As filed with
the U.S. Securities and Exchange Commission on August 18,
2010
Registration
No. 333-168254
UNITED STATES SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
Amendment No. 1
to
Form S-4
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT OF
1933
Biovail Corporation
(Exact name of registrant as
specified in its charter)
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Canada
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2834
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Not Applicable
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(State or other jurisdiction
of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification No.)
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7150 Mississauga Road
Mississauga, Ontario
Canada L5N 8M5
(905) 286-3000
(Address, including ZIP code,
and telephone number, including area code, of registrant’s
principal executive offices)
Gregory Gubitz, Esq.
Senior Vice-President, Corporate Development and General
Counsel
Biovail Corporation
7150 Mississauga Road
Mississauga, Ontario
Canada L5N 8M5
(905) 286-3000
(Name, address, including ZIP
code, and telephone number, including area code, of agent for
service)
Copies to:
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Erik R. Tavzel
Eric L. Schiele
Cravath, Swaine & Moore LLP
825 Eighth Avenue
New York, NY 10019
(212) 474-1000
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David J. Toswell
Blake, Cassels & Graydon LLP
199 Bay Street, Suite 2800
Toronto, Ontario
Canada MSL 1A9
(416) 863-2400
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Steve T. Min
Executive Vice President,
General Counsel and
Corporate Secretary
Valeant Pharmaceuticals
International
One Enterprise
Aliso Viejo, CA 92656
(949) 461-6000
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Stephen F. Arcano
Jeffrey A. Brill
Skadden, Arps, Slate,
Meagher & Flom LLP
Four Times Square
New York, NY 10036
(212) 735-3000
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Approximate date of commencement of proposed sale of the
securities to the public:
As soon as practicable
after this Registration Statement becomes effective and upon
completion of the merger described in the enclosed management
proxy circular and joint proxy statement/prospectus.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check
the following
box.
o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same
offering.
o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule
12b-2 of the Exchange Act. (Check one):
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Large accelerated filer
þ
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Accelerated filer
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Non-accelerated filer
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(Do not check if a smaller reporting company)
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Smaller reporting company
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If applicable, place an X in the box to designate the
appropriate rule provision relied upon in conducting this
transaction:
o
Exchange
Act
Rule 13e-4(i)
(Cross-Border Issuer Tender Offer)
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Exchange
Act
Rule 14d-1(d)
(Cross-Border Third-Party Tender Offer)
The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act, or until the Registration Statement shall
become effective on such dates as the Securities and Exchange
Commission, acting pursuant to said Section 8(a), may
determine.
MERGER
PROPOSAL — YOUR VOTE IS VERY IMPORTANT
The board of directors of Valeant Pharmaceuticals International
(“Valeant”) and the board of directors of Biovail
Corporation (“Biovail”) have agreed to a business
combination (the “merger”) of their two companies
under the terms of the Agreement and Plan of Merger, dated as of
June 20, 2010 (the “merger agreement”). In order
to effect the combination of Valeant and Biovail, Valeant will
merge with a wholly owned subsidiary of Biovail and the name of
the combined company will be changed to “Valeant
Pharmaceuticals International, Inc.” Valeant has also
announced its intention to pay, on the business day immediately
preceding the effective time of the merger, a special dividend
to Valeant stockholders of record as of the close of business on
such date in the amount of $16.77 per share (the
“pre-merger special dividend”).
If the merger is completed, Valeant stockholders will receive a
fixed ratio of 1.7809 Biovail common shares, no par value
(“Biovail common shares”), for each share of Valeant
common stock, par value $0.01 (“Valeant common
stock”), that they own. In addition, on the business day
immediately preceding the effective time of the merger, each
Valeant stockholder of record as of the close of business on
such date will be paid $16.77 per share of Valeant common stock
pursuant to the pre-merger special dividend. The 1.7809 exchange
ratio is fixed and will not be adjusted to reflect stock price
changes prior to the closing of the merger. Biovail shareholders
will continue to own their existing Biovail common shares after
the merger.
Based on the number of Biovail common shares and the number of
shares of Valeant common stock estimated to be outstanding
immediately prior to the closing of the merger, we estimate that
upon such closing current Biovail shareholders will own
approximately 50.5% of the combined company and former Valeant
stockholders will own approximately 49.5% of the combined
company, in each case on a fully diluted basis. Biovail common
shares are traded on both the New York Stock Exchange (the
“NYSE”) and the Toronto Stock Exchange (the
“TSX”) under the symbol BVF and shares of Valeant
common stock are traded on the NYSE under the symbol VRX.
Following completion of the merger and the change of the name of
the combined company, the common shares of Valeant
Pharmaceuticals International, Inc. are expected to trade on the
NYSE under the symbol “VRX” and on the TSX under a
symbol to be determined.
At the special meeting of Biovail shareholders, Biovail
shareholders will be asked to vote on (1) the issuance of
such number of common shares in the capital of Biovail as is
necessary to complete the merger with Valeant, being 1.7809
Biovail common shares for each share of Valeant common stock,
and such other common shares in the capital of Biovail as
contemplated by the merger agreement and (2) the amendment
of the articles of continuance of Biovail to change the name of
Biovail to “Valeant Pharmaceuticals International,
Inc.” At the special meeting of Valeant stockholders,
Valeant stockholders will be asked to vote on proposals to adopt
the merger agreement and to approve the adjournment of the
Valeant special meeting, if necessary or appropriate to solicit
additional proxies if there are not sufficient votes to adopt
the merger agreement at the time of the Valeant special meeting.
We cannot complete the merger unless the shareholders of both of
our companies approve the respective proposals related to the
merger.
Your vote is very important, regardless of the number
of shares you own. Whether or not you expect to attend the
Valeant or Biovail special meeting, as applicable, in person,
please vote your shares as promptly as possible so that your
shares may be represented and voted at your special meeting.
If you are a Biovail shareholder, please note that a failure
to vote your Biovail common shares may result in a failure to
establish a quorum for the Biovail special meeting. If you are a
Valeant stockholder, please note that a failure to vote your
shares of Valeant common stock has the same effect as a vote
against the adoption of the merger agreement.
The Biovail board of directors recommends that the Biovail
shareholders vote “FOR” the proposal to issue Biovail
common shares necessary to complete the merger and to issue such
other Biovail common shares as contemplated by the merger
agreement and “FOR” the proposal to change the name of
Biovail to “Valeant Pharmaceuticals International,
Inc.” The Valeant board of directors recommends that the
Valeant stockholders vote “FOR” the proposal to adopt
the merger agreement and “FOR” the proposal to approve
the adjournment of the Valeant special meeting, if necessary or
appropriate to solicit additional proxies if there are not
sufficient votes to adopt the merger agreement at the time of
the Valeant special meeting.
The obligations of Valeant and Biovail to complete the merger
are subject to the satisfaction or waiver of the conditions in
the merger agreement. More information about Biovail, Valeant
and the merger is contained in this management proxy circular
and joint proxy statement/prospectus.
You should read this
entire management proxy circular and joint proxy
statement/prospectus carefully, including the section entitled
“Risk Factors” beginning on page 22.
We look forward to the successful combination of Valeant and
Biovail.
Sincerely,
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J. Michael Pearson
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William M. Wells
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Chairman and Chief Executive Officer
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Chief Executive Officer
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Valeant Pharmaceuticals International
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Biovail Corporation
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Neither the Securities and Exchange Commission nor any state
securities commission nor any Canadian securities regulator has
approved or disapproved of the securities to be issued under
this management proxy circular and joint proxy
statement/prospectus or determined that this management proxy
circular and joint proxy statement/prospectus is accurate or
complete. Any representation to the contrary is a criminal
offense.
This management proxy circular and joint proxy
statement/prospectus is dated August 18, 2010 and is first
being mailed to the stockholders of Valeant and the shareholders
of Biovail on or about August 20, 2010.
Biovail Corporation
7150 Mississauga Road
Mississauga, Ontario
Canada L5N 8M5
(905) 286-3000
NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS
To Be Held On
September 27, 2010
Dear Shareholders of Biovail Corporation:
We are pleased to invite you to attend a special meeting of
shareholders of Biovail Corporation (“Biovail”), which
will be held at the Canadian Broadcasting Centre, Glenn Gould
Studio, 250 Front Street West, Toronto, Ontario, on
September 27, 2010, at 10:00 a.m., local time, for the
following purposes:
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to consider and if thought fit, approve with or without
variation, an ordinary resolution authorizing Biovail to issue
such number of common shares in the capital of Biovail as is
necessary to complete the merger with Valeant, being 1.7809
Biovail common shares for each share of Valeant common stock,
and such other common shares in the capital of Biovail as
contemplated by the merger agreement dated as of June 20,
2010 (the “merger agreement”) among Valeant
Pharmaceuticals International, Biovail, Biovail Americas Corp.,
a wholly owned subsidiary of Biovail (“BAC”), and
Beach Merger Corp., a wholly owned subsidiary of BAC, a copy of
which is included as Annex A to the management proxy
circular and joint proxy statement/prospectus of which this
notice forms a part (the “share issuance resolution”);
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conditional upon the approval of the share issuance resolution,
to consider, and if deemed advisable, pass, with or without
variation, a special resolution to amend the articles of
continuance of Biovail to change the name of Biovail from
“Biovail Corporation” to “Valeant Pharmaceuticals
International, Inc.,” the full text of which is attached as
Annex E to the management proxy circular and joint proxy
statement/prospectus of which this notice forms a part (the
“name change resolution”); and
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to transact such further or other business as may properly come
before the Biovail special meeting and any adjournments or
postponements thereof.
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An “ordinary resolution” is a resolution passed by at
least a majority of the votes cast by the Biovail shareholders
who voted in respect of that resolution at the Biovail special
meeting while a “special resolution” is a resolution
passed by a majority of not less than two-thirds of the votes
cast by the Biovail shareholders who voted in respect of that
resolution at the Biovail special meeting.
If the share issuance resolution is not approved by the Biovail
shareholders at the Biovail special meeting, the approval of the
name change resolution as set forth in this Notice of Special
Meeting will not be proceeded with.
The items of business listed above and the merger agreement and
the merger are described in detail in the accompanying
management proxy circular and joint proxy statement/prospectus
of which this notice forms a part. Biovail will transact no
other business at the special meeting except such business as
may properly be brought before the Biovail special meeting or
any adjournment or postponement thereof.
The Biovail board of
directors has unanimously determined that the merger and the
other transactions contemplated by the merger agreement,
including the share issuance resolution and name change
resolution, are advisable and in the best interests of Biovail
and its shareholders. Accordingly, the Biovail board of
directors recommends that the Biovail shareholders vote
“FOR” the share issuance resolution and
“FOR” the name change resolution.
Registered holders of Biovail common shares at the close of
business on August 18, 2010, are entitled to vote in person
or by proxy at the Biovail special meeting and any adjournment
or postponement thereof.
Completion of the merger is conditioned on approval of the share
issuance resolution and the name change resolution.
Shareholders are invited to attend the Biovail special meeting.
Registered shareholders who are unable to attend the Biovail
special meeting in person are requested to complete, date and
sign the enclosed form of proxy (the “proxy card”) and
send it in the enclosed envelope or otherwise to the CIBC Mellon
Trust Company, Proxy Department, P.O. Box 721,
Agincourt, Ontario, Canada M1S 0A1, facsimile:
416-368-2502
or to Biovail at Biovail’s registered office, which is
located at 7150 Mississauga Road, Mississauga, ON L5N 8M5, fax
number
905-286-3050,
or via the Internet, by going to
www.eproxyvoting.com/biovail
and following the instructions on the website, or by calling
toll free
1-866-271-1207
on a touch tone phone and following the instructions provided by
“Vote Voice.” You will need to refer to the proxy card
and to your 13 digit control number provided on the proxy card.
Non-registered shareholders who receive these materials through
their broker or other intermediary should follow the
instructions provided by their broker or intermediary.
To be effective, your proxy card must be received by CIBC Mellon
Trust Company not later than 10:00 a.m., Toronto time,
on September 24, 2010, or, in the case of any adjournment
or postponement of the Biovail special meeting, not less than
48 hours, excluding Saturdays, Sundays and holidays, prior
to the time of such adjournment or postponement. The time limit
for deposit of proxies may be waived by Biovail’s board of
directors at its discretion. Completing and sending the proxy
card will cancel any other proxy you may have previously
submitted in connection with the Biovail special meeting, as it
is the later dated proxy that will be counted.
Your vote is important. Whether or not you expect to attend
in person, we urge you to authorize a proxy to vote your shares
as promptly as possible so that your shares may be represented
and voted at the Biovail special meeting.
If you have any questions about the information contained in
this document or require assistance in completing your proxy
card, please contact Biovail’s proxy solicitor, Georgeson,
toll free at 1-888-605-8403.
Dated at Mississauga, Ontario this
18
th
day
of August, 2010
By order of the Board of Directors
Gregory Gubitz
Senior Vice-President, Corporate Development and General Counsel
VALEANT
PHARMACEUTICALS INTERNATIONAL
One Enterprise
Aliso Viejo, California 92656
NOTICE OF
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON SEPTEMBER 27, 2010
To the Stockholders of Valeant Pharmaceuticals International:
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of
Valeant Pharmaceuticals International, a Delaware corporation
(“Valeant”), will be held on September 27, 2010
at 10:00 a.m., local time, at 14 Main Street,
Suite 140, Madison, New Jersey 07940, solely for the
following purposes:
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to consider and vote upon a proposal to adopt the Agreement and
Plan of Merger, dated as of June 20, 2010, among Valeant,
Biovail Corporation, a Canadian corporation
(“Biovail”), Biovail Americas Corp., a Delaware
corporation and a wholly owned subsidiary of Biovail
(“BAC”), and Beach Merger Corp., a Delaware
corporation and a wholly owned subsidiary of BAC (the
“merger agreement”), a copy of which is attached as
Annex A to the management proxy circular and joint proxy
statement/prospectus accompanying this notice; and
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to approve the adjournment of the Valeant special meeting, if
necessary or appropriate to solicit additional proxies if there
are not sufficient votes to adopt the merger agreement at the
time of the special meeting.
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These items of business, including the merger agreement and the
proposed merger are described in detail in the accompanying
management proxy circular and joint proxy statement/prospectus.
The Valeant board of directors, by unanimous vote, has
determined that the merger agreement and the transactions
contemplated by the merger agreement, including the merger, are
advisable and in the best interests of Valeant and its
stockholders and recommends that Valeant stockholders vote
“FOR” the adoption of the merger agreement and
“FOR” the adjournment of the Valeant special meeting,
if necessary or appropriate to solicit additional proxies in
favor of such adoption.
The record date for the special meeting is August 18, 2010.
Only Valeant stockholders of record as of the close of business
on that date will be entitled to notice of the Valeant special
meeting and to vote, in person or by proxy, at the Valeant
special meeting or at any adjournment or postponement thereof. A
list of stockholders entitled to vote at the Valeant special
meeting will be available in Valeant’s offices located at
One Enterprise, Aliso Viejo, California 92656, during regular
business hours for a period of no less than 10 days before
the Valeant special meeting and at the place of the Valeant
special meeting during the meeting.
Adoption of the merger agreement by the Valeant stockholders is
a condition to the merger and requires the affirmative vote, in
person or by proxy, of holders of a majority of the shares of
Valeant common stock outstanding and entitled to vote thereon.
Therefore, your vote is very important. Your failure to vote
your shares will have the same effect as a vote
“against” the adoption of the merger agreement.
Whether or not you plan to attend the special meeting, please
promptly vote your proxy by telephone or by accessing the
Internet site following the instructions in the accompanying
management proxy circular and joint proxy statement/prospectus
or by marking, dating, signing and returning the accompanying
proxy card as promptly as possible.
By Order of the Board of Directors,
Steve T. Min
Corporate Secretary
Dated: August 18, 2010
ADDITIONAL
INFORMATION
This management proxy circular and joint proxy
statement/prospectus incorporates important business and
financial information about Valeant and Biovail from other
documents that are not included in or delivered with this
management proxy circular and joint proxy statement/prospectus.
This information is available to you without charge upon your
request. You can obtain the documents incorporated by reference
into this management proxy circular and joint proxy
statement/prospectus by requesting them in writing or by
telephone from the appropriate company or its representative at
the following addresses and telephone numbers:
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Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, New York 10022
Stockholders call toll-free:
(877) 456-3442
Banks and Brokers may call collect:
(212) 750-5833
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Georgeson
100 University Avenue
11th Floor, South Tower
Toronto, Ontario
Canada M5J 2Y1
North American Toll Free Number: 1-888-605-8403
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OR
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OR
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Valeant Pharmaceuticals International
One Enterprise
Aliso Viejo, California 92656
(949) 461-6178
Attn: Investor Relations
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Biovail Corporation
7150 Mississauga Road
Mississauga, Ontario
Canada L5N 8M5
(905) 286-3000
Attn: Investor Relations
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Investors may also consult Valeant’s or Biovail’s
website for more information about Valeant or Biovail,
respectively. Valeant’s website is
www.valeant.com
.
Biovail’s website is
www.biovail.com
. Information
included on these websites is
not
incorporated by
reference into this management proxy circular and joint proxy
statement/prospectus.
If you would like to request any documents, please do so by
September 20, 2010, in order to receive them before the
special meetings.
For a more detailed description of the information incorporated
by reference in this management proxy circular and joint proxy
statement/prospectus and how you may obtain it, see “Where
You Can Find More Information” beginning on page 175.
ABOUT
THIS JOINT PROXY STATEMENT/PROSPECTUS
For ease of reference, when we refer to this “joint proxy
statement/prospectus,” we mean the management proxy
circular and joint proxy statement/prospectus described above.
This joint proxy statement/prospectus, which forms part of a
registration statement on
Form S-4
filed with the U.S. Securities and Exchange Commission (the
“SEC”) by Biovail, constitutes a prospectus of Biovail
under Section 5 of the Securities Act of 1933, as amended
(the “Securities Act”), with respect to the Biovail
common shares to be issued to Valeant stockholders pursuant to
the share issuance resolution. This joint proxy
statement/prospectus also constitutes a joint proxy statement of
both Valeant and Biovail under Section 14(a) of the
Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and a management proxy circular under National
Instrument
51-102
Continuous Disclosure Obligations (“NI
51-102”)
of the Canadian Securities Administrators (the “CSA”).
It also constitutes a notice of meeting with respect to the
special meeting of Biovail shareholders and a notice of meeting
with respect to the special meeting of Valeant stockholders.
You should rely only on the information contained in or
incorporated by reference into this joint proxy
statement/prospectus. No one has been authorized to provide you
with information that is different from that contained in, or
incorporated by reference into, this joint proxy
statement/prospectus. This joint proxy statement/prospectus is
dated August 18, 2010. You should not assume that the
information contained in this joint proxy statement/prospectus
is accurate as of any date other than that date. Neither our
mailing of this joint proxy statement/prospectus to Valeant
stockholders or Biovail shareholders nor the issuance by Biovail
of common shares in connection with the merger will create any
implication to the contrary.
This joint proxy statement/prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, any
securities, or the solicitation of a proxy, in any jurisdiction
to or from any person to whom it is unlawful to make any such
offer or solicitation. Information contained in this joint proxy
statement/prospectus regarding Biovail has been provided by
Biovail and information contained in this joint proxy
statement/prospectus regarding Valeant has been provided by
Valeant.
TABLE OF
CONTENTS
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111
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111
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111
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111
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112
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112
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115
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115
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ii
QUESTIONS
AND ANSWERS
Set forth below are questions that you, as a stockholder of
Valeant or a shareholder of Biovail, may have regarding the
merger and the other matters to be considered at the special
meetings of stockholders of Valeant or shareholders of Biovail
and the answers to those questions. Valeant and Biovail urge you
to read carefully the remainder of this joint proxy
statement/prospectus because the information in this section
does not provide all the information that might be important to
you with respect to the merger and the other matters to be
considered at the special meetings. Additional important
information is also contained in the Annexes to and the
documents incorporated by reference into this joint proxy
statement/prospectus. All references in this joint proxy
statement/prospectus to “Valeant” refer to Valeant
Pharmaceuticals International, a Delaware corporation; all
references in this joint proxy statement/prospectus to
“Biovail” refer to Biovail Corporation, a Canadian
corporation; all references in this joint proxy
statement/prospectus to “BAC” refer to Biovail
Americas Corp., a Delaware corporation and a direct wholly owned
subsidiary of Biovail; all references to “Beach Merger
Corp.” refer to Beach Merger Corp., a Delaware corporation
and a direct wholly owned subsidiary of BAC; unless otherwise
indicated or as the context requires, all references in this
joint proxy statement/prospectus to “we,”
“our” and “us” refer to both Valeant and
Biovail; and all references to the “merger agreement”
refer to the Agreement and Plan of Merger, dated as of
June 20, 2010, among Valeant, Biovail, BAC and Beach Merger
Corp., a copy of which is included as Annex A to this joint
proxy statement/prospectus. Biovail following completion of the
merger is sometimes referred to in this joint proxy
statement/prospectus as the “combined company.” All
references to USD or $ are to United States dollars,
and all references to C$ are to Canadian dollars.
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Q:
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Why am I receiving this joint proxy statement/prospectus?
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A:
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Valeant and Biovail have agreed to combine under the terms of
the merger agreement (the “merger”) that is described
in this joint proxy statement/prospectus. In order to effect the
combination of Valeant and Biovail, Valeant will merge with a
wholly owned subsidiary of Biovail, and the name of the combined
company will be changed to “Valeant Pharmaceuticals
International, Inc.”
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In order to complete the merger:
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•
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Biovail shareholders must approve the issuance of Biovail common
shares necessary to complete the merger and the issuance of such
other Biovail common shares as contemplated by the merger
agreement;
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•
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Biovail shareholders must approve the amendment of
Biovail’s articles of continuance to change Biovail’s
name to “Valeant Pharmaceuticals International,
Inc.”; and
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•
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Valeant stockholders must adopt the merger agreement.
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Valeant and Biovail will hold separate special meetings to
obtain these approvals. This joint proxy statement/prospectus
contains important information about the merger and the special
meetings of the stockholders of Valeant and shareholders of
Biovail, and you should read it carefully.
Your vote is important. You do not need to attend the special
meetings in person to vote. We encourage you to vote as soon as
possible.
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Q:
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What will I receive in the merger?
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A:
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If the merger is completed, holders of shares of Valeant common
stock (except for shares of Valeant common stock owned by
Biovail, BAC or Beach Merger Corp. (all of which will be
cancelled), and other than those shares with respect to which
appraisal rights are properly exercised and not withdrawn) will
receive, for each share of Valeant common stock outstanding
immediately prior to the merger, 1.7809 Biovail common shares.
In addition, on the business day immediately preceding the
effective time of the merger, each Valeant stockholder of record
as of the close of business on such date will be paid $16.77 per
share of Valeant common stock pursuant to the pre-merger special
dividend. Valeant stockholders will not receive any fractional
Biovail common shares in the merger. Instead, Valeant
stockholders will receive cash for any fractional Biovail common
shares that a Valeant stockholder would otherwise have been
entitled to receive.
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Biovail shareholders will not receive any merger consideration
and will continue to hold their Biovail common shares after the
merger.
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iv
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Q:
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Will I receive the pre-merger special dividend?
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A:
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All holders of record of Valeant common stock as of the close of
business on the business day immediately preceding the effective
time of the merger will have the right to receive the pre-merger
special dividend. Valeant intends to pay the pre-merger special
dividend on the business day immediately preceding the effective
time of the merger.
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Biovail shareholders will not receive the pre-merger special
dividend.
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Q:
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What is the value of the merger consideration?
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A:
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Because Biovail will issue a fixed number of Biovail common
shares in exchange for each share of Valeant common stock, the
value of the merger consideration that Valeant stockholders will
receive will depend on the price per share of Biovail common
shares at the time the merger is completed. That price will not
be known at the time of the special meetings and may be less or
more than the current price or the price at the time of the
special meetings.
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Q:
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When and where will the special meetings be held?
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A:
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The Biovail special meeting will be held at the Canadian
Broadcasting Centre, Glenn Gould Studio, 250 Front Street
West, Toronto, Ontario, on September 27, 2010, at
10:00 a.m., local time. The Valeant special meeting will be
held at 14 Main Street, Suite 140, Madison,
New Jersey 07940, on September 27, 2010, at
10:00 a.m., local time.
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Q:
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Who is entitled to vote at the Biovail and Valeant special
meetings?
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A:
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Biovail has fixed August 18, 2010 as the record date for
the Biovail special meeting. If you were a Biovail shareholder
as of the close of business on such date, you are entitled to
vote on matters that come before the Biovail special meeting.
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Valeant has fixed August 18, 2010 as the record date for
the Valeant special meeting. If you were a Valeant stockholder
as of the close of business on such date, you are entitled to
vote on matters that come before the Valeant special meeting.
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Q:
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How many votes do I have?
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A:
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Biovail:
You are entitled to one vote for each
Biovail common share that you owned as of the close of business
on the Biovail record date. As of the close of business on the
Biovail record date, there were approximately 158,646,462
outstanding Biovail common shares.
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Valeant:
You are entitled to one vote for each
share of Valeant common stock that you owned as of the close of
business on the Valeant record date. As of the close of business
on the Valeant record date, there were approximately 76,696,012
outstanding shares of Valeant common stock.
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Q:
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How do I vote?
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A:
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If you are a registered shareholder of Biovail as of the close
of business on the record date for the Biovail special meeting
or a stockholder of record of Valeant as of the close of
business on the record date for the Valeant special meeting, you
may vote in person by attending your respective special meeting
or, to ensure your shares are represented at the meeting, you
may authorize a proxy to vote by:
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• accessing the Internet website specified on your
proxy card;
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• calling the toll-free number specified on your proxy
card; or
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• signing and returning your proxy card in the
postage-paid envelope provided.
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If you hold Biovail common shares or shares of Valeant common
stock in “street name” through a stock brokerage
account or through a bank or other nominee, please follow the
voting instructions provided by your broker, bank or other
nominee to ensure that your shares are represented at your
special meeting.
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v
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Q:
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My shares are held in “street name” by my broker or
I am a non-registered shareholder. Will my broker automatically
vote my shares for me?
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A:
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No. If your shares are held in the name of a broker, bank
or other nominee, you are considered the “beneficial
owner” of the shares held for you in what is known as
“street name.” You are
not
the “record
holder” or “registered holder” of such shares. If
this is the case, this joint proxy statement/prospectus has been
forwarded to you by your broker, bank or other nominee. As the
beneficial owner, unless your broker, bank or other nominee has
discretionary authority over your shares, you generally have the
right to direct your broker, bank or other nominee as to how to
vote your shares. If you do not provide voting instructions,
your shares will not be voted on any proposal on which your
broker, bank or other nominee does not have discretionary
authority. This is often called a “broker non-vote.”
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Please follow the voting instructions provided by your broker,
bank or other nominee so that it may vote your shares on your
behalf. Please note that you may not vote shares held in street
name by returning a proxy card directly to Valeant or Biovail or
by voting in person at your special meeting unless you first
provide a proxy from your broker, bank or other nominee.
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If you are a Biovail shareholder and you do not instruct your
broker, bank or other nominee on how to vote your shares, your
broker, bank or other nominee will not vote your shares on any
matter over which they do not have discretionary authority. Such
a broker non-vote will have no effect on the vote on any of the
Biovail proposals, assuming a quorum is present.
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If you are a Valeant stockholder and you do not instruct your
broker, bank or other nominee on how to vote your shares, your
broker, bank or other nominee will not vote your shares over
which they do not have discretionary authority. This broker
non-vote will have the same effect as a vote against the
proposal to adopt the merger agreement, and will have no effect
on the proposal to adjourn the Valeant special meeting, if
necessary or appropriate to solicit additional proxies if there
are not sufficient votes to adopt the merger agreement at the
time of the Valeant special meeting.
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Q:
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What vote is required to approve each proposal?
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A:
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Biovail:
The issuance of Biovail common shares
to Valeant stockholders necessary to complete the merger, and
the issuance of such other Biovail common shares as contemplated
by the merger agreement will be approved if a majority of the
votes cast in person or by proxy on the proposal vote in favor
of the proposal.
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The amendment to Biovail’s articles of continuance to
change Biovail’s name will be approved if two-thirds of the
votes cast in person or by proxy on the proposal vote in favor
of the proposal.
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Valeant:
The proposal at the Valeant special
meeting to adopt the merger agreement requires the affirmative
vote of holders of a majority of the shares of Valeant common
stock outstanding and entitled to vote as of the close of
business on the Valeant record date.
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The proposal to approve the adjournment of the Valeant special
meeting, if necessary or appropriate to solicit additional
proxies, if there are not sufficient votes to adopt the merger
agreement at the time of the Valeant special meeting, requires
the affirmative vote of holders of a majority of the shares of
Valeant common stock present in person or represented by proxy
at the Valeant special meeting and entitled to vote thereon.
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Q:
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What will happen if I fail to vote or I abstain from
voting?
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A:
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Biovail:
If you are a Biovail shareholder and
fail to vote or fail to instruct your broker, bank or other
nominee to vote, it will have no effect on any of the Biovail
proposals, assuming a quorum is present.
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Valeant
: If you are a Valeant stockholder and
fail to vote, fail to instruct your broker, bank or other
nominee to vote, or mark your proxy or voting instructions to
abstain, this will have the effect of a vote against the
proposal to adopt the merger agreement. If you are a Valeant
stockholder and are present in person at the Valeant special
meeting and abstain from voting or mark your proxy or voting
instructions to abstain, this will have the effect of a vote
against the proposal to approve the adjournment of the Valeant
special meeting. If you are a Valeant stockholder and are not
present in person at the Valeant special meeting and do not
respond by proxy, this will have
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vi
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no effect on the vote held on the proposal to approve the
adjournment of the Valeant special meeting. Failure to instruct
your broker, bank or other nominee to vote will also have no
effect on the vote held on this proposal.
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Q:
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What will happen if I return my proxy card without indicating
how to vote?
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A:
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If you are a holder of record of shares of Valeant common stock
or a registered holder of Biovail common shares and sign and
return your proxy card without indicating how to vote on any
particular proposal, the Valeant common stock or Biovail common
shares represented by your proxy will be voted in accordance
with the recommendations of the board of directors of Valeant or
Biovail, as applicable.
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Q:
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What constitutes a quorum?
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A:
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Biovail:
At least two persons present, each
being a shareholder entitled to vote at the Biovail special
meeting or a duly appointed proxyholder or representative for a
shareholder so entitled, and together holding or representing
Biovail common shares having not less than 25% of the
outstanding votes entitled to be cast at the Biovail special
meeting, constitute a quorum for the transaction of business at
the Biovail special meeting. All Biovail common shares
represented at the Biovail special meeting, including shares
that are represented but that abstain from voting, will be
treated as present and entitled to vote for purposes of
determining the presence or absence of a quorum.
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Valeant:
A majority of the outstanding shares
of Valeant common stock entitled to vote at the Valeant special
meeting must be represented in person or by proxy at the Valeant
special meeting in order to constitute a quorum for the
transaction of business at the Valeant special meeting. All
shares of Valeant common stock represented at the Valeant
special meeting, including shares of Valeant common stock that
are represented but that abstain from voting, and shares (if
any) of Valeant common stock that are represented but that are
held by brokers, banks and other nominees who do not have
authority to vote such shares (i.e., broker non-votes), will be
treated as present and entitled to vote for purposes of
determining the presence or absence of a quorum.
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Q:
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Can I change my vote after I have returned a proxy or voting
instruction card?
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A:
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Yes.
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If you are a record holder of Valeant common stock as of the
close of business on the record date for the Valeant special
meeting:
You can change your vote at any time
before the start of your special meeting. In addition to
revocation in any other manner permitted by law, you can revoke
your proxy in one of the following ways:
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• you can grant a new, valid proxy bearing a later
date (including by telephone or Internet);
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• you can send a signed notice of revocation; or
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• you can attend your special meeting and vote in
person, which will automatically cancel any proxy previously
given, or you may revoke your proxy in person, but your
attendance alone will not revoke any proxy that you have
previously given.
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If you choose any of the foregoing methods, your notice of
revocation or your new proxy must be received by Valeant no
later than the beginning of the Valeant special meeting. If you
have voted your shares by telephone or through the Internet, you
may revoke your prior telephone or Internet vote by any manner
described above. Only your latest-dated proxy will count.
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If you are a registered holder of Biovail common shares as of
the close of business on the record date for the Biovail special
meeting:
You can change your vote at any time
before the start of your special meeting, unless otherwise
noted. In addition to revocation in any other manner permitted
by law, you can revoke your proxy in one of the following ways:
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• you can grant a new, valid proxy bearing a later
date (including by telephone or Internet);
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• you can deposit a signed notice of revocation at
Biovail’s registered office at any time up to and including
the last business day preceding the day of the Biovail special
meeting (or any adjournment or postponement thereof) or with the
chair of the Biovail special meeting on the day of the Biovail
special meeting (or any adjournment or postponement thereof); or
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vii
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• you can attend the special meeting and vote in
person, which will automatically cancel any proxy previously
given, or you may revoke your proxy in person, but your
attendance alone will not revoke any proxy that you have
previously given.
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If you choose any of the foregoing methods, your notice of
revocation or your new proxy must be received by Biovail no
later than the beginning of the Biovail special meeting. If you
have voted your shares by telephone or through the Internet, you
may revoke your prior telephone or Internet vote by any manner
described above. Only your latest dated proxy will count.
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If you hold shares of Valeant common stock or Biovail common
shares in “street name”:
You may change
your vote by submitting another later-dated voting instruction
form to your broker, bank or other nominee or by voting again by
telephone or by Internet. In order to simply revoke a previous
instruction, you must notify your broker, bank or other nominee
in writing of your revocation. In order to ensure that the
broker, bank or other nominee acts upon revocation, the written
notice should be received by the broker, bank or other nominee
well in advance of your special meeting.
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Q:
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What are the material U.S. Federal income tax consequences of
the merger and the pre-merger special dividend to U.S. holders
of Valeant common stock?
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The Merger.
The merger is intended to qualify
as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the
“Code”) with no gain or loss recognition to
U.S. holders of Valeant common stock for U.S. Federal
income tax purposes, except with respect to cash received in
lieu of fractional Biovail common shares. It is a condition to
the closing of the merger that, at the effective time of the
merger, Skadden, Arps, Slate, Meagher & Flom LLP
(“Skadden”) will deliver to Valeant and Cravath,
Swaine & Moore LLP (“Cravath”) will
deliver to Biovail their respective opinions substantially to
the effect that the merger should be subject to the tax
treatment described in the immediately preceding sentence. The
conclusions in the tax opinions will not be free from doubt, and
there are significant factual and legal uncertainties concerning
these conclusions. If the conclusions in the tax opinions were
to be challenged by the Internal Revenue Service (the
“IRS”) and such challenge were to be sustained, a
U.S. holder of Valeant common stock would recognize gain
(and might not be allowed to recognize loss) in the merger based
on the amount such U.S. holder realizes in the merger.
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The Pre-Merger Special Dividend.
The
pre-merger special dividend is intended to be treated as a
distribution by Valeant within the meaning of Section 301
of the Code and not as consideration paid for Valeant stock in
the merger. The tax opinions that are to be delivered by
counsels to Valeant and Biovail as a condition to the closing of
the merger will be based in part on a determination that the
pre-merger special dividend should be treated as such. Assuming
this determination is sustained, the pre-merger special dividend
will be treated as a dividend for U.S. Federal income tax
purposes to the extent paid out of current or accumulated
earnings and profits of Valeant. If the amount of the dividend
exceeds Valeant’s current and accumulated earnings and
profits, the excess will be treated as a tax-free return of
capital to the extent of your adjusted tax basis in the Valeant
common stock and any remaining portion of the dividend will be
taxed as capital gain. However, it is possible that the IRS
would instead seek to characterize the pre-merger special
dividend as consideration paid by Biovail in the merger for a
portion of a U.S. holder’s Valeant common stock. If
this characterization were to be sustained, a U.S. holder
of Valeant common stock would recognize gain or loss in the
merger based on the amount such U.S. holder realizes in the
merger including the pre-merger special dividend.
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See “The Merger — Material U.S. Federal
Income Tax Consequences” beginning on page 102.
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Q:
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When do you expect the merger to be completed?
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A:
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Valeant and Biovail are working to complete the merger before
the end of 2010. However, the merger is subject to a financing
condition, the obtaining of various regulatory approvals and
other conditions, and it is possible that factors outside the
control of both companies could result in the merger being
completed at a later time, or not at all. There may be a
substantial amount of time between the respective Valeant and
Biovail special meetings and the completion of the merger.
Valeant and Biovail hope to complete the merger as soon as
reasonably practicable.
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viii
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Q:
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What do I need to do now?
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A:
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Carefully read and consider the information contained in, and
incorporated by reference into, this joint proxy
statement/prospectus, including its Annexes. Then please
authorize a proxy to vote your shares as soon as possible so
that your shares may be represented at your special meeting.
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Q:
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Do I need to do anything with my shares now?
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A:
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No. If you are a Valeant stockholder, after the merger is
completed, your shares of Valeant common stock (other than those
shares with respect to which appraisal rights are properly
exercised and not withdrawn) will be converted automatically
into the right to receive 1.7809 Biovail common shares and cash
in lieu of fractional shares. You do not need to take any action
at the current time. If you are a Valeant stockholder of record
as of the close of business on the business day immediately
preceding the effective time of the merger, you will be paid the
pre-merger special dividend on such date.
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If you are a Biovail shareholder, you are not required to take
any action with respect to your Biovail common shares.
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Q:
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Are shareholders entitled to appraisal/dissent rights?
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A:
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Under the merger agreement, stockholders of Valeant are entitled
to appraisal rights in connection with the merger, provided that
the applicable Valeant stockholder complies with all applicable
requirements and procedures under the Delaware General
Corporation Law (the “DGCL”). See
“Appraisal/Dissent Rights” beginning on page 169.
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Under the Canada Business Corporations Act (the
“CBCA”), the shareholders of Biovail are not entitled
to dissent rights in connection with the merger. See
“Appraisal/Dissent Rights” beginning on page 169.
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Q:
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What happens if I sell my shares before the special
meeting?
