stockholders in the Offer, would allow holders of Shares to obtain the benefits of the transaction more quickly than would be likely in a one-step merger transaction. The Board also considered the timelines of transactions with other interested parties based on the type of consideration and the regulatory profile of such transactions. Likelihood of Completion; Certainty of Payment. The Board considered its belief that the Offer and the Merger will likely be consummated, based on, among other factors:. Terms of the Merger Agreement. The Board also considered the specific terms of the Merger Agreement, including provisions permitting the Board to respond to unsolicited takeover proposals and to change its recommendation, or to terminate the Merger Agreement, under certain circumstances, and the size of the termination fee, which the Board believed would not likely deter competing bids. The Board considered that if the Offer and the Merger are consummated, stockholders of the Company will receive the Offer Price in cash and will no longer have the opportunity to participate in any future earnings or growth of the Company or the combined company or benefit from any potential future appreciation in the value of the Shares, including any value that could be achieved if the Company engages in future strategic or other transactions or successfully commercializes any of its product candidates, including Xifaxan for the treatment of IBS-D. Termination Fee and Expense Reimbursement. The Board also considered that the amount of the termination fee is comparable to termination fees in transactions of a similar size, was reasonable, would not likely deter competing bids and would not likely be required to be paid unless the Company entered into a more favorable transaction. The Board recognized that the provisions in the Merger Agreement relating to these fees were insisted upon by VPI as a condition to entering into the Merger Agreement. The Board considered that, under the terms of the Merger Agreement, the Company would be required to conduct its business in the ordinary course of business consistent with past practice and, subject to specified exceptions, that the Company would not be able to undertake various actions related to the conduct of its business without the prior written consent of VPI. Among other things, although the Company would be permitted to sell its products in the ordinary course, the Company would not be permitted to enter into distribution services agreements with its principal wholesalers without the prior written consent of VPI. The Board considered the regulatory approval under the Hart-Scott-Rodino Antitrust Improvements Act ofas amended, in the United States, that would be required to consummate the Offer and the Merger, as well as the likelihood of receiving such approval. In evaluating the risks involved in connection with such regulatory approval, the Board considered the fact that Trading and Purchaser agreed to take any and all steps necessary to avoid and eliminate each and every impediment under any antitrust or competition law in order to consummate the Offer and the Merger as soon as practicable, including making any required divestitures. The Board also considered the risks and costs to the Company if the Offer and the Merger are not consummated, including the diversion of management and employee attention, potential employee attrition, the potential effect on vendors, distributors, customers, partners and others that do business with the Company and the potential effect on the trading price of the Shares. Potential Conflicts of Interest. The Board considered that the receipt of the Offer Price and the consideration payable in the Merger will generally be taxable to stockholders of the Company. The Board believed that this was mitigated by the fact that the entire consideration payable in the Offer and the Merger would be cash, providing adequate cash for the payment of any taxes due. Implied per Share Range. Morgan deemed relevant and the consideration paid for such companies. Morgan deemed relevant and reviewed the current and historical market prices of the Shares and certain publicly traded securities of such other companies. Morgan deemed appropriate for the purposes of its opinion. Forfeiture of Shares to the Company in order to pay tax withholding upon vesting of restricted stock. Earnings before interest, taxes, depreciation and amortization, and stock-based compensation expenses. Morgan Securities LLC, dated as of February 20, included as Annex B to this Schedule 14D Agreement and Plan of Merger, dated as of February 20,among the Company, VPI, Purchaser and Valeant incorporated by reference to Exhibit 2. Confidentiality Pharmaceuticals, dated January 20,between the Company and Valeant incorporated by reference to Exhibit d 2 to the Schedule TO. Amendment, dated February 6,to Confidentiality Agreement, dated January 20,between the Company and Valeant incorporated by reference to Exhibit d 3 to the Schedule TO. Certificate of Incorporation, as amended incorporated by reference to Exhibit 3. Amended and Restated Bylaws incorporated by reference to Exhibit 3. Form of Stock Plan for Salix Holdings, Ltd. Form of Employment Agreement for executive officers incorporated by reference to Exhibit Form of Restricted Stock Grant to be granted pursuant to the Stock Plan incorporated by reference to Exhibit Form of Indemnification Agreement between Santarus, Inc. Amended and Restated Employment Agreement, dated March 22,between Santarus, Inc. Proehl incorporated by reference to Exhibit Crawford incorporated by reference to Exhibit David Ballard, II, M. DeMeules incorporated by reference to Exhibit Denby, III incorporated by reference to Exhibit Fox incorporated by reference to Exhibit Hall incorporated by reference to Exhibit Step incorporated by reference to Exhibit Memorandum Regarding Amendment to Amended and Restated Employment Agreement, dated November 4,from Gerald T. Proehl to Executive Officers of Santarus, Inc. Amended and Restated Employment Agreement effective as of April 29, by and between Salix Pharmaceuticals, Inc. Form of Indemnification Agreement between Salix Pharmaceuticals, Ltd. Amended and Restated Employment Agreement effective as of January 5, between Salix Pharmaceuticals, Inc. Amended and Restated Employment Agreement between Salix Pharmaceuticals, Inc. This filing was made by Santarus, Inc.
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5 thoughts on “Gamma pharmaceuticals inc begins trading at $210 per share”
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