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A:
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The record date of each of the special meetings is earlier than
the date of each of the special meetings and the date that the
merger is expected to be completed. If you transfer your shares
after the record date but before your special meeting, you will
retain (subject to any arrangements made with the purchaser of
your shares) your right to vote at the special meeting, but, in
the case of Valeant stockholders, you will not have the right to
receive the pre-merger special dividend and the merger
consideration in the merger. In order to receive the merger
consideration, you must hold your shares of Valeant common stock
through the effective time of the merger. In order to receive
the pre-merger special dividend, you must hold your shares of
Valeant common stock as of the close of business on the business
day immediately preceding the effective time of the merger.
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Q:
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Who is soliciting my proxy?
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A:
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Biovail.
Biovail’s management is
soliciting your proxy for use at the Biovail special meeting and
any adjournment or postponement thereof. All associated costs of
the proxy solicitation will be borne by Biovail. In addition to
the use of the mail, proxies may be solicited by directors,
officers and other employees of Biovail, without additional
remuneration, by personal interview, telephone, facsimile or
otherwise. Biovail will also request brokerage firms, nominees,
custodians and fiduciaries to forward proxy materials to the
beneficial owners of shares and will provide customary
reimbursement to such firms for the cost of forwarding these
materials. Biovail has retained Georgeson to assist in its
solicitation of proxies and has agreed to pay them a fee of
approximately C$30,000, plus reasonable expenses, for these
services.
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Valeant.
Valeant’s management is
soliciting your proxy for use at the Valeant special meeting and
any adjournment or postponement thereof. All associated costs of
the proxy solicitation will be borne by Valeant. In addition to
the use of the mail, proxies may be solicited by directors,
officers and other employees of Valeant, without additional
remuneration, by personal interview, telephone, facsimile or
otherwise. Valeant will also request brokerage firms, nominees,
custodians and fiduciaries to forward proxy materials to the
beneficial owners of shares and will provide customary
reimbursement to such firms for the cost of forwarding these
materials. Valeant has retained Innisfree M&A Incorporated
(“Innisfree”) to assist in its solicitation of proxies
and has agreed to pay them a fee of approximately $20,000, plus
reasonable
out-of-pocket
expenses, for these services.
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ix
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Q:
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When will I receive the post-merger special dividend?
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A.
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Contingent upon the closing of the merger and subject to the
discretion of the board of directors of the combined company,
and to compliance with applicable law, it is anticipated that,
on December 31, 2010, or such other date as the board of
directors of the combined company may determine, the combined
company will pay an additional one-time special dividend of
$1.00 per common share of the combined company (the
“post-merger special dividend”) to shareholders of the
combined company.
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Q:
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What if I hold shares in both Valeant and Biovail?
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A:
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If you are a shareholder of both Valeant and Biovail, you will
receive two separate packages of proxy materials. A vote as a
Valeant stockholder will not count as a vote as a Biovail
shareholder, and a vote as a Biovail shareholder will not count
as a vote as a Valeant stockholder. Therefore, please separately
vote each of your shares of Valeant common stock and Biovail
common shares.
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Q:
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Who can help answer my questions?
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A:
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Valeant stockholders or Biovail shareholders who have questions
about the merger or the other matters to be voted on at the
special meetings or desire additional copies of this joint proxy
statement/prospectus or additional proxy cards should contact:
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If you are a Valeant stockholder:
Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, New York 10022
Stockholders call toll-free:
(877) 456-3442
Banks and Brokers may call collect:
(212) 750-5833
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If you are a Biovail shareholder:
Georgeson
100 University Avenue
11th Floor, South Tower
Toronto, Ontario
Canada M5J 2Y1
North American Toll Free Number:
1-888-605-8403
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x
SUMMARY
This summary highlights information contained elsewhere in
this joint proxy statement/prospectus and may not contain all
the information that is important to you. Valeant and Biovail
urge you to read carefully the remainder of this joint proxy
statement/prospectus, including the Annexes, the documents
incorporated by reference and the other documents to which we
have referred you because this summary does not provide all the
information that might be important to you with respect to the
merger and the other matters being considered at the Valeant and
Biovail special meetings. See also the section entitled
“Where You Can Find More Information” beginning on
page 175. We have included page references in this summary
to direct you to a more complete description of the topics
presented below.
The
Companies
Biovail
Corporation (see page 32)
Biovail Corporation
7150 Mississauga Road
Mississauga, Ontario
Canada L5N 8M5
Telephone:
(905) 286-3000
Biovail, a Canadian corporation, is a specialty pharmaceutical
company with a strategic focus on developing and commercializing
products that address unmet medical needs in specialty central
nervous system (“CNS”) disorders. The growth and
development of Biovail’s specialty CNS business is
financially supported by its former base business model which
focused on the development and large-scale manufacture of
pharmaceutical products incorporating its oral drug-delivery
technologies. While Biovail’s strategy has transitioned to
specialty CNS, this base business model continues to provide
revenues and significant operating cash flow that can be used to
support and fund licensing and acquisition opportunities in
specialty CNS. Biovail’s drug delivery expertise also
provides support for life cycle management of its specialty CNS
products. Biovail also continues to identify and evaluate
complementary acquisitions or business opportunities that
support its specialty CNS strategy (such as the May 2009
acquisition of the full U.S. commercialization rights to
Wellbutrin
XL
®
).
Additional information about Biovail and its subsidiaries is
included in documents incorporated by reference into this joint
proxy statement/prospectus. See “Where You Can Find More
Information” beginning on page 175.
Biovail
Americas Corp. (see page 32)
Biovail Americas Corp., a wholly owned subsidiary of Biovail, is
a Delaware corporation that holds ownership of Biovail
subsidiaries that operate in the United States.
Beach
Merger Corp. (see page 32)
Beach Merger Corp., a wholly owned subsidiary of BAC, is a
Delaware corporation that was formed on June 15, 2010, for
the sole purpose of effecting the merger. In the merger, Beach
Merger Corp. will be merged with and into Valeant, with Valeant
surviving as a wholly owned subsidiary of BAC.
Valeant
Pharmaceuticals International (see page 32)
Valeant Pharmaceuticals International
One Enterprise
Aliso Viejo, CA 92656
Telephone:
(949) 461-6000
Valeant, a Delaware corporation, is a multinational specialty
pharmaceutical company that develops, manufactures and markets a
broad range of pharmaceutical products. Valeant’s specialty
pharmaceutical and OTC products are marketed under brand names
and are sold in the United States, Canada, Australia and New
Zealand, where Valeant focuses most of its efforts on the
dermatology and neurology therapeutic classes. Valeant also has
1
branded generic and OTC operations in Europe and Latin America
which focus on pharmaceutical products that are bioequivalent to
original products and are marketed under company brand names.
Additional information about Valeant and its subsidiaries is
included in documents incorporated by reference in this joint
proxy statement/prospectus. See “Where You Can Find More
Information” beginning on page 175.
Pre-Merger
Special Dividend (see page 41)
Valeant intends to pay to its stockholders of record as of the
close of business on the business day immediately preceding the
effective time of the merger the pre-merger special dividend, a
special dividend of $16.77 per share of Valeant common stock, on
the business day immediately preceding the effective time of the
merger. The payment of the pre-merger special dividend is a
condition to the completion of the merger.
Post-Merger
Special Dividend (see page 41)
The boards of directors of Valeant and Biovail also have
determined that, contingent upon the closing of the merger and
subject to the discretion of the board of directors of the
combined company, and to compliance with applicable law, the
post-merger special dividend, a special dividend of $1.00 per
common share of the combined company to be declared following
the consummation of the merger and contemplated to be paid on
December 31, 2010, or such other payment date as the board
of directors of the combined company determines, will be in the
best interests of the combined company and its shareholders and
that it is the intention of those directors of Valeant and
Biovail that will continue as directors of the combined company
to support the declaration and payment of the post-merger
special dividend at the applicable time following the merger.
The
Merger and the Merger Agreement
The
Merger (see page 42)
The board of directors of Valeant and the board of directors of
Biovail have agreed to a business combination of their two
companies under the terms of the merger agreement. The merger
agreement is the product of arm’s-length negotiations
between Valeant and Biovail. In order to effect the combination
of Valeant and Biovail, Valeant will merge with a wholly owned
subsidiary of Biovail, and the name of the combined company will
be changed to “Valeant Pharmaceuticals International,
Inc.” Valeant and Biovail encourage you to read the entire
merger agreement carefully because it is the principal document
governing the merger.
Terms
of the Merger; Merger Consideration (see
page 115)
In order to effect the combination of Valeant and Biovail, the
merger agreement provides for the merger of Beach Merger Corp.
with and into Valeant, with Valeant surviving as a wholly owned
subsidiary of BAC. On the business day immediately preceding the
effective time of the merger, Valeant intends to pay to its
stockholders of record the pre-merger special dividend. In the
merger, each share of Valeant common stock issued and
outstanding immediately prior to the completion of the merger,
except for any shares of Valeant common stock held by Valeant,
as treasury stock, Biovail, BAC or Beach Merger Corp. (all of
which will be cancelled) and other than those shares with
respect to which appraisal rights are properly exercised and not
withdrawn, will be converted into the right to receive 1.7809
Biovail common shares. Valeant’s convertible notes will be
treated as described in “Effect of the Merger on
Valeant’s Convertible Notes” beginning on page 98.
Valeant’s outstanding restricted stock units and options
will be treated as described in “Treatment of Valeant
Restricted Stock Units and Options” beginning on
page 88.
Biovail will not issue any fractional Biovail common shares in
the merger. Instead, a Valeant stockholder who otherwise would
have received a fraction of a Biovail common share will receive
an amount in cash equal to such fractional amount multiplied by
the average of the volume weighted average price per Biovail
common share on the NYSE on each of the 10 consecutive trading
days ending with the second complete trading day prior to the
effective time of the merger.
2
Treatment
of Valeant Restricted Stock Units and Options (see
page 91); Change in Control Provisions (see
page 122)
Accelerating Restricted Stock Units.
With the
exception of restricted stock units held by J.
Michael Pearson, each Valeant restricted stock unit award
(including performance-based restricted stock units) that, in
accordance with its existing terms, provides for vesting, in
whole or in part, upon a change in control will vest and settle
at the level provided for under the terms of the award on the
day prior to the payment of the pre-merger special dividend as
if that day was the closing date of the merger (and any
performance metrics applicable to the accelerated restricted
stock units will be measured as of that day). Any portion of the
restricted stock units that vests will be settled in common
shares of the combined company at the merger (with the number of
shares determined by multiplying the number of shares of Valeant
common stock subject to such vested restricted stock unit
immediately prior to the completion of the merger by the
exchange ratio) and the pre-merger special dividend will be paid
to the holder of the restricted stock unit in cash on the
business day preceding the effective time of the merger. Any
portion of the accelerated restricted stock units that does not
vest on the day prior to the payment of the pre-merger special
dividend will be forfeited on that day for no consideration.
Stock Options and Continuing Restricted Stock
Units.
Each stock option to acquire Valeant
common stock, each restricted stock unit award that, in
accordance with existing terms, does not vest, in whole or in
part, upon a change in control, and, except as discussed under
“The Merger — Financial Interests of Valeant
Directors and Officers in the Merger,” each equity award
held by Mr. Pearson (each, a “continuing award”)
will be adjusted to take into account the pre-merger special
dividend by multiplying the number of shares underlying the
award by the “pre-merger special dividend adjustment
ratio” of 1.5710 (rounded down to the nearest whole share)
and, in the case of stock options, dividing the per share
exercise price of the stock option by the pre-merger special
dividend adjustment ratio (rounded up to the nearest whole
cent). As contemplated by the merger agreement, at the closing
of the merger, each continuing award will be converted into an
award to acquire common shares of the combined company, on the
same terms and conditions as were applicable to the award prior
to the merger. The number of common shares of the combined
company subject to the award following the merger will be
determined by multiplying the number of shares of Valeant common
stock underlying the continuing award (as adjusted to take into
account the pre-merger special dividend) by the exchange ratio
(rounded down to the nearest whole share) and, in the case of
stock options, by dividing the per share exercise price (as
adjusted to take into account the pre-merger special dividend)
by the exchange ratio (rounded up to the nearest whole cent).
Change in Control Provisions.
The board of
directors of each of Valeant and Biovail has determined that the
merger will be deemed to be, and the merger agreement provides
that it will be treated as, a change in control under the
Valeant and Biovail employee benefit plans and agreements.
Effect
of the Merger on Valeant’s Convertible Notes (see
page 101)
In the event a holder of Valeant’s 4.0% Convertible
Subordinated Notes due 2013 (the “4% Convertible
Notes”) converts its 4% Convertible Notes and receives
shares of Valeant common stock prior to the effective time of
the merger, those shares would be treated in the merger like all
other shares of Valeant common stock. In the event a holder of
the 4% Convertible Notes does not convert its notes prior
to the effective time of the merger, those 4% Convertible
Notes will remain outstanding and will be convertible into the
merger consideration payable in respect of the Valeant common
stock into which such 4% Convertible Notes would have been
convertible prior to the merger, and the conversion rate for the
4% Convertible Notes will be adjusted pursuant to the
indenture pursuant to which the notes were issued to account for
the pre-merger special dividend. Based on the exchange ratio for
the merger, the amount of the pre-merger special dividend
(assuming a “Current Market Price” (as defined in the
indenture pursuant to which the notes were issued) of $57.75 at
the close of business on the record date for the pre-merger
special dividend) and the terms of the indenture pursuant to
which the notes were issued, after the merger the
4% Convertible Notes would have a conversion rate of
79.3904 Biovail common shares per $1,000 principal amount
of notes. On August 16, 2010, Valeant’s outstanding
3.0% Convertible Subordinated Notes due August 16,
2010 (the “3% Convertible Notes”) matured and
warrants to purchase Valeant’s common stock issued pursuant
to an Exchange Agreement entered into in August 2009 (the
“Valeant Warrants”) expired.
3
Material
U.S. Federal Income Tax Consequences (see
page 102)
The Merger.
The merger is intended to qualify
as a reorganization within the meaning of Section 368(a) of
the Code with no gain or loss recognition to U.S. holders
of Valeant common stock for U.S. Federal income tax
purposes. It is a condition to the closing of the merger that,
at the effective time of the merger, Skadden will deliver to
Valeant and Cravath will deliver to Biovail their respective
opinions to the effect that (1) the merger should qualify
for U.S. Federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code, and
(2) U.S. holders of Valeant common stock should not
recognize gain under Section 367(a) of the Code on the
exchange of their Valeant common stock for Biovail common shares
in the merger.
Assuming these conclusions are sustained, a U.S. holder of
Valeant common stock generally will not recognize any gain or
loss upon receipt of Biovail common shares in exchange for
Valeant common stock in the merger, except with respect to cash
received in lieu of fractional Biovail common shares. If either
of these conclusions were to be challenged by the IRS and such
challenge were to be sustained, then each U.S. holder of
Valeant common stock would recognize gain (and might not be
allowed to recognize loss) equal to the difference between the
sum of the fair market value of the Biovail common shares and
the amount of cash received in the merger (including the
pre-merger special dividend to the extent it is not treated as a
distribution within the meaning of Section 301 of the Code,
as described below, and cash received in lieu of fractional
Biovail common shares) and its tax basis in the Valeant shares
surrendered in exchange therefor.
The conclusions in the tax opinions will not be free from doubt
and there are significant factual and legal uncertainties
concerning these conclusions (including as to the impact of the
pre-merger special dividend described below). In particular,
Section 367(a) of the Code and the applicable Treasury
regulations promulgated thereunder require that in order for
U.S. holders of Valeant common stock to avoid recognizing
gain on the exchange of their Valeant common stock in the
merger, certain requirements must be met, including that the
fair market value of Biovail equal or exceed that of Valeant at
the effective time of the merger. There are significant factual
and legal uncertainties concerning the determination of fair
market value for this purpose. If at the effective time of the
merger the fair market value of Valeant were found to exceed
that of Biovail, a U.S. holder of Valeant common stock
would recognize gain (but not loss) based on the amount such
U.S. holder realizes in the merger.
The Pre-Merger Special Dividend.
Under the
terms of the merger agreement, Valeant stockholders of record as
of the close of business on the business day immediately
preceding the effective time of the merger will be paid the
pre-merger special dividend, a one-time special cash dividend of
$16.77 per share, on such business day. The pre-merger special
dividend is intended to be treated as a distribution by Valeant
within the meaning of Section 301 of the Code and not as
consideration paid for Valeant stock in the merger. The tax
opinions that are to be delivered by counsels to Valeant and
Biovail as a condition to the closing of the merger will be
based in part on a determination that the pre-merger special
dividend should be treated as such. Assuming this determination
is sustained, the pre-merger special dividend will be treated as
a dividend for U.S. Federal income tax purposes to the
extent paid out of current or accumulated earnings and profits
of Valeant. To the extent that the amount of the dividend
exceeds Valeant’s current and accumulated earnings and
profits, the excess will first be treated as a tax-free return
of capital, causing a reduction in the U.S. holder’s
adjusted basis in the Valeant common stock. If such basis is
reduced to zero, any remaining portion of the pre-merger special
dividend will be taxed as capital gain, which would be long-term
capital gain if the U.S. holder has held the Valeant common
stock for more than one year at the time the pre-merger special
dividend is received. However, it is possible that the IRS would
disagree with the characterization of the pre-merger special
dividend as a distribution by Valeant and instead seek to
characterize the pre-merger special dividend as merger
consideration paid by Biovail in exchange for a portion of a
U.S. holder’s Valeant common stock. If this
characterization were to be sustained, the merger would fail to
qualify as a reorganization within the meaning of
Section 368(a) of the Code.
Tax matters are very complicated and the tax consequences of the
merger and pre-merger special dividend to each U.S. holder
of Valeant common stock may depend on such stockholder’s
particular facts and circumstances. Holders of Valeant common
stock are urged to consult their tax advisors to understand
fully the tax consequences to them of the merger and pre-merger
special dividend.
4
Recommendations
of the Board of Directors of Biovail (see
page 33)
At a special meeting held on June 20, 2010, the Biovail
board of directors unanimously determined that the merger and
the other transactions contemplated by the merger agreement,
including the issuance of Biovail common shares necessary to
complete the merger and the issuance of such other Biovail
common shares as contemplated by the merger agreement and the
amendment of Biovail’s articles of continuance to effect
the name change, were advisable and in the best interests of
Biovail and its shareholders.
Accordingly, the Biovail board
of directors recommends that the Biovail shareholders vote
“FOR” the proposal to issue Biovail common shares
necessary to complete the merger and to issue such other Biovail
common shares as contemplated by the merger agreement and
“FOR” the proposal to amend Biovail’s articles of
continuance to change Biovail’s name to “Valeant
Pharmaceuticals International, Inc.”
Recommendations
of the Board of Directors of Valeant (see
page 37)
At a special meeting held on June 20, 2010, the Valeant
board of directors unanimously (1) determined that the
merger agreement and the transactions contemplated by the merger
agreement, including the merger, are advisable and in the best
interests of Valeant and its stockholders, (2) approved the
merger and the merger agreement and (3) resolved to
recommend adoption of the merger agreement to Valeant
stockholders.
Accordingly, the Valeant board of directors
recommends that the Valeant stockholders vote “FOR”
the adoption of the merger agreement and “FOR” the
adjournment of the Valeant special meeting, if necessary or
appropriate to solicit additional proxies if there are not
sufficient votes to adopt the merger agreement at the time of
the Valeant special meeting.
Opinion
of Morgan Stanley & Co. Incorporated, Biovail’s
Financial Advisor (see page 56)
In connection with the merger, on June 20, 2010, Morgan
Stanley & Co. Incorporated (“Morgan
Stanley”) rendered to Biovail’s board of directors its
oral opinion, subsequently confirmed in writing, that, on such
date and based upon and subject to the limitations,
qualifications and assumptions set forth in the written opinion,
the exchange ratio pursuant to the merger agreement was fair
from a financial point of view to Biovail. The full text of
Morgan Stanley’s written fairness opinion, which sets
forth, among other things, the assumptions made, procedures
followed, matters considered and qualifications and limitations
on the scope of the review undertaken by Morgan Stanley in
rendering its opinion, is attached as Annex B to this joint
proxy statement/prospectus. The opinion was directed to the
Biovail board of directors and addresses only the fairness from
a financial point of view of the exchange ratio pursuant to the
merger agreement on the date of the opinion. The opinion does
not address any other aspect of the merger and does not
constitute a recommendation to any Biovail shareholder or
Valeant stockholder as to how to vote or act on any matter with
respect to the merger.
Opinions
of Valeant’s Financial Advisors (see
page 72)
Opinion
of Goldman, Sachs & Co.
Goldman, Sachs & Co. (“Goldman Sachs”)
delivered its opinion to the board of directors of Valeant that,
as of June 20, 2010 and based upon and subject to the
factors and assumptions set forth therein, the exchange ratio,
together with the pre-merger special dividend to be paid to the
holders (other than Biovail and its affiliates) of outstanding
shares of Valeant’s common stock, pursuant to the merger
agreement was fair from a financial point of view to such
holders.
The full text of the written opinion of Goldman Sachs, dated
June 20, 2010, which sets forth assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with the opinion, is attached as
Annex C to this joint proxy statement/prospectus. Goldman
Sachs provided its opinion for the information and assistance of
the board of directors of Valeant in connection with its
consideration of the merger. The Goldman Sachs opinion does not
constitute a recommendation as to how any holder of
Valeant’s common stock should vote with respect to the
merger or any other matter.
Opinion
of Jefferies & Company, Inc.
Valeant retained Jefferies & Company, Inc.
(“Jefferies”) to act as a financial advisor to Valeant
in connection with the merger and to render to the Valeant board
of directors an opinion as to the fairness to the holders of
Valeant
5
common stock of the exchange ratio of 1.7809 pursuant to the
merger agreement, together with the pre-merger special dividend
of $16.77 per share to be paid to the holders of Valeant common
stock. At the meeting of the Valeant board of directors on
June 20, 2010, Jefferies rendered its opinion to the
Valeant board of directors to the effect that, as of that date
and based upon and subject to the various considerations set
forth in its opinion, the exchange ratio of 1.7809 pursuant to
the merger agreement, together with the pre-merger special
dividend of $16.77 per share to be paid to the holders of
Valeant common stock, was fair, from a financial point of view,
to such holders.
Jefferies’ opinion sets forth, among other things, the
assumptions made, procedures followed, matters considered and
limitations on the scope of the review undertaken by Jefferies
in rendering its opinion. Jefferies’ opinion was directed
to the Valeant board of directors and addresses only the
fairness from a financial point of view of the exchange ratio,
together with the pre-merger special dividend, as of the date of
the opinion. It does not address any other aspects of the merger
and does not constitute a recommendation as to how any holder of
Valeant common stock should vote on the merger or any matter
related thereto.
The full text of the written opinion of Jefferies is attached to
this joint proxy statement/prospectus as Annex D. Valeant
encourages its stockholders to read the opinion carefully and in
its entirety.
Board
of Directors and Management After the Merger (see
page 90)
Under the terms of the merger agreement, upon the effective time
of the merger, Mr. Pearson (currently Chairman of the Valeant
board of directors and Chief Executive Officer of Valeant) will
be appointed the Chief Executive Officer of the combined
company, William M. Wells (currently Chief Executive Officer of
Biovail and a Biovail director) will be appointed as
non-executive Chairman of the board of directors of the combined
company, Robert A. Ingram (currently Lead Director of the
Valeant board of directors) will be appointed as Lead Director
of the board of directors of the combined company and Michael R.
Van Every (currently Chairman of the audit committee of the
Biovail board of directors and a resident Canadian) will
continue as Chairman of the audit committee of the board of
directors of the combined company.
Under the terms of the merger agreement, upon the effective time
of the merger, the board of directors of the combined company
will consist of Messrs. Pearson, Wells, Ingram, Van Every,
three additional directors selected by Valeant, three additional
directors selected by Biovail (one of whom will be a resident
Canadian) and one independent director who is recruited by a
search firm mutually retained by Valeant and Biovail, which
director shall be selected by Valeant from a list of candidates
presented by such firm, shall be subject to the approval of
Biovail and shall be a resident Canadian.
Biovail has selected Dr. Laurence E. Paul, Mr. Robert
N. Power and Mr. Lloyd M. Segal (who is a resident
Canadian) to continue as members of the board of directors of
the combined company.
Valeant has selected Theo Melas-Kyriazi, G. Mason Morfit and
Norma A. Provencio to serve as members of the board of directors
of the combined company.
Financial
Interests of Biovail Directors and Officers in the Merger (see
page 92)
Biovail’s directors and executive officers have interests
in the merger that are in addition to those of Biovail
shareholders generally. The Biovail board of directors was aware
of and considered these potential interests, among other
matters, in evaluating the merger agreement and the merger, and
in recommending to you that you approve the issuance of Biovail
common shares necessary to complete the merger and the issuance
of such other Biovail common shares as contemplated by the
merger agreement and the amendment of Biovail’s articles of
continuance to effect the name change. For the Biovail directors
who will not remain on the board of directors of the combined
company following the merger, these interests include redemption
in cash of their deferred share units within 30 days
following the completion of the merger, in the case of United
States directors, and in one or two payments on dates chosen by
the director prior to December 15, 2011, in the case of
Canadian directors. For Biovail executive officers, these
interests include, in the event of certain terminations of
employment following the merger, enhanced severance payments and
accelerated vesting of equity compensation. In addition, Mr.
Wells has entered into an agreement with Biovail setting forth
the terms of his role as non-executive Chairman of the board of
directors of the combined company following the merger and
providing for certain additional responsibilities during a
transition period following the merger. In connection with the
merger, the
6
Biovail board of directors has taken action so that, for any
executive officer whose employment is terminated while the
executive officer holds any performance-based restricted share
units that are scheduled to vest upon such termination, the
extent of the vesting of such performance-based restricted share
units will be determined based on performance during the
applicable performance period through termination of employment
and, if termination of employment occurs prior to payment of the
post-merger special dividend, for purposes of determining the
multiplier used to determine the number of such
performance-based restricted share units that will vest, the
price per Biovail common share on the day of termination of
employment will be increased by the value of the
post-merger
special dividend. In addition, Biovail will consider the merger
a change in control for purposes of employment agreements of its
executive officers, which would give rise to enhanced severance
benefits upon certain terminations of employment within
12 months following the change in control. Please see the
section titled “The Merger — Financial Interests
of Biovail Directors and Officers in the Merger” beginning
on page 92 for additional information about these interests.
Financial
Interests of Valeant Directors and Officers in the Merger (see
page 96)
Valeant’s directors and executive officers have interests
in the merger that are in addition to those of Valeant
stockholders generally. The Valeant board of directors was aware
of and considered these potential interests, among other
matters, in evaluating the merger agreement and the merger, and
in recommending to you that you adopt the merger agreement. For
the Valeant directors, these interests include settlement within
thirty days of the merger (and, in some cases, accelerated
vesting) of restricted stock units granted to them in 2010, and
for the Valeant directors who will not remain on the board of
directors of the combined company, settlement of all other
grants of restricted stock units on the first anniversary of the
merger. The Valeant executive officers hold Valeant stock
options and time-based and performance-based restricted stock
units, which will be treated as described in “The
Merger— Treatment of Valeant Restricted Stock Units
and Options” beginning on page 91. As described in
that section, Mr. Pearson has agreed to waive accelerated
vesting of a portion of his outstanding equity awards. In
addition, in connection with entering into the merger agreement,
Mr. Pearson has entered into an employment agreement with
Biovail and Biovail Laboratories International SRL, a wholly
owned subsidiary of Biovail, (“BLS”), which will
become effective on the closing of the merger and which will
supersede Mr. Pearson’s employment agreement with
Valeant. In connection with entering into the new employment
agreement and agreeing to waive existing rights to acceleration,
and to further incentivize Mr. Pearson, Mr. Pearson
will be granted a performance-based restricted share unit award
under which Mr. Pearson will be eligible to earn additional
shares of the combined company upon achievement of compound
annual total shareholder return between 45% and 60% through
February 1, 2014, measured off a base price of $13.37 per
share. Each of Messrs. De Silva, Min and Blott,
Dr. Chaudhuri and Ms. Karlson (who are other Valeant
executive officers) are parties to severance agreements or offer
letters that provide benefits in the event of a termination of
employment following the merger. Please see the section titled
“The Merger — Financial Interests of Valeant
Directors and Officers in the Merger” beginning on
page 96 for additional information about these interests.
Regulatory
Approvals Required for the Merger and Other Regulatory Matters
(see page 110)
Valeant and Biovail have agreed to use their reasonable best
efforts to obtain all governmental and regulatory approvals
required to complete the transactions contemplated by the merger
agreement.
United States Antitrust.
Under the Hart Scott
Rodino Antitrust Improvements Act of 1976, as amended (the
“HSR Act”), Biovail and Valeant were required to file
notifications with the Federal Trade Commission (the
“FTC”) and the Antitrust Division of the Department of
Justice and observe a mandatory pre-merger waiting period before
completing the merger. Valeant and Biovail each filed its
required HSR Act notification and report form with respect to
the merger on July 6, 2010. On July 22, 2010, the FTC
granted early termination of the waiting period under the HSR
Act with respect to the proposed merger contemplated by the
merger agreement.
Canada.
The merger is not notifiable under
Part IX of the Competition Act (Canada). The Commissioner
of Competition can, however, apply to the Competition Tribunal
on substantive grounds (namely whether the merger prevents or
lessens competition substantially or is likely to do so) for a
remedial order under Section 92 of the Competition Act
(Canada) at any time before the merger has been completed or, if
completed, within one year after it was substantially completed.
7
Other Jurisdictions.
In Poland, under the
Competition and Consumer Protection Act, Biovail is required to
submit a pre-merger notification. On July 2, 2010, Biovail
filed its notification with the Polish Competition and Consumer
Protection Office (the “CCPO”). In Mexico, under the
Federal Economic Competition Law, Biovail was required to submit
a pre-merger notification to the Mexican Federal Competition
Commission (the “MFCC”). On July 8, 2010, Biovail
filed its notification with the MFCC. On July 21, 2010, the
MFCC cleared the transaction.
Completion
of the Merger (see page 116)
Valeant and Biovail currently expect to complete the merger
before the end of 2010, subject to receipt of required
shareholder and regulatory approvals and the satisfaction or
waiver of the financing and other conditions to the merger
described in the merger agreement.
Conditions
to Completion of the Merger (see page 125)
As more fully described in this joint proxy statement/prospectus
and in the merger agreement, the completion of the merger
depends on a number of conditions being satisfied or, where
legally permissible, waived. These conditions include, among
others, the receipt of the approval of Biovail shareholders to
issue Biovail common shares necessary to complete the merger and
to issue such other common shares as contemplated by the merger
agreement and to amend Biovail’s articles of continuance to
effect the name change, the adoption by Valeant stockholders of
the merger agreement, the receipt of all necessary regulatory
approvals (including under antitrust and competition laws), the
consummation of the financing (or alternative financing), the
payment of the pre-merger special dividend, New York Stock
Exchange (“NYSE”) and Toronto Stock Exchange
(“TSX”) approval of the listing of the Biovail common
shares to be issued in connection with the merger, the accuracy
of representations and warranties made by the parties in the
merger agreement (subject to certain materiality standards),
performance by the parties of their obligations under the merger
agreement (subject to certain materiality standards), the
absence of a material adverse effect on each party, and the
receipt of legal opinions by each party regarding the
qualification of the merger as a reorganization with no gain
recognition to U.S. holders of Valeant common stock for
U.S. Federal income tax purposes. We cannot be certain
when, or if, the conditions to the merger will be satisfied or
waived, or that the merger will be completed.
Termination
of the Merger Agreement (see page 126)
The merger agreement may be terminated at any time prior to the
effective time of the merger under the following circumstances:
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•
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by mutual written consent of Valeant and Biovail; or
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•
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by either Valeant or Biovail if:
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•
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the merger is not completed by February 28, 2011;
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•
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certain legal restraints regarding the merger become final and
nonappealable;
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•
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Biovail shareholders fail to approve the issuance of Biovail
common shares necessary to complete the merger and the issuance
of such other common shares as contemplated by the merger
agreement or the amendment to Biovail’s articles of
continuance to effect the name change;
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•
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Valeant stockholders fail to adopt the merger agreement; or
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•
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the other party breaches or fails to perform any of its
covenants and agreements contained in the merger agreement or
any of the other party’s representations and warranties
fails to be true and correct, in each case in a way that would
entitle the party seeking to terminate the merger agreement not
to complete the merger, subject to the right of the breaching
party to cure the breach.
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Either party may also terminate the merger agreement prior to
the applicable shareholder approval of the other party being
obtained if the board of directors of the other party withdraws
or modifies in any adverse manner, or proposes publicly to
withdraw or modify in any adverse manner, its approval or
recommendation with respect to the merger, or in the case of the
board of directors of Biovail, the merger or the other matters
to be voted on by its
8
stockholders/shareholders in connection with the merger, or
approves or recommends, or proposes publicly to approve,
recommend or declare advisable, any alternative transaction with
a third party.
Expenses
and Termination Fees; Liability for Breach (see
page 127)
Generally, all fees and expenses incurred in connection with the
merger and the transactions contemplated by the merger agreement
will be paid by the party incurring those expenses. However,
upon termination of the merger agreement under certain
circumstances, Biovail may be obligated to pay Valeant a
termination fee of $100 million and, in other similar
circumstances, Valeant may be obligated to pay Biovail a
termination fee of $100 million.
Appraisal/Dissent
Rights (see page 169)
Under the merger agreement, Valeant stockholders of record who
do not vote in favor of the adoption of the merger agreement and
who otherwise comply with the procedures for exercising
appraisal rights under Delaware law will be entitled to seek
appraisal rights in connection with the merger and, if the
merger is completed, obtain payment in cash of the fair value of
their shares of Valeant common stock, as determined by the
Delaware Chancery Court, instead of the merger consideration. To
exercise appraisal rights, Valeant stockholders of record must
strictly follow the procedures described by Delaware law.
The shareholders of Biovail are not entitled to dissent rights
in connection with the merger under the CBCA.
The
Biovail Special Meeting
Date,
Time and Place (see page 33)
The special meeting of Biovail shareholders will be held at the
Canadian Broadcasting Centre, Glenn Gould Studio, 250 Front
Street West, Toronto, Ontario on September 27, 2010, at
10:00 a.m., local time.
Purpose
of the Biovail Special Meeting (see page 33)
At the Biovail special meeting, Biovail shareholders will be
asked to vote on the following proposals (the “Biovail
proposals”):
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to consider and if thought fit, approve with or without
variation, an ordinary resolution authorizing Biovail to issue
such number of common shares in the capital of Biovail as is
necessary to complete the merger with Valeant, being 1.7809
Biovail common shares for each share of Valeant common stock,
and such other common shares in the capital of Biovail as
contemplated by the merger agreement (the “share issuance
resolution”);
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•
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conditional upon approval of the foregoing resolution, to
consider and, if deemed advisable, pass, with or without
variation, a special resolution to amend the articles of
continuance of Biovail to change the name of Biovail from
“Biovail Corporation” to “Valeant Pharmaceuticals
International, Inc.” (the “name change
resolution”); and
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•
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to transact such further or other business as may properly come
before the Biovail special meeting and any adjournments or
postponements thereof.
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Completion of the merger is conditioned on approval of the share
issuance resolution and the name change resolution.
Share
Issuance Resolution
Pursuant to the rules of the TSX, securityholder approval is
required in instances where the number of securities issued or
issuable in payment of the purchase price in a transaction such
as the merger exceeds 25% of the number of securities of the
listed issuer which are outstanding, on a non-diluted basis.
Because the merger agreement contemplates the issuance of
greater than 25% of the current outstanding Biovail common
shares on a non-diluted basis, the rules of the TSX require that
Biovail obtain approval of the share issuance resolution by the
holders of a majority of the Biovail common shares represented
in person or by proxy at the Biovail special meeting.
9
As of the close of business on the date of this joint proxy
statement/prospectus, there were approximately 158,646,462
outstanding Biovail common shares. If the merger is completed,
Biovail currently estimates that it will issue or reserve for
issuance approximately 170,177,852 Biovail common shares (equal
to approximately 107% of Biovail’s current issued and
outstanding common shares) pursuant to or as contemplated by the
merger agreement, including approximately (a) 137,837,582
Biovail common shares issuable in exchange for shares of Valeant
common stock in the merger, (b) 24,256,911 Biovail common
shares issuable in respect of Valeant stock options
(approximately 13,419,867) and Valeant restricted stock units
(approximately 10,837,044) that Biovail has agreed to assume
pursuant to the merger agreement and (c) 8,083,358 Biovail
common shares into which the 4% Convertible Notes will be
convertible.
Biovail
Record Date; Shares Entitled to Vote (see
page 34)
Only holders of Biovail common shares at the close of business
on August 18, 2010, the record date for the Biovail special
meeting, will be entitled to notice of, and to vote at, the
Biovail special meeting or any adjournments or postponements
thereof. On the record date, there were outstanding a total of
approximately 158,646,462 Biovail common shares. Each
outstanding Biovail common share is entitled to one vote on each
proposal and any other matter properly coming before the Biovail
special meeting.
Required
Vote (see page 34)
The required votes to approve the Biovail proposals are as
follows:
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•
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The share issuance resolution will be approved if a majority of
the votes cast in person or by proxy on the proposal vote in
favor of the proposal.
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•
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The name change resolution will be approved if two-thirds of the
votes cast in person or by proxy on the proposal vote in favor
of the proposal.
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Share
Ownership by and Voting Rights of Biovail’s Directors and
Executive Officers (see page 34)
As of the close of business on the Biovail record date,
Biovail’s directors and executive officers and their
affiliates beneficially owned and had the right to vote 211,108
Biovail common shares at the Biovail special meeting, which
represents approximately 0.13% of the Biovail common shares
entitled to vote at the Biovail special meeting. It is expected
that Biovail’s directors and executive officers will vote
“FOR” the share issuance resolution and
“FOR” the name change resolution.
Failure
to Vote and Broker Non-Votes (see page 34)
If you are a Biovail shareholder and fail to vote or fail to
instruct your broker, bank or other nominee to vote, it will
have no effect on any of the Biovail proposals, assuming a
quorum is present.
The
Valeant Special Meeting
Date,
Time and Place (see page 37)
The special meeting of Valeant stockholders will be held at 14
Main Street, Suite 140, Madison, New Jersey 07940
on September 27, 2010, at 10:00 a.m., local time.
Purpose
of the Valeant Special Meeting (see page 37)
At the Valeant special meeting, Valeant stockholders will be
asked to vote on the following proposals (the “Valeant
proposals”):
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•
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to adopt the merger agreement; and
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•
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to approve the adjournment of the Valeant special meeting, if
necessary or appropriate to solicit additional proxies if there
are not sufficient votes to adopt the merger agreement at the
time of the Valeant special meeting.
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10
Valeant
Record Date; Stock Entitled to Vote (see
page 37)
Only Valeant stockholders of record at the close of business on
August 18, 2010, the record date for the Valeant special
meeting, will be entitled to receive notice of, and to vote at,
the Valeant special meeting or any adjournments or postponements
thereof. As of the close of business on the Valeant record date
of August 18, 2010, there were approximately
76,696,012 shares of Valeant common stock outstanding and
entitled to vote at the Valeant special meeting. Each holder of
Valeant common stock is entitled to one vote for each share of
common stock owned as of the Valeant record date.
Required
Vote (see page 38)
The required votes to approve the Valeant proposals are as
follows:
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To adopt the merger agreement, holders of a majority of the
shares of Valeant common stock outstanding and entitled to vote
thereon must vote in favor of adoption of the merger agreement.
Valeant cannot complete the merger unless its stockholders adopt
the merger agreement.
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•
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To approve the adjournment of the Valeant special meeting, if
necessary or appropriate to solicit additional proxies if there
are not sufficient votes to adopt the merger agreement at the
time of the Valeant special meeting, the affirmative vote of
holders of a majority of the shares of Valeant common stock
present in person or represented by proxy at the Valeant special
meeting and entitled to vote thereon is required.
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Stock
Ownership by and Voting Rights of Valeant’s Directors and
Executive Officers (see page 37)
At the close of business on the Valeant record date,
Valeant’s directors and executive officers and their
affiliates beneficially owned and had the right to vote
15,853,000 shares of Valeant common stock at the Valeant
special meeting (which includes shares of which Mr. Morfit
may be deemed to share beneficial ownership, as a member of the
management board of ValueAct Holdings GP, LLC, which entity
controls the general partner and the manager of ValueAct Capital
Master Fund, L.P.), which represents approximately 21% of the
Valeant common stock entitled to vote at the Valeant special
meeting. It is expected that Valeant’s directors and
executive officers will vote their shares “FOR” the
adoption of the merger agreement and “FOR” the
adjournment of the Valeant special meeting, if necessary or
appropriate to solicit additional proxies if there are not
sufficient votes to adopt the merger agreement at the time of
the Valeant special meeting.
Failure
to Vote, Broker Non-Votes and Abstentions (see
page 38)
If you are a Valeant stockholder and fail to vote, fail to
instruct your broker, bank or other nominee to vote, or mark
your proxy or voting instructions to abstain, this will have the
effect of a vote against the proposal to adopt the merger
agreement. If you are a Valeant stockholder and are present in
person at the Valeant special meeting and abstain from voting or
mark your proxy or voting instructions to abstain, this will
have the effect of a vote “against” the proposal to
approve the adjournment of the Valeant special meeting. If you
are a Valeant stockholder and are not present in person at the
Valeant special meeting and do not respond by proxy, this will
have no effect on the vote held on the proposal to approve the
adjournment of the Valeant special meeting. Failure to instruct
your broker, bank or other nominee to vote will also have no
effect on the vote held on this proposal.
Litigation
Related to the Merger (see page 112)
Since the merger was announced on June 21, 2010, Valeant,
certain Valeant directors, Biovail, BAC and Beach Merger Corp.
have been named as defendants in one or more of the four
purported stockholder class actions filed in the Superior Court
of California, County of Orange by stockholders of Valeant
challenging the proposed merger. The actions seek, among other
things, to enjoin the defendants from completing the merger on
the agreed upon terms. Three other purported stockholder class
actions have been filed in the Court of Chancery for the State
of Delaware that also bring claims against Valeant,
Valeant’s directors, Biovail, BAC and Beach Merger Corp.
and similarly seek to enjoin the defendants from completing the
merger.
11
Voting
Agreement (see page 128)
As a condition to Biovail’s willingness to enter into the
merger agreement, Valeant and Biovail entered into a voting
agreement (the “voting agreement”), dated as of
June 20, 2010, with ValueAct Capital Master Fund, L.P.
(“ValueAct Capital”), pursuant to which ValueAct
Capital agreed, upon the terms and subject to the conditions set
forth in the voting agreement, to (1) vote its shares of
Valeant common stock for the merger and against any competing
transaction that may be proposed and (2) not sell or
otherwise transfer its shares, except in connection with the
merger. As of June 20, 2010, ValueAct Capital beneficially
owned shares of Valeant common stock equal to approximately
20.0% of the outstanding shares of Valeant common stock.
Commitment
Letter (see page 129)
Valeant and Biovail have entered into a commitment letter (the
“commitment letter”), dated as of June 20, 2010,
with Goldman Sachs Bank USA (“GS Bank”), Goldman Sachs
Lending Partners LLC (“GSLP”), Jefferies Group, Inc.
(“Jefferies Group”) and Morgan Stanley Senior Funding,
Inc. (“Morgan Stanley Senior Funding”) (such financial
institutions being referred to as the “commitment
parties”), pursuant to which the commitment parties have
committed to provide up to $3.022 billion in loans for the
purposes of (1) refinancing Valeant’s existing credit
facility, 8.375% Senior Notes due 2016 and
7.625% Senior Notes due 2020, (2) funding the
pre-merger special dividend and certain expenses incurred in
connection with the merger, (3) providing post-closing
liquidity to the combined company and (4) funding the
post-merger special dividend.
The commitment letter provides for the following facilities:
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Revolver: $250 million under a senior secured revolving
credit facility;
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•
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Term Loan A: $500 million under a senior secured term loan
facility; and
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•
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Term Loan B: up to $2.272 billion under a senior secured
term loan facility ($300 million of which is a delayed draw
directly linked to the payment of the post-merger special
dividend).
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The financing commitments of the commitment parties are subject
to various conditions set forth in the commitment letter.
Valeant, Biovail and the commitment parties are currently
finalizing the structure of the financing to be incurred in
connection with the transaction, including the form of the debt
to be incurred as well as the parties that will incur such
indebtedness. It is expected that Valeant, Biovail and the
commitment parties will enter into definitive loan documents
with respect to the financing as contemplated by the commitment
letter or with such changes to which the parties may agree prior
to the closing of the merger.
12
Selected
Historical Consolidated Financial Data of Biovail
The following selected consolidated financial information of
Biovail as of December 31, 2009 and 2008 and for the fiscal
years ended December 31, 2009, 2008 and 2007, has been
derived from the audited financial statements appearing in
Biovail’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009, incorporated
by reference in this joint proxy statement/prospectus. The
selected financial information as of December 31, 2007,
2006 and 2005 and for the fiscal years ended December 31,
2006 and 2005 was derived from historical financial statements
not incorporated by reference in this joint proxy
statement/prospectus.
The selected consolidated financial data of Biovail as of and
for the six months ended June 30, 2010 and 2009 are derived
from Biovail’s unaudited consolidated financial statements
and related notes contained in its Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2010, which is
incorporated by reference in this joint proxy
statement/prospectus. In the opinion of Biovail’s
management, all adjustments necessary for a fair presentation of
the interim three-month financial information have been
included. The information set forth below is only a summary and
is not necessarily indicative of the results of future
operations of Biovail or the combined company, and you should
read the following information together with Biovail’s
audited consolidated financial statements, the notes related
thereto and the section entitled “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” contained in Biovail’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009, and
Biovail’s unaudited consolidated financial statements, the
notes related thereto and the section entitled
“Management’s Discussion and Analysis of Financial
Condition and Results of Operations” contained in
Biovail’s Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2010, which are
incorporated by reference in this joint proxy
statement/prospectus. For more information, see the section
entitled “Where You Can Find More Information”
beginning on page 175.
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As of and for the
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Six Months Ended
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June 30,
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June 30,
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As of and for the Year Ended December 31,
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2010
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2009
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2009
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2008
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2007
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2006
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2005
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(USD in thousands, except per share amounts and where
noted)
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Continuing Operations:
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Net revenue
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$
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458,406
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$
|
366,854
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$
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820,430
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$
|
757,178
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$
|
842,818
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$
|
1,067,722
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$
|
938,343
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Net income
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$
|
30,819
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(1)
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$
|
63,093
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(2)
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$
|
176,455
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(3)
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$
|
199,904
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(4)
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|
$
|
195,539
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(5)
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|
$
|
211,626
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(6)
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$
|
246,440
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(8)
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Basic earnings (loss) per share:
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Continuing operations
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|
$
|
0.19
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(1)
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|
$
|
0.40
|
(2)
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|
$
|
1.11
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(3)
|
|
$
|
1.25
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(4)
|
|
$
|
1.22
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(5)
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|
$
|
1.35
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(7)
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|
$
|
1.61
|
(9)
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Discontinued operations
|
|
$
|
—
|
|
|
$
|
—
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|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.03
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)
|
|
$
|
(0.07
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)
|
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Total basic earnings per share
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$
|
0.19
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(1)
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|
$
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0.40
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(2)
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|
$
|
1.11
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(3)
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|
$
|
1.25
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(4)
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|
$
|
1.22
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(5)
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$
|
1.32
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(6)
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$
|
1.54
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(8)
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Diluted earnings (loss) per share:
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|
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|
|
|
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|
|
|
|
|
|
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Continuing operations
|
|
$
|
0.19
|
(1)
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|
$
|
0.40
|
(2)
|
|
$
|
1.11
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(3)
|
|
$
|
1.25
|
(4)
|
|
$
|
1.22
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(5)
|
|
$
|
1.35
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(7)
|
|
$
|
1.61
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(9)
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Discontinued operations
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.03
|
)
|
|
$
|
(0.07
|
)
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
|
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Total diluted earnings per share
|
|
$
|
0.19
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(1)
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$
|
0.40
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(2)
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|
$
|
1.11
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(3)
|
|
$
|
1.25
|
(4)
|
|
$
|
1.22
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(5)
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|
$
|
1.32
|
(6)
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|
$
|
1.54
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(8)
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Percent of net revenue:
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|
|
|
|
|
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|
|
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|
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|
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|
|
|
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Cost of goods sold
|
|
|
27
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%
|
|
|
26
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%
|
|
|
25
|
%
|
|
|
26
|
%
|
|
|
27
|
%
|
|
|
20
|
%
|
|
|
21
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%
|
Research and development
|
|
|
23
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%
|
|
|
16
|
%
|
|
|
15
|
%
|
|
|
12
|
%
|
|
|
14
|
%
|
|
|
9
|
%
|
|
|
9
|
%
|
Selling, general and administrative
|
|
|
19
|
%
|
|
|
25
|
%
|
|
|
22
|
%
|
|
|
25
|
%
|
|
|
19
|
%
|
|
|
22
|
%
|
|
|
24
|
%
|
Amortization of intangible assets
|
|
|
15
|
%
|
|
|
10
|
%
|
|
|
13
|
%
|
|
|
7
|
%
|
|
|
6
|
%
|
|
|
5
|
%
|
|
|
7
|
%
|
Restructuring costs
|
|
|
1
|
%
|
|
|
3
|
%
|
|
|
2
|
%
|
|
|
9
|
%
|
|
|
—
|
|
|
|
1
|
%
|
|
|
2
|
%
|
Acquisition-related costs
|
|
|
2
|
%
|
|
|
2
|
%
|
|
|
1
|
%
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Legal settlements, net of insurance recoveries
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
%
|
|
|
4
|
%
|
|
|
11
|
%
|
|
|
1
|
%
|
|
|
—
|
|
Balance sheet data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,029,723
|
|
|
$
|
2,058,370
|
|
|
$
|
2,067,044
|
|
|
$
|
1,623,565
|
|
|
$
|
1,782,115
|
|
|
$
|
2,192,442
|
|
|
$
|
2,036,820
|
|
Long-term obligations, including current portion
|
|
$
|
319,223
|
|
|
$
|
450,663
|
|
|
$
|
326,085
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
410,525
|
|
|
$
|
436,058
|
|
Shareholders’ equity (net assets)
|
|
$
|
1,360,683
|
|
|
$
|
1,254,132
|
|
|
$
|
1,354,372
|
|
|
$
|
1,201,599
|
|
|
$
|
1,297,819
|
|
|
$
|
1,302,257
|
|
|
$
|
1,228,364
|
|
Common share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per share
|
|
$
|
0.185
|
|
|
$
|
0.465
|
|
|
$
|
0.65
|
|
|
$
|
1.50
|
|
|
$
|
1.50
|
|
|
$
|
1.00
|
|
|
$
|
0.50
|
|
Number of common shares issued and outstanding (in
000’s)
|
|
|
158,584
|
|
|
|
158,228
|
|
|
|
158,311
|
|
|
|
158,216
|
|
|
|
161,024
|
|
|
|
160,444
|
|
|
|
159,588
|
|
13
|
|
|
(1)
|
|
Includes charges of $61,245 for in-process research and
development (“IPR&D”); $7,577 for
acquisition-related costs; $3,494 for restructuring costs; $781
for SEC/OSC independent consultant and related costs; and $547
for impairment losses on debt securities.
|
|
|
|
(2)
|
|
Includes charges of $30,414 for IPR&D; $12,715 for
restructuring costs; $5,596 for acquisition-related costs;
$4,324 for impairment losses on debt securities; $2,973 for
SEC/OSC independent consultant and related costs; $629 for proxy
contest costs; $537 for write-down of deferred financing costs;
and $241 for legal settlements. Those charges were partially
offset by a $22,000 gain on auction rate security settlement;
and a gain of $338 on disposal of investments.
|
|
|
|
(3)
|
|
Includes charges of $59,354 for IPR&D; $19,065 for
restructuring costs; $10,968 for loss on sale and leaseback of
assets; $6,191 for legal settlements; $5,596 for
acquisition-related costs; $2,887 for SEC/OSC independent
consultant costs; $1,028 for proxy contest costs; $5,210 for
impairment losses on debt and equity securities; and $537 for
write-down of deferred financing costs. Those charges were
partially offset by a $26,000 deferred income tax benefit
related to a reduction in a valuation allowance; a $22,000 gain
on auction rate security settlement; and a gain of $804 on
disposal of investment.
|
|
(4)
|
|
Includes charges of $70,202 for restructuring costs; $32,565 for
legal settlements; $13,606 for management succession and proxy
contest costs; $9,869 for impairment losses on debt and equity
securities; and an equity loss of $1,195. Those charges were
partially offset by a $90,000 deferred income tax benefit
related to a reduction in a valuation allowance; and a gain of
$6,534 on disposal of investments.
|
|
(5)
|
|
Includes charges of $95,114 for legal settlements (net of
insurance recoveries); $9,910 for intangible asset impairments;
$668 for restructuring costs; $12,463 for loss on early
extinguishment of debt; $8,949 for impairment losses on debt and
equity securities; and an equity loss of $2,528. Those charges
were partially offset by a $1,735 contract recovery; and a gain
of $24,356 on disposal of investments.
|
|
(6)
|
|
Includes charges of $143,000 for intangible asset impairments
(net of gain on disposal of $4,000); $54,800 for contract
losses; $15,126 for restructuring costs; $14,400 for legal
settlements; an equity loss of $529; and $1,084 for asset
impairments of discontinued operation.
|
|
(7)
|
|
Includes charges of $143,000 for intangible asset impairments
(net of gain on disposal of $4,000); $54,800 for contract
losses; $15,126 for restructuring costs; $14,400 for legal
settlements; and an equity loss of $529.
|
|
(8)
|
|
Includes charges of $25,833 for intangible asset impairments;
$19,810 for restructuring costs; $4,862 for write-off of
inventory; $3,397 for loss on impairment of investments; an
equity loss of $1,160; and $5,570 for asset impairments of
discontinued operation.
|
|
(9)
|
|
Includes charges of $25,833 for intangible asset impairments;
$19,810 for restructuring costs; $4,862 for write-off of
inventory; $3,397 for loss on impairment of investments; and an
equity loss of $1,160.
|
14
Selected
Historical Consolidated Financial Data of Valeant
The following selected consolidated financial information of
Valeant as of December 31, 2009 and 2008 and for the years
ended December 31, 2009, 2008 and 2007, has been derived
from the audited financial statements appearing in
Valeant’s Annual Report on
Form 10-K
for the year ended December 31, 2009, incorporated by
reference in this joint proxy statement/prospectus. The selected
financial information as of December 31, 2007, 2006 and
2005 and for the years ended December 31, 2006 and 2005 was
derived from historical financial statements not incorporated by
reference in this joint proxy statement/prospectus.
The selected consolidated financial data of Valeant as of and
for the six months ended June 30, 2010 and 2009 are
derived from Valeant’s unaudited consolidated financial
statements and related notes contained in its Quarterly Report
on
Form 10-Q
for the quarterly period ended June 30, 2010, which is
incorporated by reference in this joint proxy
statement/prospectus. In the opinion of Valeant’s
management, all adjustments necessary for a fair presentation of
the interim six-month financial information have been included.
The information set forth below is only a summary and is not
necessarily indicative of the results of future operations of
Valeant or the combined company, and you should read the
following information together with Valeant’s audited
consolidated financial statements, the notes related thereto and
the section entitled “Management’s Discussion and
Analysis of Financial Condition and Results of Operations”
contained in Valeant’s Annual Report on
Form 10-K
for the year ended December 31, 2009, and Valeant’s
unaudited consolidated financial statements, the notes related
thereto and the section entitled “Management’s
Discussion and Analysis of Financial Condition and Results of
Operations” contained in Valeant’s Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2010, which are
incorporated by reference in this joint proxy
statement/prospectus. For more information, see the section
entitled “Where You Can Find More Information”
beginning on page 175.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
June 30,
|
|
|
Year Ended December 31,
|
|
|
|
2010(1)
|
|
|
2009
|
|
|
2009(1)
|
|
|
2008(1)
|
|
|
2007
|
|
|
2006
|
|
|
2005(1)
|
|
|
|
(USD in thousands except per share data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales
|
|
$
|
423,965
|
|
|
$
|
319,698
|
|
|
$
|
710,761
|
|
|
$
|
593,165
|
|
|
$
|
603,051
|
|
|
$
|
603,810
|
|
|
$
|
546,429
|
|
Service revenue
|
|
|
9,356
|
|
|
|
12,344
|
|
|
|
22,389
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Alliance revenue
|
|
|
54,244
|
|
|
|
37,579
|
|
|
|
97,311
|
|
|
|
63,812
|
|
|
|
86,452
|
|
|
|
81,242
|
|
|
|
91,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
487,565
|
|
|
|
369,621
|
|
|
|
830,461
|
|
|
|
656,977
|
|
|
|
689,503
|
|
|
|
685,052
|
|
|
|
638,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
110,217
|
|
|
|
87,830
|
|
|
|
199,349
|
|
|
|
(172,680
|
)
|
|
|
20,145
|
|
|
|
3,522
|
|
|
|
(92,838
|
)
|
Provision (benefit) for income taxes(2)
|
|
|
42,378
|
|
|
|
23,996
|
|
|
|
(58,270
|
)
|
|
|
34,688
|
|
|
|
13,535
|
|
|
|
36,577
|
|
|
|
67,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
67,839
|
|
|
|
63,834
|
|
|
|
257,619
|
|
|
|
(207,368
|
)
|
|
|
6,610
|
|
|
|
(33,055
|
)
|
|
|
(159,872
|
)
|
Income (loss) from discontinued operations, net of tax(3)
|
|
|
432
|
|
|
|
223
|
|
|
|
6,125
|
|
|
|
166,548
|
|
|
|
(26,796
|
)
|
|
|
(37,332
|
)
|
|
|
(40,468
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
68,271
|
|
|
|
64,057
|
|
|
|
263,744
|
|
|
|
(40,820
|
)
|
|
|
(20,186
|
)
|
|
|
(70,387
|
)
|
|
|
(200,340
|
)
|
Less: Net income attributable to noncontrolling interest
|
|
|
2
|
|
|
|
2
|
|
|
|
3
|
|
|
|
7
|
|
|
|
2
|
|
|
|
3
|
|
|
|
287
|
|
Net income (loss) attributable to Valeant
|
|
$
|
68,269
|
|
|
$
|
64,055
|
|
|
$
|
263,741
|
|
|
$
|
(40,827
|
)
|
|
$
|
(20,188
|
)
|
|
$
|
(70,390
|
)
|
|
$
|
(200,627
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income (loss) per share attributable to Valeant:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations attributable to Valeant
|
|
$
|
0.87
|
|
|
$
|
0.77
|
|
|
$
|
3.15
|
|
|
$
|
(2.37
|
)
|
|
$
|
0.07
|
|
|
$
|
(0.35
|
)
|
|
$
|
(1.74
|
)
|
Income (loss) from discontinued operations attributable to
Valeant
|
|
|
0.01
|
|
|
|
—
|
|
|
|
0.07
|
|
|
|
1.90
|
|
|
|
(0.29
|
)
|
|
|
(0.40
|
)
|
|
|
(0.45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share attributable to Valeant
|
|
$
|
0.88
|
|
|
$
|
0.77
|
|
|
$
|
3.22
|
|
|
$
|
(0.47
|
)
|
|
$
|
(0.22
|
)
|
|
$
|
(0.75
|
)
|
|
$
|
(2.19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
June 30,
|
|
|
Year Ended December 31,
|
|
|
|
2010(1)
|
|
|
2009
|
|
|
2009(1)
|
|
|
2008(1)
|
|
|
2007
|
|
|
2006
|
|
|
2005(1)
|
|
|
|
(USD in thousands except per share data)
|
|
|
Diluted income (loss) per share attributable to Valeant:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations attributable to Valeant
|
|
$
|
0.82
|
|
|
$
|
0.76
|
|
|
$
|
3.07
|
|
|
$
|
(2.37
|
)
|
|
$
|
0.07
|
|
|
$
|
(0.35
|
)
|
|
$
|
(1.74
|
)
|
Income (loss) from discontinued operations attributable to
Valeant
|
|
|
0.01
|
|
|
|
0.01
|
|
|
|
0.07
|
|
|
|
1.90
|
|
|
|
(0.28
|
)
|
|
|
(0.40
|
)
|
|
|
(0.45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share attributable to Valeant
|
|
$
|
0.83
|
|
|
$
|
0.77
|
|
|
$
|
3.14
|
|
|
$
|
(0.47
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.75
|
)
|
|
$
|
(2.19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per share of common stock
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.24
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of June 30,
|
|
|
As of December 31,
|
|
|
|
2010
|
|
|
2009
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
(USD in thousands)
|
|
|
Balance Sheet Data
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
75,383
|
|
|
$
|
345,620
|
|
|
$
|
68,080
|
|
|
$
|
199,582
|
|
|
$
|
287,728
|
|
|
$
|
311,012
|
|
|
$
|
208,397
|
|
Working capital(4)
|
|
|
112,141
|
|
|
|
469,544
|
|
|
|
125,079
|
|
|
|
175,450
|
|
|
|
412,272
|
|
|
|
348,402
|
|
|
|
220,447
|
|
Net assets of discontinued operations(3)
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
272,047
|
|
|
|
282,251
|
|
|
|
307,096
|
|
Total assets
|
|
|
1,888,106
|
|
|
|
1,395,279
|
|
|
|
1,305,479
|
|
|
|
1,185,932
|
|
|
|
1,492,321
|
|
|
|
1,503,386
|
|
|
|
1,512,740
|
|
Total debt(5)
|
|
|
1,037,858
|
|
|
|
650,213
|
|
|
|
600,589
|
|
|
|
398,802
|
|
|
|
716,821
|
|
|
|
698,502
|
|
|
|
681,606
|
|
Stockholders’ equity
|
|
|
353,009
|
|
|
|
317,013
|
|
|
|
371,179
|
|
|
|
251,748
|
|
|
|
479,571
|
|
|
|
509,857
|
|
|
|
527,843
|
|
Notes to
Selected Financial Data:
|
|
|
(1)
|
|
The results of operations of Coria, DermaTech, Dow, Emo-Farm,
Tecnofarma, PFI, Dr. Renaud, Delta, another Brazilian
pharmaceutical company, Vital Science and Aton are included
since their respective acquisition dates of October 15,
2008; November 14, 2008; December 31, 2008;
April 29, 2009; July 31, 2009; October 6, 2009;
December 15, 2009; April 7, 2010; April 20, 2010;
May 19, 2010 and May 26, 2010. In connection with
Valeant’s acquisitions prior to 2009, portions of the
purchase price are allocated to acquired in-process research and
development (“IPR&D”) on projects that, as of the
acquisition date, had not yet reached technological feasibility
and had no alternative future use. In 2008, Valeant recorded
$185.8 million and $0.5 million of IPR&D expense
related to the acquisitions of Dow and Coria, respectively. In
2005, Valeant acquired Xcel for approximately
$280.0 million of which $126.4 million was allocated
to IPR&D costs and charged to expense.
|
|
|
|
(2)
|
|
The tax provision in 2005 included a net charge of
$27.4 million associated with an Internal Revenue Service
examination of Valeant’s U.S. tax returns for the
years 1997 to 2001 (including interest). The tax provision in
2007 includes a net credit of $21.5 million to partially
reverse the 2005 charge, as a result of resolving many of the
issues raised during the examination through an appeals process.
In 2007, 2006 and 2005, Valeant recorded valuation allowance
increases of $58.6 million, $33.1 million and
$44.5 million, respectively, against deferred tax assets to
recognize the uncertainty of realizing the benefits of
accumulated U.S. and state net operating losses and
credits. In 2007, the increase in the U.S. valuation
allowance was offset by liabilities for uncertain tax positions
of $60.1 million, with a net decrease of the valuation
allowance of $7.0 million. As of December 31, 2008,
the valuation allowances totaled $123.8 million. During
2008, based upon certain transactions including the sale of the
WEEMEA business and reversal of the intent to indefinitely
reinvest foreign earnings, Valeant released $23.6 million
and $4.5 million of the valuation allowance through
additional capital and goodwill, respectively. Additionally, the
tax provisions in 2005 and 2008 do not reflect tax benefits for
acquired IPR&D charged to expense. The tax benefit in 2009
includes $102.5 million related to the partial release of
valuation allowance in the U.S. as Valeant determined that
it is more likely than not that it would utilize the deferred
tax assets with the exception of state capital losses and
foreign net operating losses.
|
16
|
|
|
(3)
|
|
In September 2008 and September 2007, Valeant reclassified its
Western and Eastern Europe, Middle East and Africa business and
Infergen operations, respectively, as discontinued operations.
The consolidated financial statements have been reclassified for
all historical periods presented. In 2006, the loss from
discontinued operations was partly offset by the partial release
of $5.6 million from a reserve for an environmental
liability related to Valeant’s former biomedical facility.
In December 2005, Valeant acquired the U.S. and Canadian
rights to Infergen from InterMune. In this transaction,
$47.2 million was charged to acquired IPR&D. As a
result of the reclassification of the Infergen operations to
discontinued operations, this charge was classified as an
expense within discontinued operations.
|
|
|
|
(4)
|
|
Working capital at June 30, 2010, December 31, 2007
and December 31, 2006 excludes $1.6 million,
$325.9 million and $236.6 million, respectively, of
assets held for sale.
|
|
|
|
(5)
|
|
In May 2010, Valeant borrowed $30.0 million principal
amount under a senior secured term loan. In April 2010, Valeant
issued $400.0 million aggregate principal amount of senior
notes due 2020. In June 2009, Valeant issued $365.0 million
aggregate principal amount of senior notes due 2016. In 2009,
Valeant repurchased $173.5 million aggregate principal
amount of its 3.0% Convertible Notes and
4.0% Convertible Notes. In 2008, Valeant repurchased
$32.6 million aggregate principal amount of its
3.0% Convertible Notes. In July 2008, Valeant redeemed
$300.0 million aggregate principal amount of
7.0% Senior Notes due 2011.
|
17
Summary
Unaudited Pro Forma Condensed Combined Financial
Information
The following table shows summary unaudited pro forma condensed
combined financial information regarding the financial condition
and results of operations of the combined company after giving
effect to the merger. The summary unaudited pro forma condensed
combined financial statements have been prepared using the
acquisition method of accounting under existing accounting
principles generally accepted in the United States of America
(“U.S. GAAP”) under which the assets and
liabilities of Valeant will be recorded by Biovail at their
respective fair values as of the date the merger is completed.
The summary unaudited pro forma condensed combined balance sheet
assumes that the merger took place on June 30, 2010. The
summary unaudited pro forma condensed combined statements of
income for the fiscal year ended December 31, 2009, and for
the six months ended June 30, 2010, assume that the merger
took place on January 1, 2009, the first day of
Biovail’s 2009 fiscal year.
The summary unaudited pro forma condensed combined financial
information has been derived from and should be read in
conjunction with the more detailed unaudited pro forma condensed
combined financial statements of the combined company appearing
elsewhere in this joint proxy statement/prospectus and the
accompanying notes to the unaudited pro forma condensed combined
financial statements. In addition, the summary unaudited pro
forma condensed combined financial statements were based on and
should be read in conjunction with the historical consolidated
financial statements and related notes of both Valeant and
Biovail for the applicable periods, which have been incorporated
in this joint proxy statement/prospectus by reference. See
“Where You Can Find More Information” beginning on
page 175 and “Biovail Corporation and Valeant
Pharmaceuticals International Unaudited Pro Forma Condensed
Combined Financial Statements” beginning on page 134.
The summary unaudited pro forma condensed combined financial
information has been presented for informational purposes only.
The summary unaudited pro forma condensed combined financial
information is not necessarily indicative of what the combined
company’s financial position or results of operations
actually would have been had the merger been completed as of the
dates indicated. In addition, the summary unaudited pro forma
condensed combined financial information does not purport to
project the future financial position or operating results of
the combined company. Also, as explained in more detail in the
accompanying notes to the unaudited pro forma condensed combined
financial statements, this information excludes certain third
quarter events and the preliminary allocation of the pro forma
purchase price reflected in the unaudited pro forma condensed
combined financial information is subject to adjustment and may
vary significantly from the actual purchase price allocation
that will be recorded upon completion of the merger.
Furthermore, the determination of the final purchase price will
be based on the number of shares of Valeant common stock
outstanding immediately prior to completion of the merger and
the price of Biovail common shares immediately prior to
completion of the merger.
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended
|
|
|
Six Months Ended
|
|
|
|
December 31, 2009
|
|
|
June 30, 2010
|
|
|
|
($ in thousands, except per share amounts)
|
|
|
Summary Statement of Pro Forma Combined Income Data:
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,650,891
|
|
|
$
|
945,971
|
|
Income (loss) from continuing operations
|
|
$
|
72,967
|
|
|
$
|
6,658
|
|
Income (loss) from continuing operations attributable to
controlling interest per share — basic
|
|
$
|
0.24
|
|
|
$
|
0.02
|
|
Income (loss) from continuing operations attributable to
controlling interest per share — diluted
|
|
$
|
0.24
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
As of
|
|
|
|
June 30, 2010
|
|
|
|
($ in thousands)
|
|
|
Summary Pro Forma Combined Balance Sheet Data:
|
|
|
|
|
Total assets(1)
|
|
$
|
9,507,186
|
|
Long-term debt, including current portion
|
|
$
|
2,983,830
|
|
Total shareholders’ equity
|
|
$
|
4,736,032
|
|
|
|
|
(1)
|
|
Includes intangible assets and goodwill of $8,253,773.
|
18
Selected
Comparative Per Share Market Price and Dividend
Information
Valeant’s common stock is listed and traded on the NYSE
under the symbol “VRX.” Biovail’s common shares
are listed and traded on the NYSE and TSX under the symbol
“BVF.” The following table sets forth, for the fiscal
quarters indicated, the high and low sales price per share of
Valeant common stock and the high and low sales price per share
of Biovail common shares, in each case as reported on the NYSE.
In addition, the table also sets forth the quarterly cash
dividends per share declared by Valeant (excluding the
pre-merger special dividend) with respect to its common stock
and Biovail with respect to its common shares. On the Valeant
record date (August 18, 2010), there were approximately
76,696,012 shares of Valeant common stock outstanding. On
the Biovail record date (August 18, 2010), there were
approximately 158,646,462 Biovail common shares outstanding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valeant
|
|
|
Biovail
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
|
|
|
|
|
|
|
Dividends
|
|
|
|
High
|
|
|
Low
|
|
|
Declared
|
|
|
High
|
|
|
Low
|
|
|
Declared
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
14.63
|
|
|
$
|
11.00
|
|
|
$
|
—
|
|
|
$
|
14.90
|
|
|
$
|
10.00
|
|
|
$
|
0.375
|
|
Second Quarter
|
|
$
|
17.71
|
|
|
$
|
11.99
|
|
|
$
|
—
|
|
|
$
|
12.96
|
|
|
$
|
9.53
|
|
|
$
|
0.375
|
|
Third Quarter
|
|
$
|
21.00
|
|
|
$
|
16.00
|
|
|
$
|
—
|
|
|
$
|
11.27
|
|
|
$
|
9.27
|
|
|
$
|
0.375
|
|
Fourth Quarter
|
|
$
|
23.28
|
|
|
$
|
14.58
|
|
|
$
|
—
|
|
|
$
|
9.88
|
|
|
$
|
6.65
|
|
|
$
|
0.375
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
24.65
|
|
|
$
|
15.64
|
|
|
$
|
—
|
|
|
$
|
12.15
|
|
|
$
|
9.41
|
|
|
$
|
0.375
|
|
Second Quarter
|
|
$
|
26.22
|
|
|
$
|
16.34
|
|
|
$
|
—
|
|
|
$
|
13.75
|
|
|
$
|
9.26
|
|
|
$
|
0.09
|
|
Third Quarter
|
|
$
|
28.13
|
|
|
$
|
22.17
|
|
|
$
|
—
|
|
|
$
|
15.50
|
|
|
$
|
12.14
|
|
|
$
|
0.09
|
|
Fourth Quarter
|
|
$
|
34.44
|
|
|
$
|
26.63
|
|
|
$
|
—
|
|
|
$
|
15.49
|
|
|
$
|
12.91
|
|
|
$
|
0.09
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First Quarter
|
|
$
|
43.42
|
|
|
$
|
31.03
|
|
|
$
|
—
|
|
|
$
|
16.97
|
|
|
$
|
13.64
|
|
|
$
|
0.09
|
|
Second Quarter
|
|
$
|
53.50
|
|
|
$
|
40.50
|
|
|
$
|
—
|
|
|
$
|
19.81
|
|
|
$
|
13.67
|
|
|
$
|
0.095
|
|
Third Quarter (until August 17, 2010)
|
|
$
|
59.42
|
|
|
$
|
50.25
|
|
|
$
|
—
|
|
|
$
|
23.40
|
|
|
$
|
18.07
|
|
|
$
|
0.095
|
|
19
Certain
Historical and Pro Forma Per Share Data
The following tables set forth certain historical, pro forma and
pro forma equivalent per share financial information for Valeant
common stock and Biovail common shares. The pro forma and pro
forma equivalent per share information gives effect to the
merger as if the merger had occurred on June 30, 2010 in
the case of book value per share data and as of January 1,
2009 in the case of net income per share data.
The pro forma per share balance sheet information combines
Valeant’s June 30, 2010 unaudited consolidated balance
sheet with Biovail’s June 30, 2010 unaudited
consolidated balance sheet. The pro forma per share income
statement information for the fiscal year ended
December 31, 2009, combines Valeant’s audited
consolidated statement of income for the fiscal year ended
December 31, 2009, with Biovail’s audited consolidated
statement of income for the fiscal year ended December 31,
2009. The pro forma per share income statement information for
the six months ended June 30, 2010, combines Valeant’s
unaudited consolidated statement of income for the six months
ended June 30, 2010, with Biovail’s unaudited
consolidated statement of income for the six months ended
June 30, 2010. The Valeant pro forma equivalent per share
financial information is calculated by multiplying the unaudited
Biovail pro forma combined per share amounts by the 1.7809
exchange ratio.
The following information should be read in conjunction with the
audited consolidated financial statements of Valeant and Biovail
contained in Valeant’s and Biovail’s Annual Reports on
Form 10-K
for the year ended December 31, 2009, and the unaudited
consolidated financial statements of Valeant and Biovail
contained in Valeant’s and Biovail’s quarterly reports
on
Form 10-Q
for the quarterly period ended June 30, 2010, which are
incorporated by reference in this joint proxy
statement/prospectus, and the financial information contained in
the section entitled “Biovail Corporation and Valeant
Pharmaceuticals International Unaudited Pro Forma Condensed
Combined Financial Statements” beginning on page 134.
The unaudited pro forma information below is not necessarily
indicative of the operating results or financial position that
would have occurred if the merger had been completed as of the
periods presented, nor is it necessarily indicative of the
future operating results or financial position of the combined
company. In addition, the unaudited pro forma information does
not purport to indicate balance sheet data or results of
operations data as of any future date or for any future period.
|
|
|
|
|
|
|
|
|
|
|
As of and for the
|
|
|
|
|
|
|
Six Months
|
|
|
As of and for the
|
|
|
|
Ended June 30, 2010
|
|
|
Year Ended December 31, 2009
|
|
|
Valeant Historical Data per Share of Common Stock
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to controlling
interest
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.87
|
|
|
$
|
3.15
|
|
Diluted
|
|
$
|
0.82
|
|
|
$
|
3.07
|
|
Dividends declared per share of Common Stock
|
|
|
—
|
|
|
|
—
|
|
Book value per share of Common Stock
|
|
$
|
4.65
|
|
|
$
|
4.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the
|
|
|
|
|
|
|
Six Months Ended
|
|
|
As of and for the
|
|
|
|
June 30, 2010
|
|
|
Year Ended December 31, 2009
|
|
|
Biovail Historical Data per Common Share
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0
|
.19
|
|
|
$
|
1.11
|
|
Diluted
|
|
$
|
0
|
.19
|
|
|
$
|
1.11
|
|
Dividends declared per Common Share
|
|
$
|
0
|
.185
|
|
|
$
|
0.65
|
|
Book value per Common Share
|
|
$
|
8
|
.58
|
|
|
$
|
8.56
|
|
20
|
|
|
|
|
|
|
|
|
|
|
As of and for the
|
|
|
|
|
|
|
Six Months Ended
|
|
|
As of and for the
|
|
|
|
June 30, 2010
|
|
|
Year Ended December 31, 2009
|
|
|
Valeant Pro Forma Equivalent Combined Data per Share of
Common Stock
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to controlling
interest
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.04
|
|
|
$
|
0.43
|
|
Diluted
|
|
$
|
0.04
|
|
|
$
|
0.43
|
|
Dividends declared per share of Common Stock
|
|
$
|
0.33
|
|
|
$
|
1.15
|
|
Book value per share of Common Stock
|
|
$
|
28.71
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the
|
|
|
|
|
|
|
Six Months Ended
|
|
|
As of and for the
|
|
|
|
June 30, 2010
|
|
|
Year Ended December 31, 2009
|
|
|
Biovail Pro Forma Combined Data per Common Share
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
0.02
|
|
|
$
|
0.24
|
|
Diluted
|
|
$
|
0.02
|
|
|
$
|
0.24
|
|
Dividends declared per Common Share
|
|
$
|
0.185
|
|
|
$
|
0.65
|
|
Book value per Common Share
|
|
$
|
16.12
|
|
|
|
N/A
|
|
21
RISK
FACTORS
In addition to the other information included and
incorporated by reference into this joint proxy
statement/prospectus, including the matters addressed in the
section entitled “Special Note Regarding Forward-Looking
Statements,” you should carefully consider the following
risks before deciding whether to vote for the Valeant proposals,
in the case of Valeant stockholders, or the Biovail proposals,
in the case of Biovail shareholders. In addition, you should
read and consider the risks associated with each of the
businesses of Valeant and Biovail because these risks will also
affect the combined company — these risks can be found
in Valeant’s and Biovail’s respective Annual Reports
on
Form 10-K,
as updated by subsequent Quarterly Reports on
Form 10-Q,
all of which are filed with the SEC and, in the case of Biovail,
the CSA, and incorporated by reference into this joint proxy
statement/prospectus. You should also read and consider the
other information in this joint proxy statement/prospectus,
including the Annexes, and the other documents incorporated by
reference into this joint proxy statement/prospectus. See
“Where You Can Find More Information” beginning on
page 175.
Risk
Factors Relating to the Merger
The
exchange ratio is fixed and will not be adjusted in the event of
any change in either Valeant’s stock price or
Biovail’s share price.
In the merger, each share of Valeant common stock (except for
shares of Valeant common stock owned by Valeant, as treasury
stock, Biovail, BAC or Beach Merger Corp. (all of which will be
cancelled), and other than those shares with respect to which
appraisal rights are properly exercised and not withdrawn) will
be converted into the right to receive 1.7809 Biovail common
shares. This exchange ratio is fixed in the merger agreement and
will not be adjusted for changes in the market price of either
Valeant common stock or Biovail common shares. Changes in the
price of Biovail common shares prior to completion of the merger
will affect the market value that Valeant stockholders will
receive on the date of the merger. Share price changes may
result from a variety of factors (many of which are beyond our
control), including the following:
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changes in Valeant’s and Biovail’s respective
businesses, operations and prospects, or the market assessments
thereof;
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market assessments of the likelihood that the merger will be
completed, including related considerations regarding regulatory
approvals of the merger; and
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general market and economic conditions and other factors
generally affecting the price of Valeant’s common stock and
Biovail’s common shares.
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The price of Biovail common shares at the closing of the merger
may vary from the price on the date the merger agreement was
executed, on the date of this joint proxy statement/prospectus
and on the date of the special meetings of Valeant and Biovail.
As a result, the market value represented by the exchange ratio
will also vary. For example, based on the range of closing
prices of Biovail common shares during the period from
June 18, 2010, the last trading day before public
announcement of execution of the merger agreement, through
August 17, 2010, the last trading date before the date of
this joint proxy statement/prospectus, the exchange ratio
represented a market value, which does not take into account the
$16.77 per share pre-merger special dividend, ranging from a low
of $26.00 to a high of $41.12 for each share of Valeant common
stock. The $16.77 per share pre-merger special dividend is
payable as a fixed amount per outstanding share of Valeant
common stock.
Because
the merger will be completed after the date of the special
meetings, at the time of your special meeting, you will not know
the exact market value of the Biovail common shares that Valeant
stockholders will receive upon completion of the
merger.
If the price of Biovail common shares increases between the time
of the special meetings and the effective time of the merger,
Valeant stockholders will receive Biovail common shares that
have a market value that is greater than the market value of
such shares at the time of the special meetings. If the price of
Biovail common shares decreases between the time of the special
meetings and the effective time of the merger, Valeant
stockholders will receive Biovail common shares that have a
market value that is less than the market value of such shares
at the time of the special meetings. Therefore, because the
exchange ratio is fixed, shareholders cannot be sure at the time
of the
22
special meetings of the market value of the consideration that
will be paid to Valeant stockholders upon completion of the
merger.
Obtaining
required approvals necessary to satisfy closing conditions may
delay or prevent completion of the merger.
Completion of the merger is conditioned upon the receipt of
certain governmental authorizations, consents, orders or other
approvals, including but not limited to the expiration or
termination of the waiting period under the HSR Act in the
United States and under the Federal Economic Competition Law in
Mexico, and approval under the Competition and Consumer
Protection Act in Poland. Biovail and Valeant have agreed to use
their reasonable best efforts to obtain all required approvals
in accordance with the merger agreement. On July 22, 2010,
the FTC granted early termination of the waiting period under
the HSR Act with respect to the proposed merger contemplated by
the merger agreement. On July 21, 2010, the MFCC cleared
the transaction. Biovail and Valeant are still awaiting approval
under the Competition and Consumer Protection Act in Poland.
This approval may impose conditions on, or require divestitures
relating to, the operations or assets of Valeant or Biovail.
Such conditions or divestitures may jeopardize or delay
completion of the merger or may reduce the anticipated benefits
of the merger. Each of Valeant and Biovail has agreed that the
other party would not be required, or permitted without prior
written consent, to take any actions with respect to such
conditions or divestitures if such actions would, or would
reasonably be expected to, result (after giving effect to any
reasonably expected proceeds of any divestiture or sale of
assets) in a “Material Adverse Effect” on the combined
company. No assurance can be given that the required approval
will be obtained, and, even if such approval is obtained, no
assurance can be given as to the terms, conditions and timing of
the approval or that it will satisfy the terms of the merger
agreement. See “The Merger — Summary of the
Merger Agreement — Conditions to Completion of the
Merger” beginning on page 125 for a discussion of the
conditions to the completion of the merger and “The
Merger — Regulatory Approvals Required for the Merger
and Other Regulatory Matters” on page 110 for a
description of the regulatory approvals necessary in connection
with the merger.
Failure
to complete the merger could negatively impact the share prices
and the future business and financial results of Valeant and
Biovail.
If the merger is not completed, the ongoing businesses of
Valeant and Biovail may be adversely affected. Additionally, if
the merger is not completed and the merger agreement is
terminated, either Valeant or Biovail, as the case may be, may
be required to pay to the other a termination fee under the
merger agreement of $100 million. The foregoing risks, or
other risks arising in connection with the failure of the
merger, including the diversion of management attention from
conducting the business of the respective company and pursuing
other opportunities during the pendency of the merger, may have
an adverse effect on the business, operations, financial results
and share prices of Valeant and Biovail.
The
merger agreement contains provisions that could discourage a
potential competing acquiror of either Valeant or
Biovail.
The merger agreement contains “no shop” provisions
that, subject to limited exceptions, restrict Valeant’s and
Biovail’s ability to solicit, encourage, facilitate or
discuss competing third-party proposals to acquire shares or
assets of Valeant or Biovail. Further, even if the Valeant board
of directors or the Biovail board of directors withdraws or
qualifies its recommendation with respect to the merger, it will
still be required to submit the applicable matters to a vote at
its respective special meeting. In addition, the other party
generally has an opportunity to offer to modify the terms of its
proposal in response to any competing acquisition proposals
before the board of directors of the company that has received a
third-party proposal may withdraw or qualify its recommendation
with respect to the merger. In certain specified circumstances,
upon termination of the merger agreement, one of the parties
will be required to pay a termination fee of $100 million
to the other party. See “The Merger — Summary of
the Merger Agreement — No Solicitation of Alternative
Proposals” on page 119, “— Termination
of the Merger Agreement” beginning on page 126 and
“— Expenses and Termination Fees; Liability for
Breach” beginning on page 127.
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These provisions could discourage a potential competing acquiror
that might have an interest in acquiring all or a significant
part of Valeant or Biovail from considering or proposing that
acquisition, even if it were prepared to pay consideration with
a higher per share cash or market value than the market value
proposed to be received or realized in the merger, or might
result in a potential competing acquiror proposing to pay a
lower price than it might otherwise have proposed to pay because
of the added expense of the $100 million termination fee
that may become payable in certain circumstances.
If the merger agreement is terminated and either Valeant or
Biovail determines to seek another business combination, it may
not be able to negotiate a transaction with another party on
terms comparable to, or better than, the terms of the merger.
Lawsuits
have been filed against Valeant and Biovail relating to the
merger and an adverse ruling in any such lawsuit may prevent the
merger from being completed.
Since the merger was announced on June 21, 2010, Valeant,
certain Valeant directors, Biovail, BAC and Beach Merger Corp.
have been named as defendants in one or more of the four
purported stockholder class actions filed in the Superior Court
of California, County of Orange by stockholders of Valeant
challenging the proposed merger. The actions seek, among other
things, to enjoin the defendants from completing the merger on
the agreed upon terms. Three other purported stockholder class
actions have been filed in the Court of Chancery for the State
of Delaware that also bring claims against Valeant,
Valeant’s directors, Biovail, BAC and Beach Merger Corp.
and similarly seeks to enjoin the defendants from completing the
merger. See “The Merger — Litigation Related to
the Merger” beginning on page 112 for more information
about the lawsuits related to the merger that have been filed.
One of the conditions to the closing of the merger is that no
judgment, injunction (whether preliminary, temporary or
permanent) or other legal restraint or prohibition shall be in
effect that prevents the completion of the merger. As such, if
any of the plaintiffs are successful in obtaining an injunction
prohibiting the defendants from completing the merger, then such
injunction may prevent the merger from becoming effective, or
from becoming effective within the expected time frame.
If the
financing for the transactions contemplated by the merger
agreement becomes unavailable, the merger may not be
completed.
Valeant and Biovail have entered into the commitment letter,
pursuant to which the commitment parties have committed to
provide up to $3.022 billion in loans for the purposes of
(1) refinancing Valeant’s existing credit facility,
8.375% Senior Notes due 2016 and 7.625% Senior Notes
due 2020, (2) funding the pre-merger special dividend and
certain expenses incurred in connection with the merger,
(3) providing post-closing liquidity to the combined
company and (4) funding the post-merger special dividend.
The completion of the merger depends on a number of conditions
being satisfied or, where legally permissible, waived. These
conditions include, among others, the consummation of the
financing contemplated by the commitment letter (or alternative
financing) and the payment of the pre-merger special dividend.
In the event that the financing contemplated by the commitment
letter is not available, other financing, including any
permitted offering of debt securities by Valeant, may be
available only on less favorable terms or may not be available
on acceptable terms, in a timely manner or at all. If other
financing becomes necessary and Valeant and Biovail are unable
to secure such additional financing, Valeant may be unable to
pay the pre-merger special dividend and the merger may not be
completed.
If the
merger does not qualify as a reorganization under
Section 368(a) of the Code or is otherwise taxable to U.S.
holders of Valeant common stock, then such holders may be
required to pay substantial U.S. Federal income
taxes.
The obligations of Valeant and Biovail to complete the merger
are conditioned on, respectively, Valeant’s receipt of an
opinion of Skadden, and Biovail’s receipt of an opinion of
Cravath, each to the effect that (1) the merger should
qualify for U.S. Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the
Code, and (2) U.S. holders of Valeant common stock
should not recognize gain under
24
Section 367(a) of the Code on the exchange of their Valeant
common stock for Biovail common shares in the merger. These
opinions will be based upon, among other things, certain
assumptions and representations as to factual matters made by
Valeant, Biovail and Beach Merger Corp. and their financial
advisors. The failure of any such assumptions or representation
to be true could adversely affect the validity of the opinions.
Additionally, the conclusions in the tax opinions will not be
free from doubt and there are significant factual and legal
uncertainties concerning these conclusions (including as to the
impact of the pre-merger special dividend described below). In
particular, Section 367(a) of the Code and the applicable
Treasury regulations promulgated thereunder provide that where a
U.S. shareholder exchanges stock in a U.S. corporation
for stock in a
non-U.S. corporation
in a transaction that would otherwise qualify as a
reorganization within the meaning of Section 368(a) of the
Code, the U.S. shareholder is required to recognize gain,
but not loss, realized on such exchange unless certain
requirements are met, including that the fair market value of
Biovail equal or exceed that of Valeant at the effective time of
the merger. There are significant factual and legal
uncertainties concerning the determination of fair market value
for this purpose and no assurance can be given that the IRS will
not challenge the conclusions reflected in the opinions or that
a court would not sustain such a challenge. If at the effective
time of the merger the fair market value of Valeant were found
to exceed that of Biovail, a U.S. holder of Valeant common
stock would recognize gain (but not loss) based on the amount
such U.S. holder realizes in the merger.
Additionally, each opinion will be based, in part, on a
determination that the pre-merger special dividend should
qualify as a distribution by Valeant within the meaning of
Section 301 of the Code and not as consideration paid for
Valeant stock in the merger. However, an opinion of counsel
represents counsel’s legal judgment, and is not binding on
the IRS or the courts. If the IRS or a court disagrees with the
characterization of the pre-merger special dividend as a
distribution by Valeant within the meaning of Section 301
of the Code and instead treats the pre-merger special dividend
as merger consideration paid by Biovail in exchange for a
portion of a holder’s Valeant common stock, or otherwise
determines that the merger is taxable, U.S. holders of
Valeant common stock would recognize taxable gain or loss on
their receipt of Biovail common shares in the merger.
For a further discussion, see “The
Merger — Material U.S. Federal Income Tax
Consequences” beginning on page 102.
The
directors and executive officers of Valeant and Biovail have
interests in the merger that are in addition to those of other
Valeant stockholders and Biovail shareholders, which could have
influenced their decisions to support or approve the
merger.
In considering whether to approve the proposals at the special
meetings, Valeant stockholders and Biovail shareholders should
recognize that the directors and executive officers of Valeant
and Biovail have interests in the merger that are in addition to
their interests as stockholders of Valeant or shareholders of
Biovail. These interests include, among others, ownership
interests in the combined company, continued service as a
director or an executive officer of the combined company, and
the accelerated vesting of certain equity awards or certain
severance benefits in connection with the merger. These
interests, among others, may influence the directors and
executive officers of Valeant to support or approve the
proposals at the Valeant special meeting or the directors and
executive officers of Biovail to support or approve the
proposals at the Biovail special meeting. See “The
Merger — Financial Interests of Valeant Directors and
Officers in the Merger” beginning on page 96 and
“The Merger — Financial Interests of Biovail
Directors and Officers in the Merger” beginning on
page 92.
Risk
Factors Relating to the Combined Company Following the
Merger
The
failure to integrate successfully the businesses of Valeant and
Biovail in the expected timeframe would adversely affect the
combined company’s future results.
The success of the merger will depend, in large part, on the
ability of the combined company to realize the anticipated
benefits, including cost savings, from combining the businesses
of Valeant and Biovail. To realize these anticipated benefits,
the businesses of Valeant and Biovail must be successfully
integrated. This integration will be complex and time-consuming.
The failure to integrate successfully and to manage successfully
the challenges presented by the integration process may result
in the combined company not fully achieving the anticipated
benefits of the merger.
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Potential difficulties that may be encountered in the
integration process include the following:
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integrating the research and development, manufacturing,
distribution, marketing and promotion activities and information
technology systems of Valeant and Biovail;
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challenges and difficulties associated with managing the larger,
more complex, combined business;
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conforming standards, controls, procedures and policies,
business cultures and compensation structures between the
companies;
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integrating personnel from the two companies while maintaining
focus on developing, producing and delivering consistent, high
quality products;
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consolidating corporate and administrative infrastructures;
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consolidating sales and marketing operations;
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retaining existing customers and attracting new customers;
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identifying and eliminating redundant and underperforming
operations and assets;
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coordinating geographically dispersed organizations;
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managing inefficiencies associated with integrating the
operations of the combined company;
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potential unknown liabilities and unforeseen expenses, delays or
regulatory conditions associated with the merger;
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performance shortfalls at one or both of the companies as a
result of the diversion of management’s attention caused by
completing the merger and integrating the companies’
operations;
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complying with the terms of Biovail’s corporate integrity
agreement as a combined company;
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the ability of the combined company to deliver on its strategy
going forward; and
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making any necessary modifications to operating control
standards to comply with the Sarbanes-Oxley Act of 2002 and the
rules and regulations promulgated thereunder and National
Instrument
52-107
Certification of Disclosure in Issuers’ Annual Report and
Interim Filings.
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The
combined company’s future results will suffer if the
combined company does not effectively manage its expanded
operations.
The size of the combined company’s business will be
dramatically larger than the size of each of Valeant’s and
Biovail’s businesses today. The combined company’s
future success depends, in part, upon its ability to manage this
expanded business, which will pose substantial challenges for
management, including challenges related to the management and
monitoring of new operations and associated increased costs and
complexity. Valeant and Biovail cannot assure you that the
combined company will be successful or that the combined company
will realize the expected operating efficiencies, synergies,
cost savings, revenue enhancements and other benefits currently
anticipated from the merger.
The
combined company’s effective tax rates may
increase.
The combined company will have operations in various countries
that have differing tax laws and rates. A significant portion of
the combined company’s revenue and income will be earned in
Barbados, a country with a low domestic tax rate. Dividends from
such after-tax business income will be received tax-free in
Canada. The combined company’s tax structure will be
supported by current domestic tax laws in the countries in which
the combined company will operate and the application of tax
treaties between the various countries in which the combined
company will operate. The combined company’s income tax
reporting will be, and the historic tax reporting of each of
Valeant and Biovail is, subject to audit by domestic and foreign
authorities. The combined company’s effective tax rate may
change from year to year based on changes in the mix of
activities and income allocated or earned among the different
jurisdictions in which it will operate; changes in tax laws in
these
26
jurisdictions; changes in the tax treaties between various
countries in which it will operate; changes in its eligibility
for benefits under those tax treaties; and changes in the
estimated values of deferred tax assets and liabilities. Such
changes could result in an increase in the effective tax rate on
all or a portion of the combined company’s income to a rate
possibly exceeding the statutory income tax rate of Canada or
the U.S.
The combined company’s provision for income taxes will be
based on certain estimates and assumptions made by management.
The combined company’s consolidated income tax rate will be
affected by the amount of net income earned in its various
operating jurisdictions, the availability of benefits under tax
treaties, and the rates of taxes payable in respect of that
income. The combined company will enter into many transactions
and arrangements in the ordinary course of business in respect
of which the tax treatment is not entirely certain. The combined
company will therefore make estimates and judgments based on its
knowledge and understanding of applicable tax laws and tax
treaties, and the application of those tax laws and tax treaties
to its business, in determining its consolidated tax provision.
For example, certain countries could seek to tax a greater share
of income than will be provided for by the combined company. The
final outcome of any audits of the combined company or of
Valeant and Biovail by taxation authorities may differ from the
estimates and assumptions the combined company may use in
determining its consolidated tax provisions and accruals. This
could result in a material adverse effect on the combined
company’s consolidated income tax provision, financial
condition and the net income for the period in which such
determinations are made.
The combined company will record a valuation allowance on
deferred tax assets relating to Biovail’s Canadian and U.S.
operating losses, Scientific Research and Experimental
Development pool, investment tax credit carry-forward balances,
provisions for legal settlements, and future tax depreciation.
Valeant and Biovail have assumed that these deferred tax assets
are more likely than not to remain unrealized by the combined
company.
The combined company’s deferred tax liabilities, deferred
tax assets and any related valuation allowances will be affected
by events and transactions arising in the ordinary course of
business, acquisitions of assets and businesses, and
non-recurring items. The assessment of the appropriate amount of
a valuation allowance against the deferred tax assets will be
dependent upon several factors, including estimates of the
realization of deferred income tax assets, which realization
will be primarily based on forecasts of future taxable income.
Significant judgment will be applied to determine the
appropriate amount of valuation allowance to record. Changes in
the amount of any valuation allowance required could materially
increase or decrease the combined company’s provision for
income taxes in a given period.
The
market price of Biovail’s common shares after the merger
may be affected by factors different from those currently
affecting the shares of Valeant or Biovail.
Upon completion of the merger, holders of Valeant common stock
will become holders of Biovail common shares. The businesses of
Valeant differ from those of Biovail in important respects and,
accordingly, the results of operations of the combined company
and the market price of Biovail’s common shares following
the merger may be affected by factors different from those
currently affecting the independent results of operations of
Valeant and Biovail. For a discussion of the businesses of
Valeant and Biovail and of certain factors to consider in
connection with those businesses, see the documents incorporated
by reference into this joint proxy statement/prospectus referred
to under the section entitled “Where You Can Find More
Information” beginning on page 175.
Valeant
will incur substantial additional indebtedness to finance the
merger (including the pre-merger special dividend), which will
be guaranteed by Biovail after the merger and which may, after
the merger, decrease the combined company’s business
flexibility and may increase its borrowing costs.
In connection with its financing of the pre-merger special
dividend and the merger, Valeant expects to incur approximately
$3.0 billion indebtedness, of which approximately
$1.0 billion will be used to refinance its
8.375% Senior Notes due 2016, 7.625% Senior Notes due
2020 and current credit facility, approximately
$1.3 billion will be used for the pre-merger special
dividend and approximately $300 million would be used for
the contemplated post-merger special dividend. Upon completion
of the merger, Valeant is expected to have outstanding
indebtedness of approximately $3.0 billion, including
$225 million of its 4% Convertible Notes and
$2.8 billion of indebtedness composed of a combination of
(i) up to $2.8 billion of loans incurred under the
senior secured credit facilities contemplated by the commitment
letter and (ii) net proceeds from any permitted issuance of
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debt securities by Valeant. Such senior secured credit
facilities are expected to be guaranteed by Biovail and its
subsidiaries (including Valeant and its subsidiaries)
post-closing, and to contain covenants restricting certain
actions by Biovail and its subsidiaries (including Valeant and
its subsidiaries), including financial, affirmative and negative
covenants, which include limitations on the ability to incur
indebtedness, create liens, and merge and consolidate with other
companies, in each case, subject to exceptions and baskets to be
mutually agreed upon by Valeant and the lender parties thereto,
the exact terms of which are to be negotiated before the closing
of the merger. The financial and other covenants in the senior
secured credit facilities contemplated by the commitment letter,
and the combined company’s increased consolidated
indebtedness and higher
debt-to-equity
ratio in comparison to that of each of Valeant and Biovail on a
recent historical basis may have the effect, among other things,
of reducing the combined company’s flexibility to respond
to changing business and economic conditions and may increase
borrowing costs. Valeant currently anticipates that, prior to
the completion of the merger, it will repay in full its
8.375% Senior Notes due 2016 and 7.625% Senior Notes
due 2020.
Substantial
debt and debt service obligations may adversely affect the
combined company.
After the merger, the combined company will have a significant
amount of indebtedness. On a pro forma basis assuming the merger
was consummated on June 30, 2010 and assuming that
Valeant’s 8.375% Senior Notes due 2016 and 7.625% Senior
Notes due 2020 are repaid prior to the merger, the combined
company would have had $3.0 billion of indebtedness. The
combined company may also obtain additional long-term debt and
working capital lines of credit to meet future financing needs,
subject to certain restrictions under its existing indebtedness,
which would increase its total debt.
The potential significant negative consequences on the combined
company’s financial condition and results of operations
that could result from its substantial debt include:
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limitations on the combined company’s ability to obtain
additional debt or equity financing;
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instances in which the combined company is unable to meet the
financial covenants contained in its debt agreements or to
generate cash sufficient to make required debt payments, which
circumstances would have the potential of accelerating the
maturity of some or all of the combined company’s
outstanding indebtedness;
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the allocation of a substantial portion of the combined
company’s cash flow from operations to service the combined
company’s debt, thus reducing the amount of the combined
company’s cash flow available for other purposes, including
operating costs and capital expenditures that could improve the
combined company’s competitive position, results of
operations or share price;
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requiring the combined company to sell debt or equity securities
or to sell some of its core assets, possibly on unfavorable
terms, to meet payment obligations;
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compromising the combined company’s flexibility to plan
for, or react to, competitive challenges in its business and the
pharmaceutical industry;
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the possibility of the combined company being put at a
competitive disadvantage with competitors that do not have as
much debt as the combined company, and competitors that may be
in a more favorable position to access additional capital
resources; and
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limitations on the combined company’s ability to execute
business development activities to support its strategies.
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The
combined company is expected to incur substantial expenses
related to the integration of Valeant and Biovail.
The combined company is expected to incur substantial expenses
in connection with the merger and the integration of Valeant and
Biovail. There are a large number of processes, policies,
procedures, operations, technologies and systems that must be
integrated, including purchasing, accounting and finance, sales,
billing, payroll, manufacturing, research and development,
marketing and benefits. While Valeant and Biovail have assumed
that a certain level of expenses will be incurred, there are
many factors beyond their control that could affect the total
amount or the timing of the integration expenses. Moreover, many
of the expenses that will be
28
incurred are, by their nature, difficult to estimate accurately.
These integration expenses likely will result in the combined
company taking significant charges against earnings following
the completion of the merger, and the amount and timing of such
charges are uncertain at present.
If
goodwill or other intangible assets that the combined company
records in connection with the merger become impaired, the
combined company could have to take significant charges against
earnings.
In connection with the accounting for the merger, the combined
company expects to record a significant amount of goodwill and
other intangible assets. Under U.S. GAAP, the combined
company must assess, at least annually and potentially more
frequently, whether the value of goodwill and other
indefinite-lived intangible assets has been impaired. Amortizing
intangible assets will be assessed for impairment in the event
of an impairment indicator. Any reduction or impairment of the
value of goodwill or other intangible assets will result in a
charge against earnings, which could materially adversely affect
the combined company’s results of operations and
shareholders’ equity in future periods.
Valeant,
Biovail and, subsequently, the combined company must continue to
retain, motivate and recruit executives and other key employees,
which may be difficult in light of the uncertainty regarding the
merger, and failure to do so could negatively affect the
combined company.
For the merger to be successful, during the period before the
merger is completed, both Valeant and Biovail must continue to
retain, recruit and motivate executives and other key employees.
The combined company also must be successful at retaining,
recruiting and motivating key employees following the
completion of the merger. Experienced employees in the
pharmaceutical industry are in high demand and competition for
their talents can be intense. Employees of both Valeant and
Biovail may experience uncertainty about their future role with
the combined company until, or even after, strategies with
regard to the combined company are announced or executed. These
potential distractions of the merger may adversely affect the
ability of Valeant, Biovail or the combined company to attract,
motivate and retain executives and other key employees and keep
them focused on applicable strategies and goals. A failure by
Valeant, Biovail or the combined company to retain and motivate
executives and other key employees during the period prior to or
after the completion of the merger could have an adverse impact
on the business of Valeant, Biovail or the combined company.
The
Biovail common shares to be received by Valeant stockholders as
a result of the merger will have different rights from the
shares of Valeant common stock.
Upon completion of the merger, Valeant stockholders will become
Biovail shareholders and their rights as shareholders will be
governed by Biovail’s articles of continuance and bylaws
and the CBCA. The rights associated with Valeant common stock
are different from the rights associated with Biovail common
shares. Please see “Comparison of Rights of Valeant
Stockholders and Biovail Shareholders” beginning on
page 155 for a discussion of the different rights
associated with Biovail common shares.
The
merger may not be accretive and may cause dilution to the
combined company’s earnings per share, which may negatively
affect the market price of the combined company’s common
shares.
Valeant and Biovail currently anticipate that the merger will be
accretive to earnings per share of the combined company within
the first 12 months after the merger. This expectation is based
on preliminary estimates, which may materially change. The
combined company could also encounter additional transaction and
integration-related costs or other factors such as the failure
to realize all of the benefits anticipated in the merger. All of
these factors could cause dilution to the combined
company’s earnings per share or decrease or delay the
expected accretive effect of the merger and cause a decrease in
the market price of the combined company’s common shares.
Other
Risk Factors of Valeant and Biovail
Valeant’s and Biovail’s businesses are and will be
subject to the risks described above. In addition,
Valeant’s and Biovail’s businesses are, and will
continue to be, subject to the risks described in Valeant’s
and Biovail’s respective Annual Reports on
Form 10-K,
as updated by subsequent Quarterly Reports on
Form 10-Q,
all of which are filed with the SEC and, in the case of Biovail,
the CSA and incorporated by reference into this joint proxy
statement/prospectus. See “Where You Can Find More
Information” beginning on page 175 for the location of
information incorporated by reference in this joint proxy
statement/prospectus.
29
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus and the documents
incorporated by reference herein contain forward-looking
statements within the meaning of the Private Securities
Litigation Reform Act of 1995 with respect to the financial
condition, results of operations, business strategies, operating
efficiencies, synergies, revenue enhancements, competitive
positions, plans and objectives of management and growth
opportunities of Valeant and Biovail, and with respect to the
merger and the markets for Valeant common stock and Biovail
common shares and other matters. Statements in this joint proxy
statement/prospectus and the documents incorporated by reference
herein that are not historical facts are hereby identified as
forward-looking statements for the purpose of the safe harbor
provided by Section 27A of the Securities Act and
Section 21E of the Exchange Act and forward-looking
information within the meaning defined under applicable Canadian
securities legislation (collectively, “forward-looking
statements”).
These forward-looking statements, including, without limitation,
those relating to the expected benefits of the proposed merger,
such as efficiencies, cost savings, tax benefits, enhanced
revenues and cash flow, growth potential, market profile and
financial strength, the competitive ability and position of the
combined company, the expected timing of the completion of the
transaction and the expected payment of the pre-merger special
dividend to Valeant’s stockholders and the post-merger
special dividend to the combined company’s shareholders,
wherever they occur in this joint proxy statement/prospectus or
the documents incorporated by reference herein, are necessarily
estimates reflecting the judgment of the management of each of
Valeant and Biovail. Although Valeant and Biovail believe that
the expectations reflected in such forward-looking statements
are reasonable, such statements involve risks and uncertainties,
and undue reliance should not be placed on such statements.
These forward-looking statements should, therefore, be
considered in light of various important factors, including
those set forth in this joint proxy statement/prospectus and
incorporated by reference herein. There can be no assurance that
the proposed merger will in fact be consummated.
Forward-looking statements can generally be identified by the
use of words such as “believe,”
“anticipate,” “expect,”
“estimate,” “intend,” “continue,”
“plan,” “project,” “will,”
“may,” “should,” “could,”
“would,” “target,” “potential” and
other similar expressions. In addition, any statements that
refer to expectations, projections or other characterizations of
future events or circumstances are forward-looking statements.
Such forward-looking statements are found at various places
throughout this joint proxy statement/prospectus and the
documents incorporated by reference herein and all such
statements are qualified by these cautionary statements. Actual
results may differ materially from those expressed or implied in
such statements. Important factors that could cause actual
results to differ materially from these expectations include,
among other things, the following:
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the risk that the anticipated benefits from the proposed merger
cannot be fully realized or may take longer to realize than
expected;
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the failure to receive, on a timely basis or otherwise, the
required approvals by Valeant stockholders and Biovail
shareholders and government or regulatory agencies (including
the terms of such approvals);
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the risk that a condition to closing of the merger may not be
satisfied;
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the risk that the businesses will not be integrated
successfully, or that the integration will be more costly or
more time consuming and complex than anticipated;
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the ability of the combined company to service its significant
debt service obligations;
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the ability of the combined company to retain and hire key
personnel and maintain relationships with customers, suppliers
or other business partners;
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the impact of legislative, regulatory, competitive and
technological changes;
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the risk that the credit ratings of the combined company may be
different from what the companies expect;
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general market, labor and economic conditions and related
uncertainties; and
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other risk factors relating to the pharmaceutical industry, as
detailed from time to time in each of Valeant’s and
Biovail’s reports filed with the SEC and, in the case of
Biovail, the CSA.
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Additional information about these factors and about the
material factors or assumptions underlying such forward-looking
statements may be found in this joint proxy
statement/prospectus, as well as under Item 1.A. in each of
Valeant’s and Biovail’s Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009, and
Item 1.A in each of Valeant’s and Biovail’s most
recent Quarterly Report on
Form 10-Q
for the quarterly period ended June 30, 2010. These
important factors also include those set forth under the section
entitled “Risk Factors,” beginning on page 22.
Readers are cautioned that any forward-looking statement speaks
only as of the date of this joint proxy statement/prospectus or,
if such statement is included in a document incorporated by
reference into this joint proxy statement/prospectus, as of the
date of such other document. Neither Biovail nor Valeant
undertakes any obligation to update or revise any
forward-looking statement, whether as a result of new
information, future events or otherwise, except as may be
required by law. Valeant and Biovail caution further that, as it
is not possible to predict or identify all relevant factors that
may impact forward-looking statements, the foregoing list should
not be considered a complete statement of all potential risks
and uncertainties.
31
THE
COMPANIES
Biovail
Corporation
Biovail Corporation
7150 Mississauga Road
Mississauga, Ontario
Canada L5N 8M5
Telephone:
(905) 286-3000
Biovail, a Canadian corporation, is a specialty pharmaceutical
company with a strategic focus on developing and commercializing
products that address unmet medical needs in specialty CNS
disorders. The growth and development of Biovail’s
specialty CNS business is financially supported by its former
base business model which focused on the development and
large-scale manufacture of pharmaceutical products incorporating
its oral drug-delivery technologies. While Biovail’s
strategy has transitioned to specialty CNS, this base business
model continues to provide revenues and significant operating
cash flow that can be used to support and fund licensing and
acquisition opportunities in specialty CNS. Biovail’s drug
delivery expertise also provides support for life cycle
management of its specialty CNS products. Biovail also continues
to identify and evaluate complementary acquisitions or business
opportunities that support its specialty CNS strategy (such as
the May 2009 acquisition of the full U.S. commercialization
rights to Wellbutrin
XL
®
).
Additional information about Biovail and its subsidiaries is
included in documents incorporated by reference into this joint
proxy statement/prospectus. See “Where You Can Find More
Information” beginning on page 175.
Biovail
Americas Corp.
Biovail Americas Corp., a wholly owned subsidiary of Biovail, is
a Delaware corporation that holds ownership of Biovail
subsidiaries that operate in the United States.
Beach
Merger Corp.
Beach Merger Corp., a wholly owned subsidiary of BAC, is a
Delaware corporation that was formed on June 15, 2010, for
the sole purpose of effecting the merger. In the merger, Beach
Merger Corp. will be merged with and into Valeant, with Valeant
surviving as a wholly owned subsidiary of BAC.
Valeant
Pharmaceuticals International
Valeant Pharmaceuticals International
One Enterprise
Aliso Viejo, CA 92656
Telephone:
(949) 461-6000
Valeant, a Delaware corporation, is a multinational specialty
pharmaceutical company that develops, manufactures and markets a
broad range of pharmaceutical products. Valeant’s specialty
pharmaceutical and OTC products are marketed under brand names
and are sold in the United States, Canada, Australia and New
Zealand, where Valeant focuses most of its efforts on the
dermatology and neurology therapeutic classes. Valeant also has
branded generic and OTC operations in Europe and Latin America
which focus on pharmaceutical products that are bioequivalent to
original products and are marketed under company brand names.
Additional information about Valeant and its subsidiaries is
included in documents incorporated by reference in this joint
proxy statement/prospectus. See “Where You Can Find More
Information” beginning on page 175.
32
THE
BIOVAIL SPECIAL MEETING
Date,
Time and Place
The special meeting of Biovail shareholders will be held at the
Canadian Broadcasting Centre, Glenn Gould Studio, 250 Front
Street West, Toronto, Ontario, on September 27, 2010, at
10:00 a.m., local time.
Purpose
of the Biovail Special Meeting
At the Biovail special meeting, Biovail shareholders will be
asked:
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to consider and if thought fit, approve with or without
variation, an ordinary resolution authorizing Biovail to issue
such number of common shares in the capital of Biovail as is
necessary to complete the merger with Valeant, being 1.7809
Biovail common shares for each share of Valeant common stock,
and such other common shares in the capital of Biovail as
contemplated by the merger agreement (the “share issuance
resolution”);
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conditional upon the approval of the share issuance resolution,
to consider, and if deemed advisable, pass, with or without
variation, a special resolution to amend the articles of
continuance of Biovail to change the name of Biovail from
“Biovail Corporation” to “Valeant Pharmaceuticals
International, Inc.” (the name change resolution); and
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to transact such further or other business as may properly come
before the Biovail special meeting and any adjournments or
postponements thereof.
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Completion of the merger is conditioned on approval of the share
issuance resolution and the name change resolution.
Recommendations
of the Board of Directors of Biovail
At a special meeting held on June 20, 2010, the Biovail
board of directors unanimously determined that the merger and
the other transactions contemplated by the merger agreement,
including the issuance of Biovail common shares necessary to
complete the merger and the issuance of such other Biovail
common shares as contemplated by the merger agreement and the
amendment of Biovail’s articles of continuance to effect
the name change were advisable and in the best interests of
Biovail and its shareholders.
Accordingly, the Biovail board
of directors recommends that Biovail shareholders vote
“FOR” the share issuance resolution and
“FOR” the name change resolution.
For a discussion
of the material factors considered by the Biovail board of
directors in reaching its conclusions, see “The
Merger — Recommendations of the Biovail Board of
Directors; Biovail’s Reasons for the Merger” beginning
on page 53.
Biovail shareholders should carefully read this joint proxy
statement/prospectus in its entirety for more detailed
information concerning the merger, the merger agreement and the
treatment of the Valeant equity plans and Valeant equity awards.
In addition, Biovail shareholders are directed to the merger
agreement which is included as Annex A in this joint proxy
statement/prospectus.
Share
Issuance Resolution
Pursuant to the rules of the TSX, securityholder approval is
required in instances where the number of securities issued or
issuable in payment of the purchase price in a transaction such
as the merger exceeds 25% of the number of securities of the
listed issuer which are outstanding, on a non-diluted basis.
Because the merger agreement contemplates the issuance of
greater than 25% of the current outstanding Biovail common
shares on a non-diluted basis, the rules of the TSX require that
Biovail obtain approval of the share issuance resolution by the
holders of a majority of the Biovail common shares represented
in person or by proxy at the Biovail special meeting.
As of the close of business on the date of this joint proxy
statement/prospectus, there were approximately 158,646,462
outstanding Biovail common shares. If the merger is completed,
Biovail currently estimates that it will issue or reserve for
issuance approximately 170,177,852 Biovail common shares (equal
to approximately 107% of Biovail’s current issued and
outstanding common shares) pursuant to or as contemplated by the
merger agreement,
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including approximately (a) 137,837,582 Biovail common
shares issuable in exchange for shares of Valeant common stock
in the merger, (b) 24,256,911 Biovail common shares
issuable in respect of Valeant stock options (approximately
13,419,867) and Valeant restricted stock units (approximately
10,837,044) that Biovail has agreed to assume pursuant to the
merger agreement and (c) 8,083,358 Biovail common shares
into which the 4% Convertible Notes will be convertible.
Biovail
Record Date; Shares Entitled to Vote
Only holders of Biovail common shares at the close of business
on August 18, 2010, the record date for the Biovail special
meeting, will be entitled to notice of, and to vote at, the
Biovail special meeting or any adjournments or postponements
thereof. On the record date, there were outstanding a total of
approximately 158,646,462 Biovail common shares. Each
outstanding Biovail common share is entitled to one vote on each
proposal and any other matter properly coming before the Biovail
special meeting.
Share
Ownership by and Voting Rights of Biovail’s Directors and
Executive Officers
As of the close of business on the record date, Biovail’s
directors and executive officers and their affiliates
beneficially owned and had the right to vote
211,108 Biovail common shares at the Biovail special
meeting, which represents approximately 0.13% of Biovail common
shares entitled to vote at the Biovail special meeting. We
expect that Biovail’s directors and executive officers will
vote their shares in favor of the Biovail proposals, although no
director or executive officer has entered into any agreement
obligating him or her to do so.
Quorum
At least two persons present, each being a shareholder entitled
to vote at the Biovail special meeting or a duly appointed
proxyholder or representative for a shareholder so entitled, and
together holding or representing Biovail common shares having
not less than 25% of the outstanding votes entitled to be cast
at the Biovail special meeting constitute a quorum for the
transaction of business at the Biovail special meeting.
Required
Vote
The required votes to approve the Biovail proposals are as
follows:
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The share issuance resolution will be approved if a majority of
the votes cast on the proposal vote in favor of the proposal.
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The name change resolution will be approved if two-thirds of the
votes cast on the proposal vote in favor of the proposal.
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Failure
to Vote and Broker Non-Votes
If you are a Biovail shareholder and fail to vote or fail to
instruct your broker, bank or other nominee to vote, it will
have no effect on any of the Biovail proposals, assuming a
quorum is present.
Appointment
of Proxyholder
The persons designated by management of Biovail in the enclosed
proxy card are William M. Wells and Gregory Gubitz.
Each
Biovail shareholder has the right to appoint as proxyholder a
person or company, who need not be a shareholder of Biovail,
other than the persons designated by management of Biovail in
the enclosed form of proxy, to attend and act on the
shareholder’s behalf at the Biovail special meeting or at
any adjournment or postponement thereof.
Such right may be
exercised by inserting the name of the person or company in the
blank space provided in the enclosed proxy card or by completing
another proxy card.
Record
Holders
If you are a registered holder of Biovail common shares as of
the close of business on the record date for the Biovail special
meeting, a proxy card is enclosed for your use. Biovail requests
that you vote your shares by
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telephone or through the Internet, or sign the accompanying
proxy card and return it promptly in the enclosed postage-paid
envelope. Information and applicable deadlines for voting by
telephone or through the Internet are set forth on the enclosed
proxy card. When the enclosed proxy card is returned properly
executed, the Biovail common shares represented by it will be
voted at the Biovail special meeting or any adjournment or
postponement thereof in accordance with the instructions
contained in the proxy card and if the shareholder specifies a
choice with respect to any matter to be acted upon, the Biovail
common shares will be voted accordingly. Your telephone or
Internet vote authorizes the named proxies to vote your shares
in the same manner as if you had marked, signed and returned a
proxy card.
Your vote is important. Accordingly, if you are a registered
holder of Biovail common shares as of the close of business on
the record date, please sign and return the enclosed proxy card
or vote via telephone or the Internet whether or not you plan to
attend the Biovail special meeting in person.
If a proxy card is signed and returned without an indication as
to how the Biovail common shares represented are to be voted
with regard to a particular proposal, the Biovail common shares
represented by the proxy will be voted in accordance with the
recommendations of the Biovail board of directors. At the date
hereof, the Biovail board of directors has no knowledge of any
business that will be presented for consideration at the special
meeting and which would be required to be set forth in this
joint proxy statement/prospectus or the related Biovail proxy
card other than the matters set forth in Biovail’s Notice
of Special Meeting of Shareholders. Business transacted at the
Biovail special meeting is expected to be limited to those
matters set forth in such notice. Nonetheless, if any amendments
to matters identified in the accompanying Notice of Biovail
Special Meeting of Shareholders or any other matter is properly
presented at the Biovail special meeting for consideration, it
is intended that the persons named in the enclosed proxy card
and acting thereunder will vote in accordance with their best
judgment and pursuant to such discretionary authority on such
matter.
Shares Held
in Street Name/Non-Registered Shareholders
The proxy card provided with this joint proxy
statement/prospectus will indicate whether or not you are a
registered shareholder. Non-registered shareholders hold their
Biovail common shares through intermediaries, such as banks,
trust companies, securities dealers or brokers. If you are a
non-registered shareholder, the intermediary holding your
Biovail common shares should provide a voting instruction form
which you must complete by using any one of the methods outlined
therein. This voting instruction form will constitute voting
instructions that the intermediary must follow and should be
returned in accordance with the instructions to ensure it is
counted for the Biovail special meeting. In order to expedite
your vote, you may vote by using a touch-tone telephone or via
the Internet, following the instructions outlined on the voting
instruction form.
If, as a non-registered shareholder, you wish to attend the
Biovail special meeting and vote your common shares in person,
or have another person attend and vote your common shares on
your behalf, you should fill your own name, or the name of your
appointee, in the space provided on the voting instruction form.
An intermediary’s voting instruction form will likely
provide corresponding instructions to cast your vote in person.
In either case, you should carefully follow the instructions
provided by the intermediary and contact the intermediary
promptly if you need help.
A non-registered shareholder may revoke a proxy or voting
instruction which has been previously given to an intermediary
by written notice to the intermediary. In order to ensure that
the intermediary acts upon a revocation, the written notice
should be received by the intermediary well in advance of the
Biovail special meeting.
Revocability
of Proxy; Changing Your Vote
If you are a registered holder of Biovail common shares as of
the close of business on the record date for the Biovail special
meeting:
You can change your vote at any time
before the start of your special meeting, unless otherwise
noted. In addition to revocation in any other manner permitted
by law, you can do this in one of the following ways:
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you can grant a new, valid proxy bearing a later date (including
by telephone or Internet);
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you can deposit a signed notice of revocation at Biovail’s
registered office at any time up to and including the last
business day preceding the day of the Biovail special meeting
(or any adjournment or postponement thereof) or with the chair
of the Biovail special meeting on the day of the Biovail special
meeting (or any adjournment or postponement thereof); or
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you can attend the special meeting and vote in person, which
will automatically cancel any proxy previously given, or you may
revoke your proxy in person, but your attendance alone will not
revoke any proxy that you have previously given.
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If you choose any of the foregoing methods, your notice of
revocation or your new proxy must be received by Biovail no
later than the beginning of the Biovail special meeting. If you
have voted your shares by telephone or through the Internet, you
may revoke your prior telephone or Internet vote by any manner
described above.
If you hold Biovail common shares in “street
name”:
You must contact your broker, bank or other
nominee in writing to change your vote. In order to ensure that
the broker, bank or other nominee acts upon revocation, the
written notice should be received by the broker, bank or other
nominee well in advance of your special meeting.
Solicitation
of Proxies
The management of Biovail is soliciting proxies for use at
the Biovail special meeting or at any adjournment or
postponement thereof.
In accordance with the merger
agreement, the cost of proxy solicitation for the Biovail
special meeting will be borne by Biovail. In addition to the use
of the mail, proxies may be solicited by directors, officers and
other employees of Biovail, without additional remuneration, by
personal interview, telephone, facsimile or otherwise. Biovail
will also request brokerage firms, nominees, custodians and
fiduciaries to forward proxy materials to the beneficial owners
of shares and will provide customary reimbursement to such firms
for the cost of forwarding these materials. Biovail has retained
Georgeson to assist in its solicitation of proxies and has
agreed to pay them a fee of approximately C$30,000, plus
reasonable expenses, for these services.
Principal
Shareholders
According to a Schedule 13G filed on August 10, 2010,
by FMR LLC (“FMR”), FMR beneficially owns 16.91% of
the issued and outstanding Biovail common shares. Other than the
shareholdings reflected in such filing, to the knowledge of the
directors and officers of Biovail, as of August 17, 2010,
no person beneficially owned, directly or indirectly, or
controls or directs, more than 10% of the voting rights attached
to the issued and outstanding Biovail common shares.
36
THE
VALEANT SPECIAL MEETING
Date,
Time and Place
The special meeting of Valeant’s stockholders will be held
at 14 Main Street, Suite 140, Madison, New Jersey 07940 on
September 27, 2010 at 10:00 a.m., local time.
Purpose
of the Valeant Special Meeting
At the Valeant special meeting, Valeant stockholders will be
asked to vote on the following proposals:
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to adopt the merger agreement; and
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to approve the adjournment of the Valeant special meeting, if
necessary to solicit additional proxies if there are not
sufficient votes to adopt the merger agreement at the time of
the Valeant special meeting.
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Recommendations
of the Board of Directors of Valeant
The Valeant board of directors unanimously (1) determined
that the merger agreement and the merger are advisable and in
the best interests of Valeant and its stockholders,
(2) approved the merger and the merger agreement and
(3) resolved to recommend adoption of the merger agreement
to Valeant stockholders.
The Valeant board of directors
recommends that the Valeant stockholders vote “FOR”
the adoption of the merger agreement and “FOR” the
adjournment of the Valeant special meeting, if necessary or
appropriate to solicit additional proxies if there are not
sufficient votes to adopt the merger agreement at the time of
the Valeant special meeting.
For a discussion of the
material factors considered by the Valeant board of directors in
reaching its conclusions, see “The Merger —
Recommendations of the Valeant Board of Directors;
Valeant’s Reasons for the Merger” beginning on
page 68.
Valeant stockholders should carefully read this joint proxy
statement/prospectus in its entirety for more detailed
information concerning the merger. In addition, Valeant
stockholders are directed to the merger agreement, which is
included as Annex A in this joint proxy
statement/prospectus.
Valeant
Record Date; Stock Entitled to Vote
The record date for the Valeant special meeting is
August 18, 2010. Only Valeant stockholders of record at the
close of business on August 18, 2010 will be entitled to
receive notice of, and to vote at, the Valeant special meeting
or any adjournments or postponements thereof. Shares of Valeant
common stock held by Valeant as treasury shares and by
Valeant’s subsidiaries will not be entitled to vote.
As of the close of business on the record date of
August 18, 2010, there were approximately
76,696,012 shares of Valeant common stock outstanding and
entitled to vote at the Valeant special meeting. Each holder of
Valeant common stock is entitled to one vote for each share of
Valeant common stock owned as of the Valeant record date.
A complete list of Valeant stockholders entitled to vote at the
Valeant special meeting will be available for inspection at the
principal place of business of Valeant during regular business
hours for a period of no less than 10 days before the
special meeting and at the place of the Valeant special meeting
during the meeting.
Stock
Ownership by and Voting Rights of Valeant’s Directors and
Executive Officers
At the close of business on the record date for the Valeant
special meeting, Valeant’s directors and executive officers
and their affiliates beneficially owned and had the right to
vote 15,853,000 shares of Valeant common stock at the Valeant
special meeting (which includes shares of which Mr. Morfit
may be deemed to share beneficial ownership, as a member of the
management board of ValueAct Holdings GP, LLC, which entity
controls the general partner and the manager of ValueAct
Capital), which represents approximately 21% of the Valeant
common stock entitled to vote at the Valeant special meeting. It
is expected that Valeant’s directors and executive officers
will vote their shares “FOR” the adoption of the
merger agreement and “FOR” the adjournment of the
Valeant special meeting, if necessary or appropriate to solicit
additional proxies if there are not sufficient votes to adopt
the merger agreement at the time of the Valeant special meeting.
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Quorum
A quorum of stockholders is required to carry on the business of
the Valeant special meeting. A majority of the outstanding
shares of Valeant common stock entitled to vote at the Valeant
special meeting must be represented in person or by proxy at the
meeting in order to constitute a quorum. Any abstentions will be
counted in determining whether a quorum is present at the
Valeant special meeting. In the event that a quorum is not
represented in person or by proxy at the Valeant special
meeting, the holders of Valeant common stock present in person
or represented by proxy at the Valeant special meeting and
entitled to vote thereat may adjourn the meeting until a quorum
is represented in person or by proxy, without notice other than
announcement at the meeting. If the adjournment is for more than
30 days, or if after adjournment a new record date is set,
a notice of the adjourned meeting will be given to each Valeant
stockholder of record entitled to vote at the meeting.
The Valeant proposals are not considered a routine matter with
respect to shares of Valeant common stock that are represented
at the special meeting, but that are held by brokers, banks or
other nominees who do not have authority to vote such shares
(i.e., broker non-votes). Therefore, your broker will not be
permitted to vote on the Valeant proposals without instruction
from you as the beneficial owner of the shares of Valeant common
stock. Broker non-votes (if any) will, however, be counted for
purposes of determining whether a quorum is present at the
Valeant special meeting.
Required
Vote
The required votes to approve the Valeant proposals are as
follows:
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To adopt the merger agreement, holders of a majority of the
shares of Valeant common stock outstanding and entitled to vote
on the proposal must vote in favor of adoption of the merger
agreement.
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To approve the adjournment of the Valeant special meeting, if
necessary or appropriate to solicit additional proxies if there
are not sufficient votes to adopt the merger agreement at the
time of the Valeant special meeting, the affirmative vote of
holders of a majority of the shares of Valeant common stock
present in person or represented by proxy at the special meeting
and entitled to vote thereon is required, regardless of whether
a quorum is present.
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Failure
to Vote, Broker Non-Votes and Abstentions
If you are a Valeant stockholder and fail to vote, fail to
instruct your broker, bank or other nominee to vote, or mark
your proxy or voting instructions to abstain, this will have the
effect of a vote against the proposal to adopt the merger
agreement. If you are a Valeant stockholder and are present in
person at the Valeant special meeting and abstain from voting or
mark your proxy or voting instructions to abstain, this will
have the effect of a vote “against” the proposal to
approve the adjournment of the Valeant special meeting. If you
are a Valeant stockholder and are not present in person at the
Valeant special meeting and do not respond by proxy, this will
have no effect on the vote held on the proposal to approve the
adjournment of the Valeant special meeting. Failure to instruct
your broker, bank or other nominee to vote will also have no
effect on the vote held on this proposal.
Record
Holders
If you are entitled to vote at the Valeant special meeting and
hold your shares in your own name, you can submit a proxy or
vote in person by completing a ballot at the special meeting.
However, Valeant encourages you to submit a proxy before the
Valeant special meeting even if you plan to attend the Valeant
special meeting in order to ensure that your shares are voted. A
proxy is a legal designation of another person to vote your
shares of Valeant common stock on your behalf. If you hold
shares in your own name, you may submit a proxy for your shares
by:
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calling the toll-free number specified on the enclosed proxy
card and follow the instructions when prompted;
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accessing the Internet web site specified on the enclosed proxy
card and follow the instructions provided to you; or
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filling out, signing and dating the enclosed proxy card and
mailing it in the prepaid envelope included with these proxy
materials.
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When a stockholder submits a proxy by telephone or through the
Internet, his or her proxy is recorded immediately. Valeant
encourages its stockholders to submit their proxies using these
methods whenever possible. If you submit a proxy by telephone or
the Internet web site, please do not return your proxy card by
mail.
All shares represented by each properly executed and valid proxy
received before the Valeant special meeting will be voted in
accordance with the instructions given on the proxy. If a
Valeant stockholder executes a proxy card without giving
instructions, the shares of Valeant common stock represented by
that proxy card will be voted in accordance with the
recommendations of the Valeant board of directors.
Your vote is important. Accordingly, please submit your proxy by
telephone, through the Internet or by mail, whether or not you
plan to attend the meeting in person.
Shares Held
in Street Name
If your shares are held in an account at a broker, bank or
through another nominee, you must instruct the broker, bank or
other nominee on how to vote your shares by following the
instructions that the broker, bank or other nominee provides to
you with these proxy materials. Most brokers offer the ability
for stockholders to submit voting instructions by mail by
completing a voting instruction card, by telephone and via the
Internet.
If you do not provide voting instructions to your broker, bank
or other nominee your shares will not be voted on any proposal
on which your broker, bank or other nominee does not have
discretionary authority to vote. This is referred to in this
joint proxy statement/prospectus and in general as a broker
non-vote. Under the current rules of the NYSE, brokers do not
have discretionary authority to vote on the proposal to adopt
the merger agreement, nor on the proposal to approve the
adjournment of the Valeant special meeting, if necessary or
appropriate to solicit additional proxies if there are not
sufficient votes to adopt the merger agreement at the time of
the Valeant special meeting. Any broker non-votes would have the
same effect as a vote “against” adoption of the merger
agreement and would have no effect on the proposal to approve
the adjournment of the Valeant special meeting.
If you hold shares through a broker, bank or other nominee and
wish to vote your shares in person at the Valeant special
meeting, you must obtain a proxy from your broker, bank or other
nominee and present it to the inspector of election with your
ballot when you vote at the Valeant special meeting.
Revocability
of Proxy; Changing Your Vote
You may revoke your proxy
and/or
change your vote at any time before your proxy is voted at the
Valeant special meeting.
If you are a stockholder of record,
you can do this by
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sending a written notice stating that you revoke your proxy to
Valeant at One Enterprise, Aliso Viejo, California 92656, Attn:
Corporate Secretary that bears a date later than the date of the
proxy and is received prior to the Valeant special meeting and
states that you revoke your proxy;
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submitting a valid, later-dated proxy by mail, telephone or
Internet that is received prior to the special meeting; or
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attending the Valeant special meeting and voting by ballot in
person (your attendance at the Valeant special meeting will not,
by itself, revoke any proxy that you have previously given).
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If you hold your shares of Valeant common stock in “street
name” through a broker, bank or other nominee, you must
follow the directions you receive from your broker, bank or
other nominee in order to revoke or change your vote.
Solicitation
of Proxies
Valeant’s management is soliciting proxies for use at the
Valeant special meeting and any adjournment or postponement
thereof. In addition to the use of the mail, proxies may be
solicited by directors, officers and other employees of Valeant,
without additional remuneration, by personal interview,
telephone, facsimile or otherwise. Valeant will also request
brokerage firms, nominees, custodians and fiduciaries to forward
proxy materials to the beneficial owners of shares and will
provide customary reimbursement to such firms for the cost of
forwarding these
39
materials. Valeant has retained Innisfree to assist in its
solicitation of proxies and has agreed to pay them a fee of
approximately $20,000, plus reasonable
out-of-pocket
expenses, for these services.
Stockholders should not send stock certificates with their
proxies. A letter of transmittal and instructions for the
surrender of Valeant common stock certificates will be mailed to
Valeant stockholders shortly after the completion of the merger.
Principal
Stockholders
According to a Schedule 13D/A filed on June 24, 2010,
by ValueAct Capital, ValueAct Capital beneficially owns 20% of
the common stock of Valeant. According to a Schedule 13G
filed on June 10, 2010, by Ruane, Cunniff &
Goldfarb Inc. (“Ruane”), Ruane beneficially owns
13.76% of the common stock of Valeant. According to a
Schedule 13G filed on May 10, 2010, by FMR, FMR
beneficially owns 10.69% of the common stock of Valeant.
According to a Schedule 13G/A filed on January 28,
2010, by Iridian Asset Management LLC (“Iridian”),
Iridian beneficially owns 10.9% of the common stock of Valeant.
Other than the shareholdings reflected in such filings, to the
knowledge of the directors and officers of Valeant, as of
August 17, 2010, no person beneficially owns, directly or
indirectly, or controls or directs, more than 10% of the voting
rights attached to Valeant common stock.
No Other
Business
Under Valeant’s amended and restated bylaws, the business
to be conducted at the Valeant special meeting will be limited
to the purposes stated in the notice to Valeant stockholders
provided with this joint proxy statement/prospectus.
Delivery
of Proxy Materials to Households Where Two or More Valeant
Stockholders Reside
As permitted by the Exchange Act, only one copy of this joint
proxy statement/prospectus is being delivered to Valeant
stockholders residing at the same address, unless Valeant
stockholders have notified Valeant of their desire to receive
multiple copies of this joint proxy statement/prospectus. This
is known as householding.
Valeant will promptly deliver, upon oral or written request, a
separate copy of this joint proxy statement/prospectus to any
Valeant stockholder residing at an address to which only one
copy was mailed. Requests for additional copies should be
directed to Valeant Pharmaceuticals International, Attn:
Investor Relations, One Enterprise, Aliso Viejo, California,
92656.
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PRE-MERGER
SPECIAL DIVIDEND
Under the terms of the merger agreement, Valeant stockholders of
record as of the close of business on the business day
immediately preceding the effective time of the merger will be
paid the pre-merger special dividend, a one-time special cash
dividend of $16.77 per share, on such business day. The payment
of the
pre-merger
special dividend is a condition to the completion of the merger.
POST-MERGER
SPECIAL DIVIDEND
It is anticipated that on December 31, 2010, contingent
upon the closing of the merger and subject to the discretion of
the board of directors of the combined company, and to
compliance with applicable law, the combined company will pay
the post-merger special dividend, an additional one-time special
dividend of $1.00 per common share of the combined company, to
shareholders of the combined company. After the payment of the
post-merger special dividend, the combined company does not
intend to pay dividends.
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THE
MERGER
Effects
of the Merger
In order to effect the combination of Valeant and Biovail, Beach
Merger Corp., a wholly owned subsidiary of BAC that has been
organized to effect the merger, will merge with and into
Valeant. Valeant will be the surviving corporation in the merger
and will become a wholly owned subsidiary of BAC.
Prior to the merger, Valeant intends to pay its stockholders of
record as of the close of business on the business day
immediately preceding the effective time of the merger the
$16.77 per share pre-merger special dividend. The payment of the
pre-merger special dividend is a condition to the completion of
the merger. In the merger, each outstanding share of Valeant
common stock (other than shares of Valeant common stock owned by
Valeant, as treasury stock, Biovail, BAC or Beach Merger Corp.
(all of which will be cancelled), and other than those shares
with respect to which appraisal rights are properly exercised
and not withdrawn) will be converted into the right to receive
1.7809 Biovail common shares, with cash paid in lieu of
fractional shares. This exchange ratio is fixed and will not be
adjusted to reflect share price changes prior to the closing of
the merger. Biovail shareholders will continue to hold their
existing Biovail common shares after the merger. Upon the
completion of the merger, former Biovail shareholders will own
approximately 50.5% and former Valeant stockholders will own
approximately 49.5%, respectively, of the shares of the combined
company on a fully diluted basis.
Background
of the Merger
In light of the nature of Valeant’s and Biovail’s
businesses, management of each of Valeant and Biovail has been
and continues to be generally familiar with the other’s
businesses. In addition, each company periodically reviews and
assesses developments in the specialty pharmaceuticals industry,
and considers acquisitions, divestitures and collaborations
involving other companies. In considering potential transaction
partners in the past, Valeant and Biovail had each independently
considered the possibility of a business combination or other
transaction with the other.
In early 2008, Valeant embarked on a new business strategy to
transform itself from an R&D based global specialty
pharmaceuticals company focused on neurology and infectious
disease products into a more streamlined specialty
pharmaceuticals company focused on shifting investment from
R&D towards acquiring small in-line, undervalued products
and companies with businesses in core geographies and lower risk
therapeutic classes. Valeant also considered the possible merits
of pursuing in the future a transformational business
combination in order to apply the new strategy to a larger asset
base to enhance stockholder value. In early 2008, Valeant
identified Biovail as a potential future transaction partner if
such a transaction were pursued, in light of Biovail’s size
and spend and its corporate structural efficiencies.
Following the Valeant board of directors’ strategic retreat
in mid-August 2009, J. Michael Pearson, Chairman and Chief
Executive Officer of Valeant, telephoned William M. Wells, Chief
Executive Officer of Biovail, to discuss the possibility of a
transaction involving a Valeant neurological product, in light
of Biovail’s primary focus on specialty neurology. During
the conversation, Mr. Wells expressed an interest in
further discussions with respect to such a transaction and also
expressed an interest in discussing the possibility of a
transaction involving Valeant’s Canadian operations.
Shortly thereafter, Mr. Pearson informed Mr. Wells
that Valeant was not interested in pursuing a transaction
involving Valeant’s Canadian operations.
From mid-September 2009 through mid-January 2010,
representatives of Valeant and Biovail continued discussions
with respect to a potential transaction involving the Valeant
neurological product. During this period, Valeant
Pharmaceuticals North America, a wholly owned subsidiary of
Valeant, and Biovail entered into a confidentiality agreement.
In addition, with Biovail’s consent, Mr. Pearson
informed representatives of Valeant’s collaboration partner
on the product of Biovail’s interest in a potential
transaction.
During this period, senior management of Valeant began to
consult with representatives of Goldman, Sachs & Co.
(“Goldman Sachs”), which from time to time had
performed various financial advisory services for Valeant, about
the possibility of pursuing a broader business combination
transaction with Biovail.
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In December 2009, the Biovail board of directors reviewed the
discussions between Valeant and Biovail and discussed the
possibility of a business combination with Valeant.
In January 2010, a representative of Jefferies &
Company, Inc. (“Jefferies”), which from time to time
had performed various financial advisory services for Valeant,
raised with representatives of Valeant the possibility that
Valeant explore such a transaction. Senior management of Valeant
discussed with its advisors potential transaction structures for
a merger of Valeant and Biovail.
In the last week of January 2010, a representative of Jefferies
contacted Mr. Wells, with the knowledge of Valeant, to
inquire whether Mr. Wells would be interested in discussing
with Mr. Pearson a potential merger of Biovail and Valeant.
Biovail, with the assistance of Morgan Stanley & Co.
Incorporated (“Morgan Stanley”), which from time to
time had performed various financial advisory services for
Biovail, began to consider a potential merger with Valeant. The
Biovail board of directors authorized Mr. Wells to engage
in discussions with Mr. Pearson.
In early February, Mr. Pearson called Mr. Wells to
determine if Biovail would like to discuss a potential business
combination with Valeant. They agreed to arrange a meeting or
conference call to discuss such a transaction.
On February 10, 2010, representatives of Jefferies met with
representatives of senior management of Valeant, as well as G.
Mason Morfit and Brandon Boze, members of the Valeant board of
directors, regarding a potential merger with Biovail and
reviewed information and preliminary financial analyses.
A telephone call was held on February 11, 2010, with
Mr. Wells, Mr. Pearson, Gregory Gubitz, Senior Vice
President, Corporate Development and General Counsel of Biovail,
and Rajiv De Silva, Chief Operating Officer of Specialty
Pharmaceuticals of Valeant, participating, during which a
potential merger transaction between Valeant and Biovail was
preliminarily discussed. As a follow up to that call,
Mr. Wells and Mr. Pearson met for lunch on
February 15, 2010, in Montreal, Canada, to preliminarily
discuss a possible transaction.
On February 18, 2010, Valeant Pharmaceuticals North America
and Biovail amended their existing confidentiality agreement
dated September 28, 2009, to include mutual standstill
provisions.
On February 25, 2010, members of Biovail senior management
met with Mr. Pearson and other members of Valeant senior
management to discuss a potential combination involving the two
companies, with a particular focus on the realignment of the
businesses of the combined company following a potential merger
transaction and potential synergies that could be gained from
such a transaction. These discussions were followed by a meeting
among Mr. Wells, Mr. Pearson, Douglas J.P. Squires,
Chairman of the board of directors of Biovail, and
Mr. Morfit on February 26, 2010, to review the
discussion that took place on the previous day.
On March 1, 2010, Mr. Gubitz, other members of Biovail
management and Mr. De Silva met again in Biovail’s
offices in Mississauga, Ontario, with Mr. Blott and other
members of Valeant management participating telephonically, to
discuss potential synergies that could be gained from a
transaction combining the two companies.
On March 3, 2010, at a previously scheduled board meeting,
the Valeant board of directors discussed the status of the
conversations regarding a potential business combination
transaction between Valeant and Biovail that had occurred over
the past several weeks. Representatives of senior management and
Goldman Sachs attended the meeting and reviewed with the
directors preliminary financial analyses and operating
information regarding Biovail. The board of directors also
discussed the potential transaction structure for a merger. As
part of the meeting, the independent directors of the Valeant
board of directors met without members of management present.
The Valeant board of directors directed senior management to
continue pursuing a potential merger with Biovail.
On March 4, 2010, another meeting was held in New York, New
York, to review potential synergies, with Mr. Wells,
Dr. Squires, Mr. Gubitz, Mr. Pearson,
Mr. Morfit and Mr. De Silva in attendance.
On March 5, 2010, Dr. Squires, Mr. Wells,
Mr. Gubitz and a representative of Cravath,
Swaine & Moore LLP, Biovail’s U.S. external
legal counsel (“Cravath”), and a representative of
Blake, Cassels & Graydon LLP, Biovail’s Canadian
external legal counsel (“Blakes”), spoke by telephone
regarding a potential transaction involving Biovail and Valeant
and also discussed the advisability of forming a committee of
the Biovail board of directors to assist the Biovail board of
directors and management in reviewing the proposed merger with
Valeant. On March 5, 2010, the Biovail board
43
of directors authorized the formation of a committee of the
board (the “Biovail committee”). The Biovail board of
directors determined that the Biovail committee would consist of
four independent directors: Laurence Paul, Mark Parrish, Robert
Power and Lloyd Segal. Dr. Paul was appointed chairman of
the Biovail committee.
On March 5, 2010, the Valeant board of directors held a
meeting to review the status of the discussions between Valeant
and Biovail with respect to the proposed transaction.
Representatives of Valeant senior management attended and
provided the board of directors an update on potential synergy
opportunities. At the meeting, the Valeant board of directors
authorized the formation of, and established, an ad hoc
committee of the Valeant board of directors (the “Valeant
ad hoc committee”) to assist Valeant senior management and
the Valeant board of directors in considering a potential
transaction with Biovail, which committee consisted of
Mr. Morfit (as Chairman), Robert Ingram, Theo Melas-Kyriazi
and Stephen F. Stefano. The Valeant board of directors also
authorized the engagement of Goldman Sachs and Jefferies as
Valeant’s financial advisors and the engagement of a
strategic consulting firm to assist Valeant in its due diligence
on Biovail’s pipeline and key products.
On March 8, 2010, Dr. Paul, Dr. Squires,
Mr. Morfit and Mr. Ingram participated in a call to
discuss a potential combination of Valeant and Biovail.
The Biovail committee first met on March 9, 2010, with
Dr. Squires, members of Biovail management, members of the
Biovail board of directors, representatives of Morgan Stanley
and a representative of Sullivan & Cromwell LLP
(“Sullivan & Cromwell”), as counsel engaged
by the Biovail committee to advise it in connection with its
mandated activities, in attendance. The Biovail committee
reviewed the status of discussions between Valeant and Biovail,
as well as initial valuation analyses that Morgan Stanley had
performed.
Dr. Squires, Mr. Wells, Mr. Pearson and
Mr. De Silva, along with representatives of Morgan Stanley
and Goldman Sachs, met in New York, New York, on March 11,
2010, to discuss strategic fit, potential synergies that could
be gained from a transaction, value creation and process.
On March 12, 2010, the Valeant ad hoc committee and other
Valeant directors, including Mr. Boze, Richard Koppes and
Norma Provencio, held a meeting, with members of Valeant senior
management and representatives of Goldman Sachs and Jefferies
participating, to review the status of the discussions between
Valeant and Biovail with respect to the proposed transaction.
On March 15, 2010, the Biovail committee met with
Dr. Squires, members of Biovail management, representatives
of Morgan Stanley and a representative of Sullivan &
Cromwell to review the events of the prior week and to review
potential structures for a transaction with Valeant. The Biovail
committee authorized Mr. Wells to continue discussions with
Mr. Pearson within the parameters set forth by the Biovail
committee. Mr. Wells placed a call to Mr. Pearson that
day to continue discussions, and Mr. Wells and
Mr. Pearson spoke on the phone the next day.
On March 19, 2010, the Biovail committee met with
Dr. Squires, members of Biovail management, representatives
of Morgan Stanley and a representative of Sullivan &
Cromwell. The committee was provided with an update on
discussions between Biovail and Valeant, as well as discussions
between Morgan Stanley and Goldman Sachs. The Biovail committee
reviewed with Morgan Stanley potential valuations of Valeant.
On March 19, 2010, the Valeant ad hoc committee and other
Valeant directors, including Mr. Pearson, Mr. Boze,
Mr. Koppes, Lawrence Kugelman and Ms. Provencio, held
a meeting to review the status of the discussions between
Valeant and Biovail with respect to the proposed transaction.
Members of Valeant senior management and representatives of
Goldman Sachs and Jefferies attended. At the meeting, the
committee discussed governance matters and Valeant’s
financial advisors reviewed with the committee potential
transaction structures. It was the committee’s view that it
was important that the strategy of the combined company after
closing be consistent with Valeant’s historical business
strategy and that Valeant have the right to appoint a majority
of the initial board of directors of the combined company in
order to support that business strategy.
Mr. Wells and Mr. Pearson had a discussion on
March 20, 2010, in New York, New York, during which the
chief executive officers, based on input from the Valeant ad hoc
committee and the Biovail committee, respectively, discussed
valuation and governance of the combined company after a
potential transaction.
On March 22, 2010, the Biovail committee met with
Dr. Squires, members of Biovail management, representatives
of Morgan Stanley and a representative of Sullivan &
Cromwell. Mr. Wells reported to the Biovail
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committee on his discussions with Mr. Pearson. The Biovail
committee affirmed its desire for Mr. Wells to continue
discussions with Mr. Pearson.
On March 23, 2010, the Valeant ad hoc committee and other
Valeant directors, including Mr. Pearson, Mr. Boze,
Mr. Koppes, Mr. Kugelman and Ms. Provencio, met
with members of Valeant senior management and representatives of
Goldman Sachs and Jefferies to discuss Mr. Pearson’s
recent communications with Mr. Wells and Goldman Sachs
representatives’ conversations with Morgan Stanley’s
representatives regarding valuation. Advantages and
disadvantages of the proposed transaction with Biovail were
reviewed, including the benefits of achieving significant
synergies and greater, more stable cash flow as well as
execution risk.
The Biovail committee met on March 24, 2010, with
Dr. Squires, members of Biovail management, representatives
of Morgan Stanley and a representative of Sullivan &
Cromwell. Dr. Paul reported on a conversation he had with
Mr. Morfit. After deliberation, the Biovail committee
requested that Mr. Wells discuss certain transaction
details with representatives of Valeant. The Biovail committee
adjourned to allow Mr. Wells to have such discussions.
The Biovail committee reconvened after the discussions between
Mr. Wells and Mr. Pearson and, after additional
deliberation, requested that Dr. Paul, Mr. Morfit and
a representative from each of Morgan Stanley and Goldman Sachs
engage in further discussions to clarify each company’s
position regarding a potential transaction. A conference call
was then held and the individuals discussed the terms of a
potential transaction, including valuation and governance.
On March 25, 2010, the Biovail committee met with
Dr. Squires, members of Biovail management, representatives
of Morgan Stanley and a representative of Sullivan &
Cromwell. Dr. Paul provided an update regarding the March
24 conference call with Mr. Morfit, Morgan Stanley and
Goldman Sachs.
On March 26, 2010, the Valeant ad hoc committee and other
Valeant directors, including Mr. Pearson, Mr. Boze,
Mr. Kugelman, Anders Lönner and Ms. Provencio
met. Also in attendance were representatives of Goldman Sachs,
Jefferies, the law firm Skadden, Arps, Slate,
Meagher & Flom LLP, outside legal counsel
(“Skadden”) to Valeant, and the strategic consulting
firm engaged by Valeant. At the meeting, representatives of the
strategic consulting firm provided its due diligence analysis
relating to Biovail and its pipeline and products.
Representatives of Goldman Sachs then reviewed financial
analyses regarding Valeant and Biovail and their businesses.
Valeant’s senior management discussed with the committee
Biovail and its businesses and the strategic rationales and
opportunities and risks associated with a potential transaction
with Biovail. The committee reviewed the discussions between
Mr. Pearson and Mr. Wells, and Mr. Morfit and
Dr. Paul, that had occurred over the previous few days. The
committee authorized Mr. Morfit to communicate to
Dr. Paul Valeant’s positions on terms, including on
valuation; that Valeant appointees should constitute a majority
of the directors of the combined company board following the
proposed transaction; and that Mr. Pearson should serve as
chief executive officer of the combined company and
Mr. Wells should serve as non-executive chairman.
On March 26, 2010, and in a number of calls between
March 26, 2010, and March 29, 2010, Dr. Paul
discussed with Mr. Morfit governance for the combined
company. Dr. Paul indicated that he did not believe Biovail
would wish to pursue the transaction that Mr. Morfit had
described.
On March 29, 2010, each of the Biovail committee and the
Valeant board of directors met separately to discuss the recent
conversations and determined that discussions regarding a
potential merger transaction and any transaction involving
Valeant’s U.S. neurology business were concluded.
Between April 7, 2010, and April 11, 2010,
Mr. Morfit and Dr. Paul discussed the reasons for the
recent termination of discussions and determined to schedule a
meeting to discuss Valeant’s and Biovail’s respective
positions that led to the termination.
On April 9, 2010, the Biovail committee met with
representatives of Morgan Stanley and a representative of
Sullivan & Cromwell. Dr. Paul informed the
Biovail committee that a meeting with representatives of Valeant
was planned in Los Angeles, California, for the following week
to review why discussions regarding a potential transaction were
discontinued and to clarify Valeant’s and Biovail’s
respective positions.
45
Mr. Wells and Mr. Pearson spoke on April 11,
2010, to coordinate plans for the meeting in Los Angeles,
California.
On April 13, 2010, the Biovail committee met with
Dr. Squires, members of Biovail management, representatives
of Morgan Stanley and a representative from each of Cravath and
Sullivan & Cromwell. The agenda for the upcoming
meeting was reviewed.
On April 15, 2010, Dr. Squires, Dr. Paul,
Mr. Wells, Mr. Pearson, Mr. Ingram and
Mr. Morfit met in Los Angeles, California, to discuss
Valeant’s and Biovail’s respective positions and the
reasons why discussions recently were terminated. In this
context, the parties discussed Valeant’s and Biovail’s
views regarding the opportunities to enhance shareholder value
for both companies that were available from combining Valeant
and Biovail, as well as combined company governance and
management. As part of the meeting, Mr. Morfit,
Mr. Ingram, Dr. Squires and Dr. Paul discussed
these matters without Mr. Wells or Mr. Pearson
present. At the meeting, the representatives of the two
companies indicated a willingness to re-commence discussions if
acceptable to the Valeant ad hoc committee and the Biovail
committee, respectively.
On the same day, the Valeant board of directors convened a
meeting with representatives of senior management participating,
to update the board on the meeting held in Los Angeles,
California.
On April 16, 2010, the Biovail committee met with members
of Biovail management, representatives of Morgan Stanley and a
representative of each of Cravath and Sullivan &
Cromwell. Dr. Paul provided an update of the meeting on the
prior day in Los Angeles, California. The Biovail committee
authorized representatives of Biovail to meet with
representatives of Valeant to prepare a strategy for the
combined company.
On April 19, 2010, the Biovail committee met with
Dr. Squires, members of Biovail management, representatives
of Morgan Stanley and a representative from each of Cravath and
Sullivan & Cromwell. The Biovail committee discussed
the upcoming meeting in Barbados among representatives of
Valeant, Biovail and the strategic consulting firm engaged by
both Valeant and Biovail, which was familiar with both
companies. The purpose of the meeting would be to commence
preparation of a combined strategy, integration plan and
organizational chart and to review potential synergies. A
tentative work plan was discussed, including work relating to
due diligence, the drafting of definitive agreements and the
discussion between Morgan Stanley and Goldman Sachs of matters
relating to financial analyses of, and the capital structure
for, the combined company. Following deliberation, the Biovail
committee indicated that it was supportive of plans to further
engage in discussions with Valeant.
Also on April 19, 2010, the Valeant ad hoc committee and
other Valeant directors, including Mr. Pearson,
Mr. Boze, Mr. Koppes, Mr. Kugelman and
Ms. Provencio, held a meeting, with members of senior
management, Goldman Sachs and Jefferies participating, to
further discuss the meeting in Los Angeles, California, and
communications between Mr. Pearson and Mr. Wells.
Following discussion, the Valeant ad hoc committee determined
that, in light of the opportunities created by a potential
combination, Valeant management should resume discussions with
Biovail regarding a potential transaction providing for a merger
of Valeant and Biovail.
On April 20, 2010, the Biovail board of directors met,
together with members of Biovail management, for the purpose of
receiving an update from the Biovail committee on the renewed
discussions regarding the potential merger. At the meeting,
among other things, the Biovail board of directors discussed
strategy and the structure of a potential transaction.
During April 21, 2010, and April 22, 2010,
representatives of Biovail and Valeant met in Barbados to
discuss business strategy, potential integration and
organization of the potential combined company and to discuss
potential synergies arising from the transaction.
On April 25, 2010, the Biovail committee met with
Dr. Squires, members of Biovail management, representatives
of Morgan Stanley and a representative from each of Cravath,
Blakes and Sullivan & Cromwell. Mr. Wells
provided an update on the meetings between representatives of
Valeant and Biovail. Next steps were discussed, including
required diligence and financing plans.
On April 26, 2010, Mr. Gubitz, Margaret Mulligan,
Senior Vice President and Chief Financial Officer of Biovail,
and Gilbert Godin, Executive Vice President and Chief Operating
Officer of Biovail, met with
46
representatives of Valeant in the offices of the strategic
consulting firm engaged by both Valeant and Biovail to discuss
potential synergies.
On April 28, 2010, the Valeant board of directors held a
meeting, with members of senior management attending, to review
the recent synergies-related discussions and discuss
Biovail’s operations and the potential transaction.
In late April 2010, and early May 2010, Valeant, Biovail and
each company’s respective representatives conducted due
diligence reviews of each other’s businesses.
On April 29, 2010, and April 30, 2010,
Mr. Gubitz, Mrs. Mulligan and Mr. Godin met with
Mr. Pearson and other representatives of Valeant in
Mississauga, Ontario, to continue discussions regarding a
potential transaction. Mr. Wells participated in the
discussions on April 30, 2010.
Between April 30, 2010, and May 3, 2010, there were
multiple interactions between representatives of each of Valeant
and Biovail.
On May 3, 2010, Mr. Gubitz, Mrs. Mulligan and
other members of Biovail management met with Mr. Pearson,
Mr. De Silva, Mr. Blott and other members of Valeant
management and representatives of each of Fenwick &
West LLP, Biovail’s U.S. external tax counsel, and
Deloitte & Touche, Valeant’s external tax
advisor, in New York, New York, to discuss potential synergies.
Representatives of each of Morgan Stanley and Goldman Sachs were
also in attendance to discuss financing of a potential
transaction.
On May 4, 2010, Mr. Gubitz, Mrs. Mulligan,
Mr. Godin and a representative of Cravath met with
Mr. Pearson, Mr. De Silva, Mr. Min and a
representative of Skadden, in Newark, New Jersey, to discuss the
potential transaction.
On May 6, 2010, Dr. Paul, Dr. Squires,
Mr. Morfit and Mr. Ingram participated in a call to
discuss concerns Biovail had regarding the potential merger due
to changes in the relative prices of Biovail common shares and
shares of Valeant common stock and the resulting increased
leverage on the combined company as a result of the price
differential.
On May 6, 2010, the Biovail committee met with
Dr. Squires, members of Biovail management, representatives
of Morgan Stanley and a representative of each of Cravath and
Sullivan & Cromwell. Because of the concerns discussed
on the May 6, 2010 call, the Biovail committee decided to
halt discussions with Valeant. Representatives of Morgan Stanley
informed representatives of Goldman Sachs of this decision later
that day.
On May 7, 2010, the Valeant ad hoc committee and other
Valeant directors, including Mr. Koppes, Mr. Kugelman
and Ms. Provencio met, with representatives of senior
management, Goldman Sachs and Jefferies in attendance.
Mr. Morfit reviewed with the committee members the
outstanding issues relating to a possible merger between Valeant
and Biovail, including open valuation and governance issues. The
committee determined that Valeant’s financial advisors
should perform additional analyses in light of the recent market
changes.
On May 10, 2010, the Valeant ad hoc committee and other
Valeant directors, including Mr. Pearson, Mr. Boze,
Mr. Koppes, Mr. Kugelman and Ms. Provencio, met
with members of Valeant senior management and representatives of
Goldman Sachs and Jefferies to review and consider proposed
terms upon which Valeant would be willing to pursue further
discussion of a potential merger with Biovail. Members of
Valeant senior management reviewed Biovail and potential
transaction benefits with the committee. Representatives of
Goldman Sachs and Jefferies reviewed preliminary financial
analyses of Valeant and Biovail and discussed with the committee
the possible structures for a merger as well as governance and
valuation matters. The committee determined that the strategy of
the combined company after closing be consistent with
Valeant’s historical business strategy, Valeant director
appointees should constitute a majority of the combined company
board of directors in order to support that business strategy
and Biovail’s name should be changed to “Valeant
Pharmaceuticals International” at the closing, and asked
management to propose terms consistent with this premise. At the
meeting, the Valeant board of directors, in consultation with
representatives of Goldman Sachs, reviewed other strategic
alternatives available to Valeant.
On May 10, 2010, the Biovail committee met with
Dr. Squires, members of Biovail management and a
representative of Sullivan & Cromwell to review
whether there was a basis on which to proceed with discussions
with Valeant.
47
On May 12, 2010, the Valeant board of directors convened a
meeting, with representatives of senior management, Goldman
Sachs, Jefferies and Skadden attending, to discuss the matters
reviewed and determinations made at the Valeant ad hoc committee
meeting on May 10, 2010. The Valeant board of directors
authorized management to pursue further discussions with Biovail.
On May 17, 2010, and May 18, 2010, prior to and after
Biovail’s annual general meeting of shareholders, the
Biovail committee met with Dr. Squires, Mr. Wells,
Mr. Gubitz and representatives of Morgan Stanley, Cravath,
Blakes and Sullivan & Cromwell to discuss a revised
merger proposal received from Valeant. The Biovail board of
directors also discussed the revised proposal and Biovail’s
potential response. On May 18, 2010, a response to that
revised proposal was presented to representatives of Valeant by
Dr. Paul on behalf of the Biovail committee.
On May 19, 2010, the Valeant ad hoc committee and other
Valeant directors, including Mr. Pearson, Mr. Boze and
Ms. Provencio, held a meeting, with representatives of
senior management, Goldman Sachs, Jefferies and Skadden
attending, to review and discuss the revised proposal.
On May 20, 2010, the Biovail committee met with
Dr. Squires, members of Biovail management, representatives
of Morgan Stanley and a representative of each of Cravath,
Blakes and Sullivan & Cromwell to further discuss the
revised proposal and next steps, including a joint meeting of
the Biovail committee with the Valeant ad hoc committee.
On May 22, 2010, and May 24, 2010, the Biovail
committee met with a representative of Sullivan &
Cromwell to further discuss the revised proposal.
On May 25, 2010, Dr. Paul and Mr. Ingram
discussed a joint meeting of the Biovail committee and Valeant
ad hoc committee scheduled for the next day in New York, New
York, to discuss the current proposals. The Biovail committee
met later that day with a representative of Sullivan &
Cromwell to discuss the joint meeting.
On May 26, 2010, the Biovail committee met with
Dr. Squires, members of each of Biovail management,
representatives of Morgan Stanley and a representative of each
of Cravath, Blakes and Sullivan & Cromwell, to discuss
the joint meeting being held later that day.
Later that day the Biovail committee met with the Valeant ad hoc
committee in New York, New York, to discuss the potential
merger, with Dr. Squires, Mr. Wells and
Mr. Pearson in attendance. As part of the meeting, the
committee members met without Mr. Wells or Mr. Pearson
present. After discussions, the parties ended negotiations due
to differences over valuation and governance.
On June 8, 2010, the Valeant ad hoc committee held a
conference call to discuss whether Mr. Pearson should make
one final attempt to re-engage Mr. Wells and Biovail.
Following consideration of the advantages and disadvantages of
the proposed merger with Biovail, the committee agreed that
Mr. Pearson should reach out to Mr. Wells.
On June 9, 2010, the Biovail committee met with
Dr. Squires, members of Biovail management and a
representative of Sullivan & Cromwell to update the
Biovail committee on the contact from Mr. Pearson and to
discuss the possibility of continuing discussions with Valeant.
The Biovail committee authorized Mr. Wells to meet with
Mr. Pearson based on the last proposal for the potential
transaction provided to Valeant by Biovail.
On June 9, 2010, Mr. Pearson and Mr. Wells met
for dinner to continue discussing the terms of a potential
merger, including a proposed governance structure that could be
considered by each of Valeant’s and Biovail’s board of
directors, including potentially structuring the board of the
combined company with an equal number of directors from Biovail
and Valeant with an additional independent director identified
through a search process and to be nominated by Valeant and
agreed to by Biovail.
On the morning of June 10, 2010, Mr. Wells and
Mr. Pearson, together with representatives of Cravath and
Skadden, met to discuss the proposed terms of the merger.
After the morning meeting on June 10, 2010, between
Mr. Wells, Mr. Pearson and counsel, the Biovail
committee met with Dr. Squires, members of Biovail
management, representatives of Morgan Stanley and a
representative from each of Cravath and
Sullivan & Cromwell. Prior to the meeting, the members
of the Biovail committee had been briefed on the proposed terms
of the merger as discussed by Mr. Wells and
Mr. Pearson on the
48
previous day. The Biovail committee reviewed the proposed terms
and noted that the Valeant ad hoc committee also was meeting to
discuss the merger. The possible timetable for a potential
transaction was discussed. A representative of Cravath presented
the proposed structure and other terms of the proposed
transaction. Morgan Stanley also reviewed its financial analysis
of the potential transaction. The Biovail committee tasked
Mr. Power and Mr. Segal with working with two members
of the Valeant compensation committee to negotiate contracts for
each of Mr. Wells, as non-executive chairman of the
combined company, and Mr. Pearson, as chief executive
officer of the combined company. The contracts were negotiated
between June 11, 2010, and June 20, 2010.
On the afternoon of June 10, 2010, Mr. Wells and
Mr. Pearson, together with representatives of Cravath,
Skadden, Morgan Stanley, Goldman Sachs and Jefferies, met to
discuss financing of the potential merger.
Following these meetings, Mr. Pearson and representatives
of Goldman Sachs, Jefferies and Skadden updated certain members
of the Valeant board of directors.
On June 11, 2010, the Biovail board of directors met,
together with Biovail management, representatives of Morgan
Stanley and a representative of each of Cravath and
Sullivan & Cromwell. At the meeting, among other
things, the Biovail board of directors discussed the potential
transaction.
On June 11, 2010, the Valeant ad hoc committee and other
Valeant directors, including Mr. Pearson, Mr. Boze,
Mr. Kugelman and Ms. Provencio, met to discuss the
status of negotiations with Biovail regarding the proposed
transaction, with representatives of senior management, Goldman
Sachs, Jefferies and Skadden participating. The representatives
of Valeant’s financial and legal advisors discussed the
proposed terms of the merger. The committee also discussed next
steps in connection with negotiations of a merger agreement and
a voting agreement, arrangement of financing commitments and
determination of employment arrangements for Messrs. Wells
and Pearson. The committee also confirmed the request that
Mr. Morfit and Ms. Provencio work with two
representatives of the Biovail committee to develop and
negotiate employment and compensation arrangements for
Mr. Wells and Mr. Pearson.
On June 11, 2010, the Biovail committee met with
Dr. Squires, members of Biovail management, representatives
of Morgan Stanley and Cravath and a representative of
Sullivan & Cromwell. The status of negotiations was
reviewed and the timing of the transaction was discussed.
On June 11, 2010, Cravath delivered a draft merger
agreement to Skadden. Thereafter, between June 11, 2010,
and June 20, 2010, Valeant, Biovail and each company’s
respective representatives engaged in negotiations of the terms
of the merger agreement and financing commitments. Between
June 11, 2010, and June 20, 2010, Valeant, Biovail and
each company’s respective representatives conducted further
due diligence review of each other’s businesses, which
included review of materials made available in electronic
datarooms created by each company.
During the period from June 12, 2010, to June 20,
2010, Mr. Morfit, Ms. Provencio, Mr. Power and
Mr. Segal worked with Valeant’s and Biovail’s
outside legal and compensation advisors to develop and negotiate
employment and compensation arrangements for Mr. Wells and
Mr. Pearson.
On June 12, 2010, Cravath delivered a draft voting
agreement to Skadden. The voting agreement with Valeant’s
largest stockholder was a condition to Biovail’s
willingness to execute a merger agreement. Thereafter, between
June 12, 2010, and June 18, 2010, Valeant, Biovail,
ValueAct Capital and each company’s respective
representatives engaged in discussions of the terms of the
voting agreement.
On June 13, 2010, the Biovail board of directors convened a
special meeting in New York, New York, to consider the proposed
transaction. Present at the meeting were the Biovail board of
directors, Mr. Pearson and representatives of Morgan
Stanley, Cravath and Blakes. At the outset of the meeting, the
Biovail board of directors invited Mr. Pearson to present a
proposed strategic plan for the combined company. After
presenting to the Biovail board of directors, Mr. Pearson
departed. At the meeting, among other things, Biovail management
provided a summary of the due diligence review of Valeant’s
businesses, Morgan Stanley discussed its financial analysis of
Biovail and reviewed other strategic alternatives available to
Biovail, including other potential business combination
candidates, Cravath discussed the most recent draft of the
merger agreement, and Blakes reviewed the fiduciary duties of
the Biovail board of directors in light of the proposed
transaction.
49
On June 14, 2010, the Biovail committee met with
representatives of Morgan Stanley, Cravath and Hugessen
Consulting Inc. (“Hugessen Consulting”), as well as a
representative of Sullivan & Cromwell. The discussions
of Mr. Power and Mr. Segal were reviewed, as well as
appropriate compensation packages for Mr. Wells and
Mr. Pearson.
On June 14, 2010, the Valeant board of directors convened a
special meeting with representatives of senior management,
Goldman Sachs, Jefferies and Skadden participating and
Mr. Wells joining for a portion of the meeting at the
invitation of the Valeant directors. The Valeant board of
directors reviewed with its advisors and management the recent
discussions with Biovail regarding the proposed transaction.
Representatives of Goldman Sachs and Jefferies reviewed with the
Valeant board of directors their respective preliminary
financial analyses and discussed the proposed financing for the
transaction, and representatives of Skadden reviewed with the
directors an overview of the transaction terms reflected in the
current merger agreement and voting agreement, and certain legal
considerations in connection with the proposed transaction.
Mr. Morfit and Ms. Provencio reviewed with the Valeant
board of directors the proposed terms being contemplated for the
employment arrangements for Mr. Wells and Mr. Pearson.
As part of the meeting, the independent directors on the Valeant
board of directors met without management present.
On June 15, 2010, the Biovail committee met with a
representative of Sullivan & Cromwell. The latest
discussions of Mr. Power and Mr. Segal were reviewed,
as well as proposed employment arrangements for Mr. Wells
and Mr. Pearson.
On June 15, 2010, and June 16, 2010, the finance and
audit committee of the Valeant board of directors convened
meetings, with representatives of senior management and Skadden
participating, to discuss the terms of the proposed financing
and progress on the proposed commitment letter.
On June 16, 2010, and June 17, 2010, the Biovail
committee met with representatives of Cravath and Hugessen
Consulting, as well as a representative of Sullivan &
Cromwell. The current status of the negotiations was discussed.
In addition, the Biovail committee discussed the proposed
employment arrangements for Mr. Wells and Mr. Pearson,
including compensation.
On June 17, 2010, the audit committee of the Biovail board
of directors met with members of Biovail management as well as
representatives of Deloitte & Touche and a
representative of each of Ernst & Young LLP, Cravath
and Fenwick & West LLP. At the meeting, the audit
committee reviewed, among other things, the transaction
accounting.
On June 18, 2010, the Biovail committee met with
Dr. Squires and a representative of Sullivan &
Cromwell. The Biovail committee reviewed the negotiations of the
employment arrangements for Mr. Wells and Mr. Pearson.
It later reconvened with Dr. Squires, members of Biovail
management, representatives of Morgan Stanley and Cravath and a
representative from each of Hugessen Consulting and
Sullivan & Cromwell. Morgan Stanley discussed the
valuation analysis it had been performing on the transaction,
and Cravath discussed terms of the proposed transaction and
financing for the transaction. The merger agreement was also
reviewed and the remaining open issues discussed. The Biovail
committee determined to meet again the following day in order to
conclude its review of the transaction based on resolution of
the remaining economic issues.
On June 19, 2010, the Biovail committee met with
Dr. Squires, members of Biovail management and
representatives of Cravath and a representative of Hugessen
Consulting as well as Sullivan & Cromwell. The Biovail
committee received a report on the final agreed terms for the
employment arrangements of each of Mr. Wells and
Mr. Pearson from Mr. Power and Mr. Segal, and
discussed the report to the Biovail board of directors at its
meeting scheduled for the following day. After deliberation and
review of the then current draft of the merger agreement, the
Biovail committee determined that the transaction was in the
best interests of the Biovail shareholders and resolved to
recommend that the merger agreement be adopted by the Biovail
board of directors on terms substantially in the form provided
to the Biovail board of directors and that the Biovail board of
directors recommend the transaction to the Biovail shareholders
for their approval.
On June 19, 2010, members of each of Biovail management and
Valeant management met in New York, New York, to continue work
on the proposed transaction. On June 19, 2010, and
June 20, 2010, negotiations regarding the merger agreement
continued, and Valeant and Biovail, with the assistance of
each company’s respective financial advisors, calculated
and agreed to the exchange ratio and size of the special
pre-merger dividend to Valeant
50
stockholders that would be necessary to achieve the appropriate
proportional ownership interests in the combined company by
former Valeant and Biovail shareholders.
On June 20, 2010, the Biovail board of directors convened a
special meeting at Biovail’s headquarters in Mississauga,
Ontario, to consider the proposed transaction. Prior to the
meeting, the members of the Biovail board of directors had been
provided with a summary of the merger agreement and related
agreements and copies of the most recent drafts thereof. Present
at the meeting were members of Biovail management and
representatives of Morgan Stanley, Cravath and Blakes, with a
representative of Sullivan & Cromwell joining by
telephone. At the meeting, among other things, Biovail
management discussed with the Biovail board of directors the
current status of negotiations with Valeant and provided a
summary of the due diligence review of Valeant’s
businesses; Biovail management and Cravath reviewed the terms of
the proposed commitment letter that had been negotiated with
Goldman Sachs, Jefferies and Morgan Stanley; Morgan Stanley
discussed its financial analysis of the proposed transaction and
delivered its oral opinion, which opinion was confirmed by
delivery of a written opinion dated June 20, 2010, to the
effect that on such date and based upon and subject to the
limitations, qualifications and assumptions set forth in the
written opinion (as more fully described below under the caption
“— Opinions of Biovail’s Financial
Advisor”), the exchange ratio pursuant to the merger
agreement was fair from a financial point of view to Biovail
(Morgan Stanley’s opinion is attached as Annex B to
this joint proxy statement/prospectus); Cravath discussed the
most recent draft of the merger agreement, the proposed
employment agreement with Mr. Pearson, the proposed
non-executive chairman agreement with Mr. Wells and the
voting agreement and the changes made to such agreements since
the last drafts circulated to the Biovail board of directors;
Blakes reviewed the fiduciary duties of the Biovail board of
directors in light of the proposed transaction; and Hugessen
discussed the proposed employment agreement with
Mr. Pearson and the proposed non-executive chairman
agreement with Mr. Wells. During the special meeting, the
Biovail committee unanimously recommended that the merger
agreement be adopted by the Biovail board of directors on terms
substantially in the form provided to the Biovail board of
directors and that the Biovail board of directors recommend the
transaction to the Biovail shareholders for their approval and
approve the non-executive chairman agreement with Mr. Wells
and the employment agreement with Mr. Pearson. As part of
the meeting, the Biovail board of directors met without Biovail
management or representatives of Morgan Stanley, Cravath, Blakes
and Sullivan & Cromwell present. Following further
discussion, the Biovail board of directors unanimously approved
the merger agreement and the merger, the non-executive chairman
agreement with Mr. Wells, the employment agreement with
Mr. Pearson and the commitment letter, and recommended that
Biovail shareholders approve the issuance of Biovail common
shares necessary to complete the merger and the issuance of such
other common shares as contemplated by the merger agreement and
amendment of Biovail’s articles of continuance to change
Biovail’s name to “Valeant Pharmaceuticals
International, Inc.” The Biovail board of directors
authorized the appropriate officers of Biovail to finalize,
execute and deliver the merger agreement, the employment
agreement with Mr. Pearson, the non-executive chairman
agreement with Mr. Wells and related documents.
In the morning on June 20, 2010, the finance and audit
committee of the Valeant board of directors convened a special
meeting to review and consider certain financial matters
relating to the proposed transaction with Biovail, including the
terms of the proposed financing and the due diligence performed
on Biovail. Present at the meeting were representatives of
senior management, Goldman Sachs, Jefferies, Skadden and
PricewaterhouseCoopers LLP (“PricewaterhouseCoopers”).
Prior to the meeting the members of the committee had been
provided with a summary of the proposed commitment letter and
copies of the most recent draft thereof. Members of
Valeant’s senior management and representatives of Skadden
provided an update regarding the negotiations of the terms of
the commitment letter relating to the proposed transaction that
had been negotiated with Goldman Sachs, Jefferies and Morgan
Stanley. Representatives of Goldman Sachs and Jefferies further
reviewed the contemplated financing and terms of the proposed
commitment letter. As part of the meeting, the committee met
without representatives of Goldman Sachs or Jefferies present.
Members of Valeant’s senior management and representatives
of PricewaterhouseCoopers summarized the results of the
financial, tax and accounting diligence that was conducted
regarding Biovail and its businesses. Following discussion, the
members of the finance and audit committee of Valeant
unanimously determined to recommend to the Valeant board of
directors that the board approve the proposed commitment letter.
At noon on the same day, the compensation committee of the
Valeant board of directors convened a special meeting to review
and consider employment and compensation related matters
relating to the proposed transaction with Biovail. Present at
the meeting were representatives of senior management, Skadden
and ClearBridge
51
Compensation Group, a compensation consulting firm providing
advisory services to the committee. Prior to the meeting the
members of the committee had been provided with a summary of the
proposed employment agreement with Mr. Pearson and the
proposed non-executive chairman agreement with Mr. Wells
and copies of the most recent drafts thereof. Representatives of
Skadden summarized the terms of the proposed agreements to be
entered into by the combined company and each of
Mr. Pearson and Mr. Wells as of the effective time of
the merger. See “— Financial Interests of Valeant
Directors and Officers in the Merger” beginning on
page 96 of this joint proxy statement/prospectus and
“— Financial Interests of Biovail Directors and
Officers in the Merger” beginning on page 92 of this
joint proxy statement/prospectus for a detailed descriptions of
these agreements. The committee noted the importance of having
these agreements in place prior to entering into any transaction
with Biovail in order to ensure Mr. Pearson’s and
Mr. Wells’ availability to the combined company and,
with respect to Mr. Pearson, his availability to lead the
execution of business strategy for the combined company.
Representatives of Skadden also described the treatment of the
equity awards of Valeant in the merger pursuant to the merger
agreement. See “— Treatment of Valeant Restricted
Stock Units and Options” beginning on page 91 of this
joint proxy statement/prospectus for a detailed description of
these matters. The committee then met with representatives of
Skadden without members of management present to discuss
compensation, benefits and severance matters. The committee
unanimously determined to recommend to the Valeant board of
directors that the board approve the proposed employment
agreement and proposed non-executive chairman agreement.
In the early afternoon on the same day, the Valeant board of
directors convened a special meeting to review and consider the
proposed transaction with Biovail. Present at the meeting were
representatives of senior management, Skadden, Goldman Sachs and
Jefferies. Prior to the meeting the members of the Valeant board
of directors had been provided with a summary of the merger
agreement and related agreements and copies of the most recent
drafts thereof. Representatives of Skadden reviewed with the
directors the terms and conditions of the merger agreement that
had been negotiated with Biovail. Representatives of Skadden
also reviewed with the directors the terms of the voting
agreement that had been negotiated with Biovail and ValueAct
Capital. Representatives of Goldman Sachs and Skadden reviewed
the terms of the proposed commitment letter that had been
negotiated with Goldman Sachs, Jefferies and Morgan Stanley.
Mr. Morfit and representatives of Skadden reviewed the
proposed compensation, benefit and severance arrangements
contemplated by the proposed merger agreement, employment
agreement of Mr. Pearson and non-executive chairman
agreement of Mr. Wells. Following discussion of these and
other matters, each of Goldman Sachs and Jefferies discussed
with the Valeant board of directors its respective financial
analyses in connection with the proposed transaction and
rendered its respective oral opinion to the Valeant board of
directors, which opinion was confirmed by delivery of a written
opinion dated as of June 20, 2010, to the effect that,
based upon and subject to the qualifications, limitations and
assumptions stated in its opinion (as more fully described under
“— Opinions of Valeant’s Financial
Advisors” beginning on page 72 of this joint proxy
statement/prospectus), as of June 20, 2010, the exchange
ratio of 1.7809, together with the pre-merger special dividend
of $16.77 per share to be paid to the holders (other than
Biovail and its affiliates) of Valeant common stock, pursuant to
the merger agreement, was fair from a financial point of view to
such holders. Goldman Sachs’ and Jefferies’ respective
opinions are attached as Annex C and Annex D to this
joint proxy statement/prospectus. As part of the meeting,
Valeant’s independent directors met in executive session
with representatives of Skadden to discuss the proposed terms of
the merger agreement and related agreements, including the
proposed arrangements with Mr. Wells and Mr. Pearson.
The independent directors unanimously approved, and unanimously
determined to recommend that the Valeant board of directors
approve, the merger agreement and the transactions contemplated
thereby, the commitment letter and the proposed employment
agreement of Mr. Pearson and non-executive chairman
agreement of Mr. Wells. The Valeant board of directors
unanimously determined that the merger agreement and the
transactions contemplated thereby, including the merger, are
advisable and in the best interests of Valeant and its
stockholders and authorized the appropriate officers of Valeant
to finalize, execute and deliver the merger agreement and
related documents.
Following the board meetings, members of management of each of
Biovail and Valeant met in New York, New York, to finalize the
definitive agreements. All agreements were finalized, the merger
agreement was executed by Valeant, Biovail, BAC and Beach Merger
Corp., and the employment agreement with Mr. Pearson and
the non-executive chairman agreement with Mr. Wells were
executed by Biovail or one of the Biovail subsidiaries and by
Mr. Wells or Mr. Pearson, as applicable. On
June 21, 2010, prior to the opening of trading on the NYSE
and TSX, Valeant and Biovail issued a joint press release
announcing the transaction.
52
Recommendations
of the Biovail Board of Directors; Biovail’s Reasons for
the Merger
On June 20, 2010, at a special meeting of the Biovail board
of directors, by unanimous vote, the Biovail board of directors
determined that the merger and the other transactions
contemplated by the merger agreement, including the issuance of
Biovail common shares to Valeant stockholders necessary to
complete the merger and the issuance of such other Biovail
common shares as contemplated by the merger agreement and the
amendment of Biovail’s articles of continuance to effect
the name change, are advisable and in the best interests of
Biovail and its shareholders.
Accordingly, the Biovail board
of directors recommends that the Biovail shareholders vote
“FOR” the share issuance resolution and
“FOR” the name change resolution.
In reaching
these determinations, the Biovail board of directors consulted
with Biovail’s management and its legal, financial and
other advisors, and also considered numerous factors, including
the following factors which the Biovail board of directors
viewed as supporting its decisions:
Strategic Benefits of the Merger.
The Biovail
board of directors believes that the combination of Valeant and
Biovail should result in significant strategic benefits to the
combined company, which benefits would accrue to Biovail’s
shareholders, as shareholders of the combined company, and to
the combined company. These strategic benefits include the
following:
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that combining Valeant and Biovail would create a larger, more
globally diversified company than Biovail currently has, with a
broader and better diversified array of products than that
offered by Biovail alone, a deeper drug development pipeline and
an expanded presence in North America and internationally;
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that both Valeant and Biovail are well known and respected
specialty pharmaceutical companies, and the belief that the
combination of such companies could create a superior combined
specialty pharmaceutical company;
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the belief that the combined company could achieve approximately
$175 million in annual operational cost savings by the
second year of operations, coming from, among other things,
reductions in general and administrative expenses, research and
development consolidation and sales and marketing;
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that Valeant’s and Biovail’s product lines and
geographic scopes are generally complementary, and do not
present areas of significant overlap;
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•
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the belief that the combined company will have increased
resources (including an increased market capitalization and an
anticipated increased access to capital over the long-term) to
invest in future growth opportunities in comparison to Biovail
on a stand-alone basis;
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•
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the opportunity to combine two strong senior management teams,
as described under “— Board of Directors and
Management After the Merger,” with the result that
Mr. Pearson will become Chief Executive Officer of the
combined company and Mr. Wells will serve as Non-Executive
Chairman of the board of directors of the combined company;
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•
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the belief that the combined company would be able to operate
under Biovail’s existing corporate structure; and
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•
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that the merger is the best strategic transaction available to
Biovail, following a review of other strategic alternatives with
Morgan Stanley (including the stand-alone alternative of
continuing with Biovail’s current strategic plan).
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Financial Benefits of the Merger.
The Biovail
board of directors believes that the combination of Valeant and
Biovail should result in significant financial benefits to
Biovail’s shareholders and the combined company. These
financial benefits include the following:
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•
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the 15% premium to Biovail shareholders implied by the exchange
ratio, based on a calculation of the share prices of Biovail and
Valeant over the 10 trading days prior to entering into the
merger agreement;
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•
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the fact that the exchange ratio is fixed and will not fluctuate
based upon changes in the market price of Valeant common stock
or Biovail common shares between the date of the merger
agreement and the date of completion of the merger;
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53
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•
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the $1.00 per share post-merger special dividend anticipated to
be paid to shareholders of the combined company, including
current Biovail shareholders that retain ownership of their
Biovail common shares through the record date of the post-merger
special dividend;
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•
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the anticipated market capitalization, strong balance sheet,
free cash flow, liquidity and capital structure of the combined
company;
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•
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the significant value to Biovail shareholders represented by the
expected increased cash flow and earnings improvement of the
combined company, including as a result of the anticipated
synergies of $175 million in annual cost benefits by the
second year of operations, and the views of Biovail’s
management as to the expected realization of synergies by the
combined company;
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•
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the belief that the combined company will be better positioned
to pursue an aggressive growth strategy, as a result of the
combined company’s larger market capitalization, enhanced
access to capital over the long-term and the likelihood of
increased access to business development opportunities as a
result of the combined company’s larger market
presence; and
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•
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the belief that, after closing, the combined company will
continue to have a strong financial profile.
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Corporate Governance Benefits of the
Merger.
During the course of its deliberations
relating to the merger, the Biovail board of directors also
considered factors related to the corporate governance of the
combined company, including the following benefits:
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•
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the initial composition of the combined company’s board of
directors comprised of 11 directors, including five
representatives of Valeant, five representatives of Biovail, and
one additional resident Canadian director to be identified
through a search process and selected by Valeant subject to the
approval of Biovail;
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•
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the fact that directors and senior executives of Biovail who
have an in-depth knowledge of Biovail and its businesses would
have substantial representation on the board of directors and on
the senior management team, respectively, of the combined
company; and
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•
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the fact that directors and senior executive officers of Valeant
(including Mr. Pearson) who have an in-depth knowledge of
Valeant and its businesses and who were responsible for
overseeing Valeant’s significant growth and success over
the past two years would have substantial representation on the
board of directors and on the senior management team,
respectively, of the combined company.
|
Other Factors Considered.
During the course of
its deliberations relating to the merger, the Biovail board of
directors considered the following factors in addition to the
benefits described above:
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•
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its knowledge of Biovail’s business, operations, financial
condition, earnings, strategy and future prospects and its
knowledge of Valeant’s business, operations, financial
condition, earnings, strategy and future prospects, taking into
account, among many factors, Biovail’s and Valeant’s
internal financial forecasts for the 2010 to 2014 fiscal years
and the results of Biovail’s due diligence review of
Valeant;
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•
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the history of each of Valeant’s and Biovail’s
management teams in successfully completing strategic
transactions and the success of each of Valeant’s and
Biovail’s management teams in the integration of businesses
and products acquired in such transactions with their respective
businesses;
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•
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the opinion of Morgan Stanley, dated June 20, 2010, to the
Biovail board of directors to the effect that, as of that date
and based on and subject to the limitations, qualifications and
assumptions described in the Morgan Stanley opinion included
with this joint proxy statement/prospectus as Annex B, the
exchange ratio pursuant to the merger agreement was fair, from a
financial point of view, to Biovail (as more fully described
below under the caption “— Opinion of Morgan
Stanley & Co. Incorporated, Biovail’s Financial
Advisor”);
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•
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its view of the possible prospects of the combined company in
light of industry and economic trends, as well as
Biovail-specific factors, following presentations and discussion
with Biovail management and Morgan Stanley;
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•
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the current and prospective competitive climate in the industry
in which Valeant and Biovail operate, including the potential
for further consolidation;
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54
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•
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the terms and conditions of the merger agreement, including the
commitments by both Valeant and Biovail to complete the merger,
and the likelihood of completing the merger;
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•
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the recommendation of the Biovail committee;
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•
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the likelihood that Valeant and Biovail would be able to obtain
the necessary financing given the financing commitments from the
commitment parties, and the fact that Biovail would not be
required to complete the transaction in the event that the
financing contemplated by the merger agreement (or alternative
financing) is not consummated;
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•
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the terms and conditions of the agreements entered into with
Mr. Pearson and Mr. Wells, and the recommendations of
the independent compensation consultant in connection therewith;
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•
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that Mr. Pearson agreed to waive accelerated vesting of a
significant portion of the equity awards to which he would
otherwise be entitled to in connection with the merger, and that
a significant portion of his future compensation as Chief
Executive Officer of the combined company will be in the form of
equity in the combined company and will be contingent on the
performance of the combined company;
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•
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the impact of the merger on all stakeholders in Biovail,
including holders of Biovail common shares;
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•
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the fact that Biovail’s head office in Mississauga,
Ontario, would remain the combined company’s head office in
Canada;
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•
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the fact that the merger agreement does not preclude a third
party from making a proposal for an acquisition of or business
combination with Biovail and, that under certain circumstances
more fully described in the sections “— Summary
of the Merger Agreement — No Solicitation of
Alternative Proposals” on page 119 and
“— Summary of the Merger Agreement —
Changes in Board Recommendations” on page 120, Biovail
may provide information to and negotiate with such a third party
and the Biovail board of directors may change its
recommendations to Biovail shareholders regarding the merger;
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•
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the fact that ValueAct Capital, a Valeant stockholder owning
approximately 20% of the shares of Valeant common stock
outstanding as of the date of the merger agreement, entered into
a voting agreement with Valeant and Biovail to vote in favor of
the merger and the merger agreement (see
“— Voting Agreement” beginning on
page 128);
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•
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the results of due diligence investigations of Valeant by
Biovail’s management and financial, legal and other
advisors; and
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•
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the fact that the shareholders of both Valeant and Biovail would
vote on approval of the transaction, including the fact that the
required vote of Biovail shareholders for the name change
resolution is approval of at least two-thirds of those shares
voting and for the share issuance resolution is approval of at
least one-half of those shares voting.
|
The Biovail board of directors weighed these factors against a
number of uncertainties, risks and potentially negative factors
relevant to the merger, including:
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•
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the challenges inherent in the combination of two businesses of
the size, geographic diversity and complexity of Valeant and
Biovail, including the possible diversion of management
attention for an extended period of time;
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•
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the restrictions on the conduct of Biovail’s business
during the period between execution of the merger agreement and
the consummation of the merger;
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•
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the risk of not being able to realize all of the anticipated
cost savings and operational synergies between Valeant and
Biovail and the risk that other anticipated benefits to the
combined company might not be realized;
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•
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the change of Biovail’s name to “Valeant
Pharmaceuticals International, Inc.” and the reaction to
such name change in the market and from Biovail stakeholders;
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55
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•
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the risk that, despite the combined efforts of Valeant and
Biovail prior to the consummation of the merger, the combined
company may lose key personnel;
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•
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the possibility that the efficiencies inherent in Biovail’s
corporate structure cannot be fully realized for the combined
company or may take longer to realize than expected;
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•
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the costs associated with completion of the merger and the
realization of the benefits expected to be obtained in
connection with the merger, including transaction expenses
arising from the merger, payments owed to management and other
employees of Valeant and Biovail, and the costs associated with
the prepayment of certain of Valeant’s indebtedness;
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•
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the possible impact on Biovail employees, including the possible
loss of employment as a result of the merger;
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•
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the risk that regulatory agencies may not approve the merger or
may impose terms and conditions on their approvals that
adversely affect the business and financial results of the
combined company (see “— Regulatory Approvals
Required for the Merger and Other Regulatory Matters” on
page 110);
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•
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the risk that the merger may not be completed despite the
parties’ efforts or that completion may be unduly delayed,
even if the requisite approval is obtained from Valeant’s
stockholders and Biovail’s shareholders;
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•
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the increased leverage of the combined company which will result
in high interest payments and could negatively affect the
combined company’s credit ratings, limit access to credit
markets or make such access more expensive and reduce
operational and strategic flexibility;
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•
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the fact that certain provisions of the merger agreement,
although reciprocal, may have the effect of discouraging
alternative acquisition transactions involving Biovail,
including: (1) the restrictions on Biovail’s ability
to solicit proposals for alternative transactions; (2) the
requirement that the Biovail board of directors submit the share
issuance resolution and name change resolution to the Biovail
shareholders for adoption in certain circumstances, even if the
Biovail board of directors withdraws its recommendation for
those proposals; and (3) the requirement that Biovail pay a
termination fee of $100 million to Valeant in certain
circumstances following the termination of the merger
agreement; and
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•
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the risks of the type and nature described under the section
entitled “Risk Factors,” beginning on page 22 and
the matters described under “Special Note Regarding
Forward-Looking Statements” beginning on page 30.
|
The Biovail board of directors concluded that the uncertainties,
risks and potentially negative factors relevant to the merger
were outweighed by the potential benefits that it expected
Biovail and Biovail shareholders would achieve as a result of
the merger.
This discussion of the information and factors considered by the
Biovail board of directors includes the principal positive and
negative factors considered by the Biovail board of directors,
but is not intended to be exhaustive and may not include all of
the factors considered by the Biovail board of directors. In
view of the wide variety of factors considered in connection
with its evaluation of the merger and the other transactions
contemplated in connection with the merger, and the complexity
of these matters, the Biovail board of directors did not find it
useful and did not attempt to quantify or assign any relative or
specific weights to the various factors that it considered in
reaching its determination to approve the merger and the other
transactions contemplated in connection with the merger and to
make its recommendations to Biovail shareholders. Rather, the
Biovail board of directors viewed its decisions as being based
on the totality of the information presented to it and the
factors it considered. In addition, individual members of the
Biovail board of directors may have given differing weights to
different factors.
Opinion
of Morgan Stanley & Co. Incorporated, Biovail’s
Financial Advisor
Under a letter agreement dated June 13, 2010, Biovail
retained Morgan Stanley to act as its financial advisor in
connection with the transaction. Biovail selected Morgan Stanley
to act as its financial advisor based on Morgan Stanley’s
qualifications, expertise and reputation and its knowledge of
the business and affairs of Biovail. On June 20, 2010,
Morgan Stanley rendered to Biovail’s board of directors its
oral opinion, subsequently confirmed in
56
writing, that, on such date and based upon and subject to the
limitations, qualifications and assumptions set forth in the
written opinion, the exchange ratio pursuant to the merger
agreement was fair from a financial point of view to Biovail.
The full text of the written fairness opinion of Morgan
Stanley, dated June 20, 2010, is attached to this joint
proxy statement/prospectus as Annex B. The opinion sets
forth, among other things, the assumptions made, procedures
followed, matters considered and qualifications and limitations
on the scope of the review undertaken by Morgan Stanley in
rendering its opinion. You should read the entire opinion
carefully and in its entirety. Morgan Stanley’s opinion is
directed to Biovail’s board of directors and addresses only
the fairness from a financial point of view of the exchange
ratio pursuant to the merger agreement on the date of the
opinion. It does not address any other aspect of the merger and
does not constitute a recommendation to the shareholders of
Biovail or stockholders of Valeant as to how to vote with
respect to the merger or any other matter. In addition, this
opinion does not in any manner address the prices at which
Biovail common shares will trade following the consummation of
the merger. The summary of the opinion of Morgan Stanley set
forth in this joint proxy statement/prospectus is qualified in
its entirety by reference to the full text of the opinion.
In arriving at its opinion, Morgan Stanley, among other things:
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•
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Reviewed certain publicly available financial statements and
other business and financial information of Biovail and Valeant,
respectively;
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•
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Reviewed certain internal financial statements and other
financial and operating data concerning Biovail and Valeant,
respectively;
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•
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Reviewed certain financial projections prepared by the
managements of Biovail and Valeant, respectively;
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•
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Reviewed information relating to certain strategic, financial
and operational benefits anticipated from the merger, prepared
by the managements of Biovail and Valeant, respectively;
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•
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Discussed the past and current operations and financial
condition and the prospects of Biovail, including information
relating to certain strategic, financial and operational
benefits anticipated from the merger, with senior executives of
Biovail;
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•
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Discussed the past and current operations and financial
condition and the prospects of Valeant, including information
relating to certain strategic, financial and operational
benefits anticipated from the merger, with senior executives of
Valeant;
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•
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Reviewed the pro forma impact of the merger on Biovail’s
earnings per share, cash flow, consolidated capitalization and
financial ratios;
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•
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Reviewed the reported prices and trading activity for Biovail
common shares and Valeant common stock;
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•
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Compared the financial performance of Biovail and Valeant and
the prices and trading activity of the Biovail common shares and
the Valeant common stock with that of certain other
publicly — traded companies comparable with Biovail
and Valeant, respectively, and their securities;
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•
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Reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions;
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•
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Participated in certain discussions and negotiations among
representatives of Biovail and Valeant and certain parties and
their financial and legal advisors;
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•
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Reviewed the merger agreement, the draft commitment letter
addressed to Biovail and Valeant from certain lenders
substantially in the form of the draft dated June 20, 2010,
and certain related documents; and
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•
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Performed such other analyses, reviewed such other information
and considered such other factors as Morgan Stanley had deemed
appropriate.
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In arriving at its opinion, Morgan Stanley assumed and relied
upon, without independent verification, the accuracy and
completeness of the information that was publicly available or
supplied or otherwise made available to
57
it by Biovail and Valeant and that formed a substantial basis
for its opinion. With respect to the financial projections,
including information relating to certain strategic, financial
and operational benefits anticipated from the merger, Morgan
Stanley assumed that it had been reasonably prepared on bases
reflecting the best currently available estimates and judgments
of the respective managements of Biovail and Valeant of the
future financial performance of Biovail and Valeant. In
addition, Morgan Stanley assumed that (1) the merger would
be consummated in accordance with the terms described in the
merger agreement without any waiver, amendment or delay of any
material terms or conditions, including, among other things,
that the merger would be treated as a tax-free reorganization
pursuant to the Internal Revenue Code of 1986, as amended;
(2) the required financings would be obtained in accordance
with the terms set forth in the commitment letter; (3) the
pre-merger special dividend would be paid to the holders of
Valeant’s common stock; and (4) there would be no
adjustment to the exchange ratio. Morgan Stanley assumed that in
connection with the receipt of all the necessary governmental,
regulatory or other approvals and consents required for the
proposed merger, no delays, limitations, conditions or
restrictions would be imposed that would have a material adverse
effect on the contemplated benefits expected to be derived in
the proposed merger. Morgan Stanley relied upon, without
independent verification, the assessment by the managements of
Biovail and Valeant of: (1) the strategic, financial and
other benefits expected to result from the merger; (2) the
timing and risks associated with the integration of Biovail and
Valeant; (3) their ability to retain key employees of
Biovail and Valeant, respectively; and (4) the validity of,
and risks associated with, Biovail’s and Valeant’s
existing and future technologies, intellectual property,
products, services and business models.
In its opinion, Morgan Stanley noted that it is not a legal, tax
or regulatory advisor and that as financial advisor only it
relied upon, without independent verification, the assessment of
Biovail and Valeant and their legal, tax, and regulatory
advisors with respect to legal, tax, and regulatory matters.
Morgan Stanley expressed no opinion with respect to the fairness
of the amount or nature of the compensation to any of
Valeant’s officers, directors or employees, or any class of
such persons, relative to the exchange ratio to be paid to the
holders of shares of Valeant common stock in the transaction.
Morgan Stanley did not make any independent valuation or
appraisal of the assets or liabilities of Biovail or Valeant,
nor was it furnished with any such appraisals. Morgan
Stanley’s opinion was necessarily based on financial,
economic, market and other conditions as in effect on, and the
information made available to it as of, the date of the opinion.
Events occurring after the date of the opinion may affect Morgan
Stanley’s opinion and the assumptions used in preparing it,
and Morgan Stanley did not assume any obligation to update,
revise or reaffirm its opinion.
In arriving at its opinion, Morgan Stanley was not authorized to
solicit, and did not solicit, interest from any party with
respect to the merger, business combination or other
extraordinary transaction, involving Biovail, nor did it
negotiate with any parties, other than Valeant, with respect to
such potential transaction.
The following is a brief summary of the material analyses
performed by Morgan Stanley in connection with its oral opinion
and the preparation of its written opinion dated June 20,
2010. Although each analysis was provided to the Biovail board
of directors, in connection with arriving at its opinion, Morgan
Stanley considered all of its analysis as a whole and did not
attribute any particular weight to any analysis described below.
This summary of financial analyses includes information
presented in tabular format. In order to fully understand the
financial analyses used by Morgan Stanley, the tables must be
read together with the text of each summary. The tables alone do
not constitute a complete description of the financial analyses.
The analyses listed in the tables and described below must be
considered as a whole; considering any portion of such analyses
and of the factor considered, without considering all analyses
and factors, could create a misleading or incomplete view of the
process underlying Morgan Stanley’s fairness opinion.
Historical
Share Price Analysis
Morgan Stanley reviewed the price performance and trading
volumes of Biovail common shares and Valeant common stock during
various periods ending on June 18, 2010.
Morgan Stanley noted that the range of low and high closing
prices of Biovail common shares during the
52-week
period ending on June 18, 2010, was approximately $12 to
$17. Morgan Stanley then noted that the average price per
Biovail common share during the 10-trading day period ending
June 18, 2010, was $14.37, during
58
the 30-trading day period ending on June 18, 2010, was
$15.12, during the
six-month
period ending June 18, 2010, was $15.36 and during the
12-month
period ending on June 18, 2010, was $14.56.
Morgan Stanley noted that the range of low and high closing
prices of Valeant common stock during the
52-week
period ending on June 18, 2010, was approximately $22 to
$50. Morgan Stanley then noted that the average price per share
of Valeant common stock during the 10-trading day period ending
June 18, 2010, was $46.12, during the 30-trading day period
ending on June 18, 2010, was $46.15, during the six-month
period ending June 18, 2010, was $40.01 and during the
12-month
period ending on June 18, 2010, was $34.05.
Morgan Stanley next compared the implied transaction
consideration of $16.49 per Biovail common share and $42.31 per
share of Valeant common stock, after giving effect to the
pre-merger special dividend, to the closing share prices of
Biovail common shares and Valeant common stock as of
June 18, 2010, of $14.60 per share and $45.87 per share,
respectively, with historical Biovail and Valeant share prices
for the
12-month
period ending on June 18, 2010. The following table lists
the share price premiums (discounts) represented by the implied
transaction consideration during the selected periods:
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Biovail Transaction
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Valeant Transaction
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Premium (Discount) to
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Premium (Discount) to
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Time Period
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Share Price
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Share Price
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June 18, 2010(1)(2)
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13.0
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%
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(7.8)
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%
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Last 10 Trading Days
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14.8
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%
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(8.3)
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%
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Last 30 Trading Days
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9.1
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%
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(8.3)
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%
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Last 6 Months
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7.3
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%
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5.7
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%
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Last 12 Months
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13.3
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%
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24.2
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%
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(1)
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Based on Biovail share price of $14.60, as of June 18, 2010.
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(2)
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Based on Valeant share price of $45.87, as of June 18, 2010.
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Equity
Research Price Targets
Morgan Stanley reviewed and analyzed the public market trading
price targets for Biovail’s common shares prepared and
published by equity research analysts during the period from
February 27, 2010, through May 28, 2010. These targets
reflected each analyst’s publicly available estimate of the
future public market trading price of Biovail’s common
shares at the end of the particular time period considered for
each estimate. Morgan Stanley noted that such analyst price
targets for Biovail’s common shares ranged from $13 to $24
per Biovail common share. Using a discount rate of 10%, based on
an analysis of Biovail’s cost of equity, Morgan Stanley
discounted these estimates to arrive at a range of present
values of the equity analyst price targets for Biovail’s
common shares of $12 to $22 per share.
Morgan Stanley also reviewed and analyzed the public market
trading price targets for Valeant’s common stock prepared
and published by equity research analysts during the period from
May 3, 2010, through June 9, 2010. These targets
reflected each analyst’s publicly available estimate of the
future public market trading price of Valeant’s common
stock at the end of the particular time period considered for
each estimate. Morgan Stanley noted that such analyst price
targets for Valeant’s common stock ranged from $39 to $58
per share of Valeant common stock. Using a discount rate of 10%,
based on an analysis of Valeant’s cost of equity, Morgan
Stanley discounted these estimates to arrive at a range of
present values of the equity analyst price targets for
Valeant’s common stock of $35 to $53 per share.
The public market trading price targets published by equity
research analysts do not necessarily reflect current market
trading prices for Biovail common shares or Valeant common stock
and these estimates are subject to uncertainties, including the
future financial performance of Biovail and Valeant and future
financial market conditions.
59
Comparable
Company Analysis
Morgan Stanley performed a comparable company analysis, which is
designed to provide an implied value of a company by comparing
it to similar companies. In performing this analysis, Morgan
Stanley reviewed and compared certain financial information of
Biovail and Valeant with publicly available information for
comparable companies that operate in and are exposed to similar
lines of business as Biovail and Valeant, namely companies in
the pharmaceutical industry generally. The group of comparable
companies included:
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Shire plc
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•
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Medicis Pharmaceutical Corporation
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•
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King Pharmaceuticals, Inc.
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•
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Cephalon, Inc.
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•
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Forest Laboratories, Inc.
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•
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Warner Chilcott Public Limited Company
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•
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Endo Pharmaceuticals Holdings Inc.
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Based upon Institutional Broker Estimate System
(“IBES”) consensus estimates for calendar year 2011
earnings per share (“EPS”) and EPS growth rates for
2010 to 2012, and using the closing prices as of June 18,
2010, for shares of the comparable companies, Morgan Stanley
calculated, among other things, the ratio of share price to 2011
estimated EPS for Biovail, Valeant and each of the companies
listed above. The following table lists the results of these
calculations:
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Company
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2011 EPS Multiple
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Shire plc
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14.4x
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Medicis Pharmaceutical Corporation
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10.5x
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King Pharmaceuticals, Inc.
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10.2x
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Cephalon, Inc.
|
|
8.3x
|
Forest Laboratories, Inc.
|
|
7.1x
|
Warner Chilcott Public Limited Company
|
|
6.6x
|
Endo Pharmaceuticals Holdings Inc.
|
|
6.6x
|
Valeant (management estimates)
|
|
11.6x
|
Valeant (analyst consensus estimates)
|
|
12.6x
|
Biovail (management estimates)
|
|
7.5x
|
Biovail (analyst consensus estimates)
|
|
7.6x
|
Based on the analysis of the relevant metrics for each of the
comparable companies, Morgan Stanley selected a reference range
of share price to 2011 estimated EPS multiple of 6.5x to 9.5x
for Biovail and a reference range of stock price to 2011
estimated EPS multiple of 11.0x to 14.0x for Valeant.
Applying the reference range of multiples derived from the
comparable public companies analysis described above, Morgan
Stanley calculated a range of implied equity values per Biovail
common share and share of Valeant common stock with respect to
stock price to 2011 EPS based on a consensus of selected brokers
of projected financial results adjusted to reflect
management’s definition of EPS for each of Biovail and
Valeant. Based on this analysis, Morgan Stanley derived a range
of implied equity value per Biovail common share of $12 to $18
and a range of implied equity value per Valeant common stock of
$40 to $51. Additionally Morgan Stanley noted that this range
implied a multiple range for price to earnings divided by 2010
to 2012 EPS growth rate for Biovail of 2.6x to 3.9x and for
Valeant of 0.9x to 1.1x. Morgan Stanley noted that such analyses
indicated a range of implied exchange ratios (after giving
effect to the pre-merger special dividend) of 1.885x to 1.893x
based on analyst consensus estimates for 2011 estimated EPS,
compared to an exchange ratio of 1.7809x for the merger.
60
Morgan Stanley also calculated a range of implied equity values
per Biovail common share and Valeant common stock with respect
to stock price to 2011 EPS based on management estimates of
projected financial results for each of Biovail and Valeant.
Applying the same reference range of multiples derived from the
comparable public companies analysis, Morgan Stanley calculated
a range of implied equity value per Biovail common share of $13
to $19 and a range of implied equity value per share of Valeant
common stock of $44 to $56. Additionally Morgan Stanley noted
that this range implied a multiple range for price to earnings
divided by 2010 to 2012 EPS growth rate for Biovail of 1.4x to
2.0x and for Valeant of 0.7x to 0.9x. Morgan Stanley noted that
such analyses indicated a range of implied exchange ratios
(after giving effect to the pre-merger special dividend) of
2.089x to 2.116x based on management estimates for 2011
estimated EPS, compared to an exchange ratio of 1.7809x for the
merger.
No company utilized in the peer group comparison is identical to
Biovail or Valeant. In evaluating the comparable companies,
Morgan Stanley made judgments and assumptions with regard to
general business, economic, market and financial conditions and
other matters, which are beyond the control of Biovail and
Valeant, such as the impact of competition on the business of
Biovail, Valeant or the industry generally, industry growth and
the absence of any adverse material change in the financial
condition of Biovail, Valeant or the industry or in the
financial markets in general, which could affect the public
trading value of the companies. Mathematical analysis (such as
determining the median) is not in itself a meaningful method of
using comparable company data.
Discounted
Equity Value Analysis
Morgan Stanley calculated a range of equity values per share for
each of Biovail and Valeant based on a discounted equity value
analysis, which is designed to provide insight into the future
price of a company’s common equity as a function of the
company’s future earnings and its current forward price to
earnings multiples.
In arriving at the estimated equity values per Biovail common
share, Morgan Stanley applied a 9.0x to 12.0x next twelve-month
P/E multiple range to Biovail management’s projections of
2014 adjusted earnings per share based on the analysis of
relevant metrics for the comparable companies. Morgan Stanley
then discounted the resulting values at an estimated cost of
equity of 10%, based on Morgan Stanley’s professional
judgment having taken into consideration the cost of equity
based on the capital asset pricing model and considering certain
financial metrics, including betas, for Biovail and certain
comparable companies which exhibited similar business
characteristics to Biovail, as well as certain financial metrics
for the United States equity markets generally. Based on the
calculations set forth above, this analysis implied a range for
Biovail’s common shares of approximately $15 to $21 per
share.
In arriving at the estimated equity values per share of Valeant
common stock, Morgan Stanley applied a 9.0x to 12.0x next
twelve-month P/E multiple range to Valeant management’s
projections of 2014 adjusted earnings per share based on the
analysis of relevant metrics for the comparable companies.
Morgan Stanley then discounted the resulting values at an
estimated cost of equity of 10% based on Morgan Stanley’s
professional judgment having taken into consideration the cost
of equity based on the capital asset pricing model and
considering certain financial metrics, including betas, for
Valeant and certain comparable companies which exhibited similar
business characteristics to Valeant, as well as certain
financial metrics for the United States equity markets
generally. Based on the calculations set forth above, this
analysis implied a range for Valeant’s common stock of
approximately $43 to $57 per share.
Morgan Stanley noted that such analyses indicated a range of
implied exchange ratios (after giving effect to the pre-merger
special dividend) of 1.705x to 1.977x, compared to an exchange
ratio of 1.7809x for the merger.
Discounted
Cash Flow Analysis
Morgan Stanley performed a discounted cash flow analysis, which
is designed to provide an implied value of a company by
calculating the present value of the estimated future cash flows
and terminal value of the company. Morgan Stanley calculated
ranges of implied equity values per share for each of Biovail
and Valeant, based on estimates of future cash flows for
calendar years 2010 through 2014. In preparing its analysis,
Morgan Stanley relied upon management projections with respect
to the projected future financial performance of Biovail and
Valeant, respectively. Morgan Stanley used the following
unlevered free cash flow projections for Biovail, which were
61
derived from Biovail management’s projections regarding
revenue and adjusted net income and based on guidance from
management, for 4Q 2010 through calendar year 2014:
|
|
|
|
|
|
|
|
|
4Q 2010
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
(in $ millions)
|
|
$69
|
|
$315
|
|
$346
|
|
$360
|
|
$368
|
For purposes of its discounted cash flow analysis of both
Valeant and Biovail, Morgan Stanley calculated unlevered free
cash flow as earnings before interest and tax (EBIT), plus
(a) depreciation and amortization, minus (b) taxes,
capital expenditures and changes in working capital and deferred
revenue. In each case, Morgan Stanley treated stock-based
compensation as a cash expense.
In arriving at the estimated equity values per Biovail common
share, Morgan Stanley noted the estimated unlevered free cash
flows for calendar years 2010 through 2014 and then calculated
the terminal value by applying a range of perpetual growth rates
for unlevered free cash flow in the terminal year ranging from
-1% to 1%. The range of perpetuity growth rates was estimated by
Morgan Stanley utilizing its professional judgment and
experience, taking into account the financial forecasts and
market expectations regarding long-term growth of gross domestic
product and inflation. Morgan Stanley also cross-checked such
estimates of perpetuity growth rates against the EBITDA
multiples that are implied by such growth rates. The unlevered
free cash flows and the terminal value were then discounted to
present values using a range of discount rates from 9% to 10%.
The range of discount rates was selected based on Morgan
Stanley’s professional judgment having taken into
consideration a weighted average cost of capital analysis based
on the capital asset pricing model and considering certain
financial metrics, including betas, for Biovail and certain
comparable companies which exhibited similar business
characteristics to Biovail, as well as certain financial metrics
for the United States equity markets generally. Based on the
calculations set forth above, this analysis implied a range for
Biovail’s common shares of approximately $18 to $24 per
share.
In arriving at the estimated equity values per share of Valeant
common stock, Morgan Stanley noted the estimated unlevered free
cash flows for calendar years 2010 through 2014 and then
calculated the terminal value by applying a range of perpetual
growth rates for unlevered free cash flow in the terminal year
ranging from 0% to 2%. The range of perpetuity growth rates was
estimated by Morgan Stanley utilizing its professional judgment
and experience, taking into account the financial forecasts and
market expectations regarding long-term growth of gross domestic
product and inflation. Morgan Stanley also cross-checked such
estimates of perpetuity growth rates against the EBITDA
multiples that are implied by such growth rates. The unlevered
free cash flows and the terminal value were then discounted to
present values using a range of discount rates from 9% to 10%.
The range of discount rates was selected based on Morgan
Stanley’s professional judgment having taken into
consideration a weighted average cost of capital analysis based
on the capital asset pricing model and considering certain
financial metrics, including betas, for Valeant and certain
comparable companies which exhibited similar business
characteristics to Valeant, as well as certain financial metrics
for the United States equity markets generally. Based on the
calculations set forth above, this analysis implied a range for
Valeant’s common stock of approximately $51 to $74 per
share.
Morgan Stanley noted that the discounted cash flow analysis of
each of Biovail and Valeant indicated a range of implied
exchange ratios (after giving effect to the pre-merger special
dividend) of 1.900x to 2.407x, compared to an exchange ratio of
1.7809x for the merger.
Contribution
Analysis
Morgan Stanley also performed a contribution analysis which
reviewed the pro forma contribution of each of Biovail and
Valeant to the combined entity and implied contributions based
on certain operational and financial metrics using management
plans for both Biovail and Valeant. Such operational and
financial metrics included revenue, EBITDA, adjusted pre-tax
income and adjusted net income. Based on the relative
contributions of each company, Morgan Stanley derived an implied
equity contribution for each company by multiplying the
cumulative total enterprise value of the two standalone
companies by the respective contribution percentages and
subtracting net debt attributable to each standalone company.
Morgan Stanley also noted the implied exchange ratio (after
giving effect to the pre-merger special dividend) derived from
the implied equity contributions across the selected metrics.
62
The computations resulted in the following implied equity
contributions and implied exchange ratios:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Implied
|
|
Equity Contribution Analysis
|
|
Biovail
|
|
|
Valeant
|
|
|
Exchange Ratio
|
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
2010E Revenue
|
|
|
48.2
|
%
|
|
|
51.8
|
%
|
|
|
0.751
|
x
|
2011E Revenue
|
|
|
45.2
|
%
|
|
|
54.8
|
%
|
|
|
1.059
|
x
|
2012E Revenue
|
|
|
44.2
|
%
|
|
|
55.8
|
%
|
|
|
1.193
|
x
|
2013E Revenue
|
|
|
40.9
|
%
|
|
|
59.1
|
%
|
|
|
1.710
|
x
|
EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
2010E EBITDA
|
|
|
48.7
|
%
|
|
|
51.3
|
%
|
|
|
0.711
|
x
|
2011E EBITDA
|
|
|
44.8
|
%
|
|
|
55.2
|
%
|
|
|
1.113
|
x
|
2012E EBITDA
|
|
|
41.6
|
%
|
|
|
58.4
|
%
|
|
|
1.574
|
x
|
2013E EBITDA
|
|
|
36.6
|
%
|
|
|
63.4
|
%
|
|
|
2.699
|
x
|
Adjusted Pre-Tax Income
|
|
|
|
|
|
|
|
|
|
|
|
|
2010E EBT
|
|
|
44.5
|
%
|
|
|
55.5
|
%
|
|
|
1.157
|
x
|
2011E EBT
|
|
|
40.5
|
%
|
|
|
59.5
|
%
|
|
|
1.778
|
x
|
2012E EBT
|
|
|
38.1
|
%
|
|
|
61.9
|
%
|
|
|
2.294
|
x
|
2013E EBT
|
|
|
33.4
|
%
|
|
|
66.6
|
%
|
|
|
3.750
|
x
|
Adjusted Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
2010E Adjusted Net Income
|
|
|
52.1
|
%
|
|
|
47.9
|
%
|
|
|
0.457
|
x
|
2011E Adjusted Net Income
|
|
|
48.4
|
%
|
|
|
51.6
|
%
|
|
|
0.737
|
x
|
2012E Adjusted Net Income
|
|
|
46.3
|
%
|
|
|
53.7
|
%
|
|
|
0.938
|
x
|
2013E Adjusted Net Income
|
|
|
41.7
|
%
|
|
|
58.3
|
%
|
|
|
1.561
|
x
|
Equity Value
|
|
|
|
|
|
|
|
|
|
|
|
|
Assumes 15% premium to Biovail’s 10-trading day
volume-weighted average price and Valeant’s 10-trading day
volume-weighted average price, each as of June 18, 2010.
|
|
|
40.5
|
%
|
|
|
59.5
|
%
|
|
|
1.781
|
x
|
Morgan Stanley noted that the 1.7809 exchange ratio of Biovail
common shares to Valeant common stock would result in pro forma
ownership of the combined company for holders of Biovail common
shares equal to approximately 50.5% after giving effect to the
pre-merger special dividend.
Precedent
Merger of Equals Premium Analysis
Morgan Stanley reviewed the acquisition premium paid for a
target’s common stock compared to the closing price on the
trading day prior to the announcement of the applicable
acquisition and to the 30-trading day average stock price prior
to the announcement of the applicable acquisition in precedent
merger of equals, focusing on deals with a transaction value
above $1.0 billion since January 1, 2004. Morgan
Stanley reviewed transactions where the consideration paid
consisted primarily of stock. Morgan Stanley also reviewed the
composition of the board of directors and senior management, and
analyzed publicly available information, including the
respective transaction values and pro forma ownership, for the
selected transactions reviewed.
The following transactions were reviewed in connection with this
analysis:
|
|
|
|
•
|
UAL Corporation/Continental Airlines, Inc.
|
|
|
|
|
•
|
RRI Energy, Inc./Mirant Corporation
|
|
|
•
|
Quadra Mining Ltd./FNX Mining Company Inc.
|
|
|
•
|
Live Nation Entertainment, Inc./Ticketmaster Entertainment LLC
|
|
|
•
|
Mediceo Paltac Holdings Co., Ltd./Alfresa Holdings Corporation
|
|
|
•
|
Republic Services, Inc./Allied Waste Industries, Inc.
|
|
|
•
|
Grey Wolf, Inc./Basic Energy Services, Inc.
|
63
|
|
|
|
•
|
Macrovision
Corporation/Gemstar-TV
Guide International, Inc.
|
|
|
•
|
Sirius Satellite Radio Inc./XM Satellite Radio Holdings Inc.
|
|
|
•
|
Universal Compression, Inc./Hanover Compressor Company
|
|
|
•
|
Bowater Incorporated/Abitibi-Consolidated Inc.
|
|
|
•
|
CVS Corporation/Caremark Rx, Inc.
|
|
|
•
|
EuroZinc Mining Corporation/Lundin Mining Corporation
|
|
|
•
|
WPS Resources Corporation/Peoples Energy Corporation
|
|
|
•
|
Regions Financial Corporation/AmSouth Bancorporation
|
|
|
•
|
NYSE Group, Inc./Euronext N.V.
|
|
|
•
|
Thermo Electron Corporation/Fisher Scientific International Inc.
|
|
|
•
|
Alcatel/Lucent Technologies Inc.
|
|
|
•
|
Tattersall’s Limited/UNiTAB Limited
|
|
|
•
|
FPL Group, Inc./Constellation Energy Group, Inc.
|
|
|
•
|
Axalto Holding N.V./Gemplus International S.A.
|
|
|
•
|
Lincoln National Corporation/Jefferson-Pilot Corporation
|
|
|
•
|
Boots Group PLC/Alliance UniChem Plc
|
|
|
•
|
American Tower Corporation/SpectraSite, Inc.
|
|
|
•
|
iPCS, Inc./Horizon PCS, Inc.
|
|
|
•
|
Crompton Corporation/Great Lakes Chemical Corporation
|
|
|
•
|
Symantec Corporation/VERITAS Software Corporation
|
|
|
|
|
•
|
Sprint Corporation/Nextel Communications, Inc.
|
|
|
|
|
•
|
Adolph Coors Company/Molson Inc.
|
|
|
•
|
Harrah’s Entertainment, Inc./Caesars Entertainment, Inc.
|
|
|
•
|
Sanofi-Synthélabo/Aventis
|
|
|
•
|
Fisher Scientific International Inc./Apogent Technologies Inc.
|
|
|
•
|
North Fork Bancorporation, Inc./GreenPoint Financial Corp.
|
|
|
•
|
Regions Financial Corporation/Union Planters Corporation
|
|
|
•
|
JPMorgan Chase & Co./Bank One Corporation
|
Based on these analyses, Morgan Stanley noted that the average
premium paid relative to the closing stock price one day prior
to transaction announcement was 6.02%, and that the average
premium paid relative to the most recent 30-trading day average
was 10.20%.
No company or transaction utilized in the precedent merger of
equals premium analyses is identical to Biovail, Valeant, or the
merger. In evaluating the precedent transactions, Morgan Stanley
made judgments and assumptions with regard to general business,
market and financial conditions and other matters, which are
beyond the control of Biovail and Valeant, such as the impact of
competition on the business of Biovail, Valeant or the industry
generally, industry growth and the absence of any adverse
material change in the financial condition of Biovail, Valeant
or the industry or in the financial markets in general, which
could affect the public trading value of the companies and the
aggregate value of the transactions to which they are being
compared.
64
Pro
Forma Accretion/Dilution Analysis
Using financial projections provided by the managements of
Biovail and Valeant, Morgan Stanley calculated the
accretion/dilution of the adjusted earnings per Biovail common
share as a result of the merger. For each of the years ended
December 31, 2010, through December 31, 2014, Morgan
Stanley compared the adjusted EPS of the pro forma entity to the
adjusted EPS of Biovail as a standalone entity. The analysis
indicated that the merger would be accretive to Biovail’s
adjusted earnings per share for calendar years 2011 through 2014.
In performing its analysis, Morgan Stanley made numerous
assumptions with respect to industry performance, general
business and economic conditions and other matters, many of
which are beyond the control of Biovail or Valeant. Any
estimates contained in Morgan Stanley’s analysis are not
necessarily indicative of future results or actual values, which
may be significantly more or less favorable than those suggested
by the estimates. These analyses were prepared solely as part of
the analysis of Morgan Stanley of the fairness to Biovail from a
financial point of view of the exchange ratio pursuant to the
merger agreement and were conducted in connection with the
delivery of Morgan Stanley’s opinion to Biovail’s
board of directors.
Package
Value Analysis
Using financial projections provided by the managements of
Biovail and Valeant, Morgan Stanley calculated the present value
of the expected value per Biovail common share plus dividends
discounted assuming a 10% cost of equity. For each of the years
ended December 31, 2010, through December 31, 2014,
Morgan Stanley compared the present value of the expected value
per Biovail common share plus dividends of the pro forma entity
to the present value of the expected value per Biovail common
share plus dividends as a standalone entity. The analysis
indicated that the merger would be accretive to Biovail’s
expected value per share for calendar years 2011 through 2014.
In performing its analysis, Morgan Stanley made numerous
assumptions with respect to industry performance, general
business and economic conditions and other matters, many of
which are beyond the control of Biovail or Valeant. Any
estimates contained in Morgan Stanley’s analysis are not
necessarily indicative of future results or actual values, which
may be significantly more or less favorable than those suggested
by the estimates. These analyses were prepared solely as part of
the analysis of Morgan Stanley of the fairness to Biovail from a
financial point of view of the exchange ratio pursuant to the
merger agreement and were conducted in connection with the
delivery of Morgan Stanley’s opinion to Biovail’s
board of directors.
Pro
Forma Intrinsic Value Analysis
Using the mid-point of the estimated discounted cash flow values
of Biovail and Valeant, Morgan Stanley calculated the
merger’s effect on the intrinsic value of Biovail’s
ownership stake in the combined entity as compared to the
intrinsic value of Biovail as a standalone entity. Beginning
with the full intrinsic value of standalone Biovail, Morgan
Stanley subtracted 49.5% of the value of standalone Biovail and
added 50.5% of the value of standalone Valeant, accounting for
the contemplated post-merger 50.5% ownership by Biovail. Morgan
Stanley then added 50.5% of the net synergies that are expected
to arise from the merger and subtracted 50.5% of the increased
debt of the combined entity over the aggregate pre-merger debt
of Biovail and Valeant. Based on the calculations set forth
above, this analysis implied that the merger would result in a
25.4% increase in intrinsic value to Biovail.
General
In connection with the review of the merger by Biovail’s
board of directors, Morgan Stanley performed a variety of
financial and comparative analyses for purposes of rendering its
opinion. The preparation of a financial opinion is a complex
process and is not susceptible to a partial analysis or summary
description. In arriving at its opinion, Morgan Stanley
considered the results of all of its analyses as a whole and did
not attribute any particular weight to any analysis or factor it
considered. Furthermore, Morgan Stanley believes that the
summary provided and the analyses described above must be
considered as a whole and that selecting any portion of the
analyses, without considering all of the analyses as a whole,
would create an incomplete view of the process underlying Morgan
Stanley’s analyses and opinion. In addition, Morgan Stanley
may have given various analyses and factors more or less weight
than other analyses and factors, and may have deemed various
assumptions more or less probable than other assumptions. As a
result, the ranges of valuations resulting from any particular
analysis or combination of
65
analyses described above should not be taken to be the view of
Morgan Stanley with respect to the actual value of Biovail or
Valeant. In performing its analyses, Morgan Stanley made
numerous assumptions with respect to industry performance,
general business, regulatory, economic, market and financial
conditions and other matters. Many of these assumptions are
beyond the control of Biovail and Valeant. Any estimates
contained in Morgan Stanley’s analyses are not necessarily
indicative of future results or actual values, which may be
significantly more or less favorable than those suggested by
such estimates.
Morgan Stanley conducted the analyses described above solely as
part of its analysis of the fairness of the exchange ratio
pursuant to the merger agreement from a financial point of view
to Biovail and in connection with the delivery of its opinion to
Biovail’s board of directors. These analyses do not purport
to be appraisals or to reflect the prices at which Biovail
common shares or shares of Valeant common stock might actually
trade.
Morgan Stanley’s opinion and its presentation to
Biovail’s board of directors was one of many factors taken
into consideration by Biovail’s board of directors in
deciding to approve, adopt and authorize the merger agreement.
Consequently, the analyses as described above should not be
viewed as determinative of the opinion of Biovail’s board
of directors with respect to the exchange ratio or of whether
Biovail’s board of directors would have been willing to
agree to a different exchange ratio. The exchange ratio was
determined through arm’s-length negotiations between
Biovail and Valeant and was approved by Biovail’s board of
directors. Morgan Stanley provided advice to Biovail during
these negotiations. Morgan Stanley did not, however, recommend
any specific exchange ratio to Biovail or that any specific
exchange ratio constituted the only appropriate exchange ratio
for the merger.
Morgan Stanley’s opinion was approved by a committee of
Morgan Stanley investment banking and other professionals in
accordance with its customary practice.
Morgan Stanley is a global financial services firm engaged in
the securities, investment management and individual wealth
management businesses. Its securities business is engaged in
securities underwriting, trading and brokerage activities,
foreign exchange, commodities and derivatives trading, prime
brokerage, as well as providing investment banking, financing
and financial advisory services. Morgan Stanley, its affiliates,
directors and officers may at any time invest on a principal
basis or manage funds that invest, hold long or short positions,
finance positions, and may trade or otherwise structure and
effect transactions, for their own account or the accounts of
its customers, in debt or equity securities or loans of Biovail,
Valeant, or any other company, or any currency or commodity,
that may be involved in this transaction, or any related
derivative instrument. During the two-year period prior to the
date of Morgan Stanley’s opinion, Morgan Stanley entered
into a derivatives transaction and participated in a share
repurchase transaction for Valeant and provided financial
advisory and banking financing services to Biovail, all of which
were unrelated to the merger and for which Morgan Stanley
received fees for the rendering of these services and
participation in such transactions. Morgan Stanley may also seek
to provide such services to Biovail in the future and expects to
receive fees for the rendering of these services.
Under the terms of its engagement letter with Biovail, Morgan
Stanley provided Biovail with financial advisory services in
connection with the merger for which Biovail has agreed to pay
Morgan Stanley a transaction fee of $21.7 million, $4 million of
which was paid upon execution of the merger agreement between
Biovail and Valeant and the remainder of which will become
payable upon completion of the merger. Morgan Stanley or one of
its affiliates is also providing a portion of the commitments
under the commitment letter and will receive fees in connection
with such commitment. Biovail has also agreed to reimburse
Morgan Stanley for its expenses incurred in performing its
services. In addition, Biovail has agreed to indemnify Morgan
Stanley and its affiliates, their respective directors,
officers, agents and employees and each person, if any,
controlling Morgan Stanley or any of its affiliates against
certain liabilities and expenses, including certain liabilities
under the federal securities laws, related to or arising out of
Morgan Stanley’s engagement. Morgan Stanley has also
entered into an engagement letter with Valeant to serve as joint
lead underwriter, joint initial purchaser, joint bookrunner,
joint arranger or joint placement agent in connection with a
potential issuance or sale for cash of notes of Valeant or one
or more of its affiliates, as applicable, in connection with the
merger, pursuant to which Morgan Stanley may receive customary
fees.
66
Certain
Biovail Prospective Financial Information
Biovail does not as a matter of course make public long-term
forecasts as to future performance or other prospective
financial information beyond the current fiscal year, and
Biovail is especially wary of making forecasts or projections
for extended periods due to the unpredictability of the
underlying assumptions and estimates. However, as part of the
due diligence review of Biovail in connection with the merger,
Biovail’s management prepared and provided to Valeant, as
well as to Morgan Stanley, Goldman Sachs and Jefferies in
connection with their respective evaluation of the fairness of
the merger consideration, non-public, internal financial
forecasts regarding Biovail’s projected future operations
for the 2010 through 2014 fiscal years. Biovail has included
below a summary of these forecasts for the purpose of providing
shareholders and investors access to certain non-public
information that was furnished to third parties and such
information may not be appropriate for other purposes. These
forecasts were also considered by the Biovail board of directors
for purposes of evaluating the merger. The Biovail board of
directors also considered non-public, financial forecasts
prepared by Valeant regarding Valeant’s anticipated future
operations for the 2010 through 2014 fiscal years for purposes
of evaluating Valeant and the merger. See “The
Merger — Certain Valeant Prospective Financial
Information” beginning on page 89 for more information
about the forecasts prepared by Valeant.
The Biovail internal financial forecasts were not prepared with
a view toward public disclosure, nor were they prepared with a
view toward compliance with published guidelines of the SEC, the
guidelines established by the American Institute of Certified
Public Accountants for preparation and presentation of financial
forecasts, the guidelines established by the Canadian Institute
of Chartered Accountants Handbook, rules relating to future
oriented financial information under Canadian securities laws or
generally accepted accounting principles in the United States or
Canada. Ernst & Young LLP has not examined,
compiled or performed any procedures with respect to the
accompanying prospective financial information and, accordingly,
Ernst & Young LLP does not express an opinion or
any other form of assurance with respect thereto. The
Ernst & Young LLP reports incorporated by
reference in this joint proxy statement/prospectus relate only
to Biovail’s historical financial information. They do not
extend to the prospective financial information and should not
be read to do so. The summary of these internal financial
forecasts included below is not being included to influence your
decision whether to vote for the merger and the transactions
contemplated in connection with the merger, but because these
internal financial forecasts were provided by Biovail to Valeant
and Morgan Stanley, Goldman Sachs and Jefferies.
While presented with numeric specificity, these internal
financial forecasts were based on numerous variables and
assumptions (including, but not limited to, those related to
industry performance and competition and general business,
economic, market and financial conditions and additional matters
specific to Biovail’s businesses) that are inherently
subjective and uncertain and are beyond the control of
Biovail’s management. Important factors that may affect
actual results and cause these internal financial forecasts to
not be achieved include, but are not limited to, risks and
uncertainties relating to Biovail’s business (including its
ability to achieve strategic goals, objectives and targets over
applicable periods), industry performance, general business and
economic conditions and other factors described in the
“Risk Factors” section of Biovail’s Annual Report
on
Form 10-K,
as updated by subsequent Quarterly Reports on
Form 10-Q,
all of which are filed with the SEC and the CSA and incorporated
by reference into this joint proxy statement/prospectus. These
internal financial forecasts also reflect numerous variables,
expectations and assumptions available at the time they were
prepared as to certain business decisions that are subject to
change. As a result, actual results may differ materially from
those contained in these internal financial forecasts.
Accordingly, there can be no assurance that the forecasted
results summarized below will be realized.
The inclusion of a summary of these internal financial forecasts
in this joint proxy statement/prospectus should not be regarded
as an indication that any of Biovail, Valeant or their
respective affiliates, advisors or representatives considered
these internal financial forecasts to be predictive of actual
future events, and these internal financial forecasts should not
be relied upon as such nor should the information contained in
these internal financial forecasts be considered appropriate for
other purposes. None of Biovail, Valeant or their respective
affiliates, advisors, officers, directors, partners or
representatives can give you any assurance that actual results
will not differ materially from these internal financial
forecasts, and none of them undertakes any obligation to update
or otherwise revise or reconcile these internal financial
forecasts to reflect circumstances existing after the date these
internal financial forecasts were generated or to reflect the
occurrence of future events, even in the event that any or all
of the assumptions underlying these forecasts are shown to be in
error. Since the forecasts cover multiple years, such
67
information by its nature becomes less meaningful and predictive
with each successive year. Biovail does not intend to make
publicly available any update or other revision to these
internal financial forecasts. None of Biovail or its affiliates,
advisors, officers, directors, partners or representatives has
made or makes any representation to any shareholder or other
person regarding Biovail’s ultimate performance compared to
the information contained in these internal financial forecasts
or that the forecasted results will be achieved. Biovail has
made no representation to Valeant, in the merger agreement or
otherwise, concerning these internal financial forecasts. The
below forecasts do not give effect to the merger. Biovail urges
all shareholders to review Biovail’s most recent SEC
filings for a description of Biovail’s reported financial
results.
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Fiscal Year
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|
|
2010
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2011
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2012
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2013
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2014
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|
($ in millions)
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|
Revenue
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$
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913
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|
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$
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954
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|
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$
|
1,029
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|
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$
|
1,063
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|
|
$
|
1,095
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|
Operating Income
|
|
$
|
186
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|
|
$
|
225
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|
|
$
|
249
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|
|
$
|
259
|
|
|
$
|
268
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EBITDA
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$
|
383
|
|
|
$
|
384
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|
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$
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409
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|
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$
|
419
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|
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$
|
428
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Adjusted Net Income
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$
|
314
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|
|
$
|
309
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|
|
$
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344
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|
|
$
|
361
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|
|
$
|
379
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Biovail management did not prepare or provide free cash flow
forecasts for Biovail to Valeant, Goldman Sachs or Jefferies. As
discussed above in the section of this joint proxy
statement/prospectus entitled “Opinion of Morgan
Stanley & Co. Incorporated, Biovail’s Financial
Advisor,” Morgan Stanley used projected free cash flow for
4Q 2010 through calendar year 2014 which was based on Biovail
management’s projections regarding revenue and adjusted net
income and guidance from Biovail management for the purpose of
Morgan Stanley’s discounted cash flow analysis and other
analyses.
Recommendations
of the Valeant Board of Directors; Valeant’s Reasons for
the Merger
On June 20, 2010, at a special meeting of the Valeant board
of directors, by unanimous vote, the Valeant board of directors
determined that the merger agreement and the transactions
contemplated by the merger agreement, including the merger, are
advisable and in the best interests of Valeant and its
stockholders.
The Valeant board of directors recommends that
Valeant stockholders vote “FOR” the adoption of the
merger agreement and “FOR” the adjournment of the
Valeant special meeting if necessary or appropriate to solicit
additional proxies in favor of such adoption.
In considering the proposed business combination with Biovail
and in making its determination that the merger is advisable and
in the best interests of Valeant and its stockholders, the
Valeant board of directors consulted with its management and
financial, legal and other advisors, and considered a variety of
factors weighing in favor of or relevant to the merger,
including the factors discussed below.
Strategic Benefits of the Merger.
The Valeant
board of directors believes that the combination of Valeant and
Biovail should result in significant strategic benefits to the
combined company, which would benefit Valeant and its
stockholders as shareholders of the combined company. These
strategic benefits include the following:
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•
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The creation of a more diversified, larger combined specialty
pharmaceutical company than Valeant currently is alone,
including a significantly expanded presence in Canada and a more
diversified business in the U.S.;
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•
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The advantages presented by the larger scale and expanded scope
of the combined company in meeting the challenges facing the
pharmaceutical industry in light of current and potential future
changes in regulatory, financial and economic conditions
affecting the industry, including possible industry
consolidation;
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•
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The complementary nature of the respective products and
geographic markets of Valeant and Biovail, and the opportunity
created by the transaction to enhance the capabilities of both
companies to operate more effectively and efficiently;
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•
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The additional revenue growth opportunities presented by the
expanded product offerings of the combined company and strong
and stable cash flows from legacy products that are expected to
support future growth coupled with limited patent exposure with
respect to the combined company’s existing portfolio of
products;
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68
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•
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The expected market capitalization, strong balance sheet, free
cash flow, liquidity and capital structure of the combined
company relative to Valeant on a stand-alone basis, including
the potential for the combined company to participate in
strategic opportunities that otherwise might not be available to
Valeant;
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•
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The opportunity for the combined company to achieve significant
synergy benefits, anticipated to be at least $175 million
in annual cost savings by the second year of operations after
closing;
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•
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The fact that the name of the combined company will be
“Valeant Pharmaceuticals International, Inc.,” which
the Valeant board of directors believes is valuable to the
combined company;
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•
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The opportunity for the combined company to retain
Biovail’s corporate structure, potentially leading to
enhanced financial performance; and
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•
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The opportunity for the combined company to enhance its senior
management led by Mr. Pearson, relative to that of Valeant
and Biovail separately.
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Financial Benefits of the Merger.
The Valeant
board of directors believes that the combination of Valeant and
Biovail should result in significant financial benefits to
Valeant’s stockholders and the combined company. These
financial benefits include the following:
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•
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The payment of the $16.77 per share pre-merger special dividend,
payable in cash, giving Valeant stockholders an opportunity to
immediately realize value for a significant portion of their
investment and providing certainty of value;
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•
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The exchange ratio of 1.7809 Biovail common shares for each
share of Valeant common stock, the fact that the exchange ratio
is fixed and would not fluctuate based upon changes in the
market price of Valeant or Biovail stock between the date of the
merger agreement and the date of the consummation of the
proposed merger, as well as the opportunity Valeant stockholders
may have as a result of the fixed exchange ratio to benefit from
any increase in the trading price of Biovail common shares
between the announcement and completion of the merger;
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•
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The fact that Valeant stockholders would receive the merger
consideration (excluding any cash received in lieu of fractional
shares) in the form of shares of the combined company’s
common stock, which would allow Valeant stockholders to share in
value-creation opportunities of the combined company, including
the realization of synergies;
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•
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The value to Valeant stockholders of the $1.00 per share
post-merger special dividend intended to be paid by the combined
company in respect of its shares of common stock;
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•
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The significant value to Valeant stockholders represented by the
increased cash flow and earnings improvement of the combined
company, including as a result of the anticipated synergies of
at least $175 million in annual cost benefits by the second
year of operations, and the views of Valeant’s management
as to the expected realization of synergies by the combined
company;
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•
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The belief that, after closing, the combined company will have a
strong financial profile;
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•
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The fact that the merger is intended to qualify as a
reorganization for U.S. Federal income tax purposes, and
the expectation that, assuming it does so qualify, a
U.S. holder of Valeant common stock generally would not
recognize any gain or loss upon receipt of Biovail common shares
solely in exchange for Valeant common stock in the merger
(excluding any cash received in lieu of fractional
shares); and
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•
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The business operations and prospects of the combined company
and each of Valeant and Biovail, and the then-current financial
market conditions and historical market prices, volatility and
trading information with respect to shares of common stock of
Valeant and Biovail.
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69
Corporate Governance Benefits of the
Merger.
During the course of its deliberations
relating to the merger, the Valeant board of directors also
considered factors related to the corporate governance of the
combined company, including the following benefits:
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•
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The initial composition of the combined company’s board of
directors comprised of 11 directors, including five
representatives of Valeant, five representatives of Biovail, and
one additional resident Canadian director to be identified
through a search process and selected by Valeant subject to the
approval of Biovail; and
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•
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The fact that directors of Valeant who have an in-depth
knowledge of Valeant and its business would have substantial
representation on the board of directors of the combined company.
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Other Factors Considered.
During the course of
its deliberations relating to the merger, the Valeant board of
directors considered the following factors in addition to the
benefits described above:
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•
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The Valeant board of directors’ and management’s
analysis and understanding of the business, operations,
financial performance, financial condition, earnings, strategy
and future prospects of Valeant on a stand-alone basis, and the
assessment, based on such analysis and understanding, that the
merger would be more favorable to Valeant and its stockholders
in the long-term in light of the potential rewards, risks and
uncertainties associated with Valeant continuing to operate as a
stand-alone entity;
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•
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The alternatives available to Valeant if it continued on a
stand-alone basis;
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•
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The history of Valeant’s management team in successfully
completing strategic transactions and the success of
Valeant’s management team in the integration of businesses
and products acquired in such transactions with its other
businesses;
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•
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The fact that Mr. Pearson agreed to waive accelerated
vesting of a significant portion of the equity awards he would
otherwise be entitled to in connection with the merger, and that
a significant portion of his future compensation as Chief
Executive Officer of the combined company will be in the form of
equity in the combined company and will be contingent on the
performance of the combined company’s common shares;
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•
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The financial analyses reviewed and discussed with the Valeant
board of directors by representatives of Goldman Sachs, as well
as the opinion rendered by Goldman Sachs to the Valeant board of
directors to the effect that, as of June 20, 2010 and based
upon and subject to the various considerations set forth in its
opinion, the exchange ratio of 1.7809, together with the
pre-merger special dividend of $16.77 per share to be paid to
the holders of Valeant common stock (other than Biovail and its
affiliates), pursuant to the merger agreement, was fair, from a
financial point of view, to such holders;
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•
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The financial analyses reviewed and discussed with the Valeant
board of directors by representatives of Jefferies, as well as
the opinion rendered by Jefferies to the Valeant board of
directors to the effect that, as of June 20, 2010 and based
upon and subject to the various considerations set forth in its
opinion, the exchange ratio of 1.7809 pursuant to the merger
agreement, together with the pre-merger special dividend of
$16.77 per share to be paid to the holders of Valeant common
stock, was fair, from a financial point of view, to such holders;
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•
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The likelihood that Valeant would be able to obtain financing
for the transaction given Valeant’s financial resources and
the financing commitments it obtained from the commitment
parties, and the fact that Valeant would not be required to
complete the transaction in the event that the financing
contemplated by the merger agreement (or alternative financing)
is not consummated;
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•
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The fact that the respective stockholders of Valeant and
shareholders of Biovail would vote on approval of the
transaction, including the fact that the required vote of
Valeant stockholders for the adoption of the merger agreement is
a majority of the shares of Valeant common stock outstanding and
entitled to vote;
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•
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The fact that ValueAct Capital, a Valeant stockholder owning
approximately 20% of the shares of Valeant common stock
outstanding as of the date of the merger agreement, which will
receive the same per share consideration as all other Valeant
stockholders, entered into a voting agreement with Valeant and
Biovail to vote in favor of the merger and the merger agreement
(see “— Voting Agreement” beginning on
page 128);
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•
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The results of the due diligence investigations of Biovail by
Valeant’s management and financial, legal and other
advisors;
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•
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The structure of the merger and terms and conditions of the
merger agreement, including the commitment by Valeant and
Biovail to take all actions to complete the merger as soon as
reasonably possible (see “— Summary of the Merger
Agreement” beginning on page 115); and
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•
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The fact that the merger agreement does not preclude a third
party from making a proposal for an acquisition of or business
combination with Valeant and that, under certain circumstances
more fully described in the sections “— Summary
of the Merger Agreement — No Solicitation of
Alternative Proposals” on page 119 and
“— Summary of the Merger Agreement —
Changes in Board Recommendations” on page 120 of this
joint proxy statement/prospectus, Valeant may provide
information to and negotiate with such a third party and the
Valeant board may change its recommendation to Valeant
stockholders regarding the transaction with Biovail.
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The Valeant board of directors weighed these factors against a
number of uncertainties, risks and potentially negative factors
relevant to the merger, including:
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•
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The challenges inherent in the combination of companies of the
size and geographic scope of Valeant and Biovail, the risk of
not capturing all of the anticipated synergies and the risk that
other anticipated benefits might not be fully realized or may
take longer than expected to achieve;
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•
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The risk that integration of the two businesses, including the
transaction expenses associated with the merger, may be more
costly, and may divert management attention for a greater period
of time, than anticipated and that it may be difficult to retain
key employees;
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•
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The possibility that the efficiencies inherent in Biovail’s
corporate structure cannot be fully realized for the combined
company or may take longer to realize than expected;
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•
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The risk of not maintaining Valeant’s and Biovail’s
product revenues given the challenges facing the pharmaceutical
industry in light of changes in regulatory, financial and
economic conditions affecting the industry, including possible
industry consolidation;
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•
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The fact that because the merger consideration is a fixed
exchange ratio of shares of Biovail common shares to Valeant
common stock, Valeant stockholders could be adversely affected
by a decrease in the trading price of Biovail common shares
during the pendency of the merger and the fact that the merger
agreement does not provide Valeant with a price-based
termination right or similar protection;
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The possibility that, due to the current monetization of a
portion of the value of each outstanding Valeant share pursuant
to the pre-merger special dividend or other factors, the future
per share value of Valeant on a standalone basis could be
greater than the value to Valeant stockholders of the merger
consideration;
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•
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The restrictions on the conduct of Valeant’s business
during the period between execution of the merger agreement and
the completion of the merger;
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•
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The risk that regulatory agencies may not approve the proposed
merger or may impose terms and conditions on their approvals
that adversely affect the business and financial results of the
combined company;
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•
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The risk that the merger may not be completed despite the
parties’ efforts or that completion may be unduly delayed,
even if the requisite approval is obtained from Valeant’s
stockholders and Biovail’s shareholders;
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•
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The fact that certain provisions of the merger agreement,
although reciprocal, may have the effect of discouraging
alternative acquisition transactions involving Valeant,
including: (1) the restrictions on Valeant’s ability
to solicit proposals for alternative transactions; (2) the
requirement that the Valeant board of directors submit the
merger agreement to the Valeant stockholders for adoption in
certain circumstances, even if it withdraws its recommendation
for the merger; and (3) the requirement that Valeant pay a
termination fee of $100 million to Biovail in certain
circumstances following the termination of the merger agreement;
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71
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•
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The increased leverage of the combined company which, while
believed to be appropriate for a company with the expected
earnings profile of the combined company, could negatively
affect the combined company’s credit ratings, limit access
to credit markets or make such access more expensive and reduce
operational and strategic flexibility;
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•
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The potential challenges of operating the business of the
combined company pursuant to the terms of the Biovail corporate
integrity agreement;
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•
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The risk that changes in the regulatory, competitive or
technological landscape may adversely affect the business
benefits anticipated to result from the proposed merger; and
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•
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The other risks described in the sections entitled “Risk
Factors” beginning on page 22 and “Special Note
Regarding Forward-Looking Statements” beginning on
page 30.
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The Valeant board of directors concluded that the uncertainties,
risks and potentially negative factors relevant to the merger
were outweighed by the potential benefits that it expected
Valeant and Valeant stockholders would achieve as a result of
the merger.
This discussion of the information and factors considered by the
Valeant board of directors includes the principal positive and
negative factors considered by the board of directors, but is
not intended to be exhaustive and may not include all of the
factors considered. The Valeant board of directors did not
quantify or assign any relative or specific weights to the
various factors that it considered in reaching its determination
that the merger agreement and the merger are advisable and in
the best interests of Valeant and its stockholders. Rather, the
Valeant board of directors viewed its position and
recommendation as being based on the totality of the information
presented to it and the factors it considered. In addition,
individual members of the Valeant board of directors may have
given differing weights to different factors. It should be noted
that this explanation of the reasoning of the board of directors
of Valeant and certain information presented in this section is
forward-looking in nature and, therefore, that information
should be read in light of the factors discussed in the section
entitled “Special Note Regarding Forward-Looking
Statements” in this joint proxy statement/prospectus,
beginning on page 30.
Opinions
of Valeant’s Financial Advisors
Opinion
of Goldman, Sachs & Co.
Goldman Sachs rendered its opinion to the board of directors of
Valeant that, as of June 20, 2010 and based upon and
subject to the factors and assumptions set forth therein, the
exchange ratio, together with the pre-merger special dividend to
be paid to the holders (other than Biovail and its affiliates)
of outstanding shares of Valeant’s common stock, pursuant
to the merger agreement was fair from a financial point of view
to such holders.
The full text of the written opinion of Goldman Sachs, dated
June 20, 2010, which sets forth assumptions made,
procedures followed, matters considered and limitations on the
review undertaken in connection with the opinion, is attached as
Annex C to this joint proxy statement/prospectus. Goldman
Sachs provided its opinion for the information and assistance of
the board of directors of Valeant in connection with its
consideration of the merger. The Goldman Sachs opinion does not
constitute a recommendation as to how any holder of
Valeant’s common stock should vote with respect to the
merger or any other matter.
In connection with rendering the opinion described above and
performing its related financial analyses, Goldman Sachs
reviewed, among other things:
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the merger agreement;
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annual reports to stockholders and annual reports on
Form 10-K
of Valeant for the five fiscal years ended December 31,
2009;
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•
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annual reports on
Form 10-K
or
Form 20-F
of Biovail for the five fiscal years ended December 31,
2009;
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•
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certain interim reports to shareholders and Quarterly Reports on
Form 10-Q
of Valeant and Biovail;
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certain other communications from Valeant and Biovail to their
respective shareholders;
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certain publicly available research analyst reports for Valeant
and Biovail; and
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•
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certain internal financial analyses and forecasts for Valeant
prepared by its management and for Biovail prepared by its
management, in each case as approved for Goldman Sachs’ use
by Valeant (referred to as the “Forecasts”) and
certain cost savings and operating synergies projected by the
management of Valeant to result from the merger, as approved for
Goldman Sachs’ use by Valeant (referred to as the
“Synergies”).
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Goldman Sachs also: held discussions with members of the senior
managements of Valeant and Biovail regarding their assessment of
the strategic rationale for, and the potential benefits of, the
merger and the past and current business operations, financial
condition, and future prospects of their respective companies;
reviewed the reported price and trading activity for Valeant
common stock and Biovail common shares; compared certain
financial and stock market information for Valeant and Biovail
with similar information for certain other companies the
securities of which are publicly traded; reviewed the financial
terms of certain recent business combinations in the specialty
pharmaceuticals industry specifically and in other industries
generally; and performed such other studies and analyses, and
considered such other factors, as it deemed appropriate.
For purposes of rendering the opinion described above, Goldman
Sachs relied upon and assumed, without assuming any
responsibility for independent verification, the accuracy and
completeness of all of the financial, legal, accounting, tax and
other information provided to, discussed with or reviewed by it
and it does not assume any responsibility for any such
information. In that regard, Goldman Sachs assumed with the
consent of the board of directors of Valeant that the Forecasts
and the Synergies were reasonably prepared on a basis reflecting
the best then available estimates and judgments of the
management of Valeant. Goldman Sachs did not make an independent
evaluation or appraisal of the assets and liabilities (including
any contingent, derivative or other off-balance-sheet assets and
liabilities) of Valeant or Biovail or any of their respective
subsidiaries, nor was any evaluation or appraisal of the assets
or liabilities of Valeant or Biovail or any of their respective
subsidiaries furnished to Goldman Sachs. Goldman Sachs assumed
that all governmental, regulatory or other consents and
approvals necessary for the consummation of the transaction will
be obtained without any adverse effect on Valeant or Biovail or
on the expected benefits of the transaction in any way
meaningful to its analysis. Goldman Sachs has also assumed that
the pre-merger special dividend will be paid to the holders of
outstanding shares of Valeant’s common stock on the terms
set forth in the merger agreement and that the merger will be
consummated on the terms set forth in the merger agreement,
without the waiver or modification of any term or condition the
effect of which would be in any way meaningful to its analysis.
Goldman Sachs’ opinion does not address the underlying
business decision of Valeant to engage in the transaction or the
relative merits of the merger as compared to any strategic
alternatives that may be available to Valeant; nor does it
address any legal, regulatory, tax or accounting matters.
Goldman Sachs’ opinion addresses only the fairness from a
financial point of view, as of the date of the opinion, of the
exchange ratio, together with the pre-merger special dividend to
be paid to the holders (other than Biovail and its affiliates)
of outstanding shares of Valeant’s common stock, pursuant
to the merger agreement. Goldman Sachs’ opinion does not
express any view on, and does not address, any other term or
aspect of the merger agreement or the merger or any term or
aspect of any other agreement or instrument contemplated by the
merger agreement or entered into or amended in connection with
the merger, including, without limitation, the fairness of the
merger to, or any consideration received in connection therewith
by, the holders of any other class of securities, creditors, or
other constituencies of Valeant, nor as to the fairness of the
amount or nature of any compensation to be paid or payable to
any of the officers, directors or employees of Valeant or class
of such persons, in connection with the merger, whether relative
to the exchange ratio, together with the pre-merger special
dividend to be paid to the holders (other than Biovail and its
affiliates), pursuant to the merger agreement or otherwise.
Goldman Sachs does not express any opinion as to the prices at
which shares of Biovail’s common shares will trade at any
time or as to the impact of the merger on the solvency or
viability of Valeant or Biovail or the ability of Valeant or
Biovail to pay its obligations when they come due. Goldman
Sachs’ opinion was necessarily based on economic, monetary
market and other conditions, as in effect on, and the
information made available to it as of, the date of the opinion.
Goldman Sachs assumed no responsibility for updating, revising
or reaffirming its opinion based on circumstances, developments
or events occurring after the date of its opinion. Goldman
Sachs’ opinion was approved by a fairness committee of
Goldman Sachs.
73
The following is a summary of the material financial analyses
delivered by Goldman Sachs to the board of directors of Valeant
in connection with rendering the opinion described above. The
following summary, however, does not purport to be a complete
description of the financial analyses performed by Goldman
Sachs, nor does the order of analyses described represent
relative importance or weight given to those analyses by Goldman
Sachs. Some of the summaries of the financial analyses include
information presented in tabular format. The tables must be read
together with the full text of each summary and are alone not a
complete description of Goldman Sachs’ financial analyses.
Except as otherwise noted, the following quantitative
information, to the extent that it is based on market data, is
based on market data as it existed on or before June 18,
2010, which was the last business day prior to the date that
Goldman Sachs delivered its opinion to the board of directors of
Valeant, and is not necessarily indicative of current market
conditions.
Selected
Companies Analysis
Goldman Sachs reviewed and compared certain financial
information for Valeant and Biovail to corresponding financial
information, ratios and public market multiples for the
following publicly traded corporations in the specialty
pharmaceuticals industry:
|
|
|
|
•
|
Allergan, Inc.;
|
|
|
•
|
Cephalon, Inc.;
|
|
|
•
|
King Pharmaceuticals, Inc.;
|
|
|
•
|
Endo Pharmaceuticals;
|
|
|
•
|
Forest Laboratories, Inc.;
|
|
|
•
|
Medicis Pharmaceutical Corporation;
|
|
|
•
|
Mylan Inc.;
|
|
|
•
|
Warner Chilcott Plc; and
|
|
|
•
|
Watson Pharmaceuticals, Inc. (referred to collectively as the
“Selected Companies”).
|
Although none of the Selected Companies is directly comparable
to Valeant or Biovail, the companies included were chosen
because they are publicly traded companies with operations that
for purposes of analysis may be considered similar to certain
operations of Valeant and Biovail. With respect to each of the
Selected Companies, Goldman Sachs calculated the following
multiples and compared them to the results for Valeant and
Biovail:
|
|
|
|
•
|
enterprise value (referred to as “EV”), which is the
market value of common equity on a diluted basis (including
outstanding warrants, options and restricted stock units but
prior to the payment of the
pre-merger
special dividend) plus the par value of total debt (including
convertible debt), preferred equity and minority interest less
cash and cash equivalents per the latest publicly available
financial statements, as a multiple of estimated 2010 fiscal
year earnings before interest, taxes, depreciation and
amortization (referred to as “EBITDA”); and
|
|
|
•
|
price per share as a multiple of estimated 2011 cash earnings
per share (referred to as the “P/E multiple”).
|
74
The calculations for the Selected Companies were based on the
closing prices per share of the Selected Companies’
respective common stock on June 18, 2010, information from
SEC filings and EBITDA and cash earnings per share estimates
from the Institutional Brokers’ Estimate System (IBES). The
calculations for Valeant and Biovail were based on the closing
prices per share of Valeant’s common stock and
Biovail’s common shares, respectively, on June 18,
2010 and the Forecasts. The results of these analyses are
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
EV/Estimated
|
|
2011 P/E
|
Company
|
|
2010 EBITDA
|
|
Multiple
|
|
Valeant (standalone, as of June 18, 2010)
|
|
|
10.1
|
x
|
|
|
11.4
|
x
|
Biovail (standalone, as of June 18, 2010)
|
|
|
6.8
|
x
|
|
|
7.3
|
x
|
Allergan, Inc.
|
|
|
11.9
|
x
|
|
|
15.8
|
x
|
Cephalon, Inc.
|
|
|
5.9
|
x
|
|
|
8.3
|
x
|
King Pharmaceuticals, Inc.
|
|
|
5.1
|
x
|
|
|
10.2
|
x
|
Endo Pharmaceuticals
|
|
|
3.7
|
x
|
|
|
6.1
|
x
|
Forest Laboratories, Inc.
|
|
|
N/A
|
|
|
|
7.0
|
x
|
Medicis Pharmaceutical Corporation
|
|
|
4.3
|
x
|
|
|
9.5
|
x
|
Mylan Inc.
|
|
|
7.9
|
x
|
|
|
7.4
|
x
|
Warner Chilcott Plc
|
|
|
7.1
|
x
|
|
|
6.6
|
x
|
Watson Pharmaceuticals, Inc.
|
|
|
8.2
|
x
|
|
|
11.9
|
x
|
Median of Selected Companies
|
|
|
6.5
|
x
|
|
|
9.4
|
x
|
Contribution
Analysis
Goldman Sachs reviewed specific estimated future operating and
financial information including, among other things, revenue,
EBITDA and cash net income for Valeant and Biovail based on the
Forecasts. Goldman Sachs analyzed the relative potential
financial contributions of Valeant and Biovail to the combined
company following the merger, before taking into account any
Synergies, but after taking into account the pre-merger special
dividend and, in particular, the interest expense of the
indebtedness to be incurred by Valeant to finance the pre-merger
special dividend. Goldman Sachs then adjusted the relative
potential financial contributions to calculate an adjusted
contribution of Valeant and Biovail to the combined company
following the merger based on an appropriate weighted average
enterprise valuation multiple, which is referred to as the
implied equity contribution. The following table presents the
results of this analysis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contribution
|
|
Implied Equity Contribution
|
|
|
Valeant
|
|
Biovail
|
|
Valeant
|
|
Biovail
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY 2011(estimated)
|
|
|
58.6
|
%
|
|
|
41.4
|
%
|
|
|
41.0
|
%
|
|
|
59.0
|
%
|
FY 2012 (estimated)
|
|
|
59.5
|
%
|
|
|
40.5
|
%
|
|
|
42.3
|
%
|
|
|
57.7
|
%
|
EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY 2011(estimated)
|
|
|
59.2
|
%
|
|
|
40.8
|
%
|
|
|
41.9
|
%
|
|
|
58.1
|
%
|
FY 2012 (estimated)
|
|
|
61.6
|
%
|
|
|
38.4
|
%
|
|
|
45.4
|
%
|
|
|
54.6
|
%
|
Cash Net Income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FY 2011(estimated)
|
|
|
46.3
|
%
|
|
|
53.7
|
%
|
|
|
46.3
|
%
|
|
|
53.7
|
%
|
FY 2012 (estimated)
|
|
|
49.2
|
%
|
|
|
50.8
|
%
|
|
|
49.2
|
%
|
|
|
50.8
|
%
|
Illustrative
Discounted Cash Flow Analysis
Goldman Sachs performed an illustrative discounted cash flow
analysis on Valeant, Biovail and the combined company using the
Forecasts. Goldman Sachs calculated indications of net present
value of unlevered free cash flows for Valeant, Biovail and the
combined company for the years 2010 through 2014, discounted
back to September 30, 2010. In each case, unlevered free
cash flows in the terminal year were adjusted such that
75
depreciation was equal to capital expenditures. In this
analysis, unlevered free cash flow, which is the relevant
company’s projected EBITDA, minus taxes (calculated by
multiplying the tax rate for the relevant company contained in
the Forecasts by the relevant company’s projected earnings
before interest and taxes), minus its projected capital
expenditures and minus the projected increase in net working
capital, was calculated using the Forecasts. In addition, stock
based compensation expense was treated as a cash expense for
purposes of determining unlevered free cash flow.
Goldman Sachs calculated implied prices per share of Valeant
common stock using illustrative terminal values in the year 2014
based on multiples ranging from 8.0x EBITDA to 11.0x EBITDA.
These illustrative terminal values were then discounted to
calculate implied indications of present values using
illustrative discount rates ranging from 9.0% to 11.0%, derived
by utilizing a weighted average cost of capital analysis based
on the capital asset pricing model and taking into account
certain financial metrics, including betas, for Valeant and
certain Selected Companies which exhibited similar business
characteristics to Valeant, as well as certain financial metrics
for the United States equity markets generally. The applied
discount rates ranging from 9.0% to 11.0% were based upon
Goldman Sachs’ judgment of an illustrative range based upon
the above analysis. This analysis resulted in a range of
illustrative per share value indications of $60 to $87 for
Valeant’s common stock. Goldman Sachs then calculated the
implied perpetuity growth rates for Valeant using the same range
of illustrative per share value indications for Valeant’s
common stock, EBITDA multiples and discount rates from the
analysis described in this paragraph. This analysis resulted in
a range of implied perpetuity growth rates from 1.1% to 5.0%
Goldman Sachs calculated implied prices per share of Biovail
common shares using illustrative terminal values in the year
2014 based on multiples ranging from 6.0x EBITDA to 9.0x EBITDA.
These illustrative terminal values were then discounted to
calculate implied indications of present values using
illustrative discount rates ranging from 9.0% to 11.0%, derived
by utilizing a weighted average cost of capital analysis based
on the capital asset pricing model and taking into account
certain financial metrics, including betas, for Biovail and
certain Selected Companies which exhibited similar business
characteristics to Biovail, as well as certain financial metrics
for the United States equity markets generally. The applied
discount rates ranging from 9.0% to 11.0% were based upon
Goldman Sachs’ judgment of an illustrative range based upon
the above analysis. This analysis resulted in a range of
illustrative per share value indications of $16 to $23 for
Biovail’s common shares. Goldman Sachs then calculated the
implied perpetuity growth rates for Biovail using the same range
of illustrative per share value indications for Biovail’s
common shares, EBITDA multiples and discount rates from the
analysis described in this paragraph. This analysis resulted in
a range of implied perpetuity growth rates from -5.1% to 1.0%,
respectively.
Goldman Sachs calculated the total equity value per share of
common shares of the combined company using illustrative
terminal values in the year 2014 based on multiples ranging from
8.0x EBITDA to 11.0x EBITDA, based upon how certain key peer
companies in the specialty pharmaceuticals industry traded as of
June 18, 2010 and upon Goldman Sachs’ judgment as to
how the combined company’s stock will trade following the
consummation of the merger. These illustrative terminal values
were then discounted to calculate implied indications of present
values using illustrative discount rates ranging from 9.0% to
11.0%, derived by utilizing a weighted average cost of capital
analysis based on the capital asset pricing model and taking
into account certain financial metrics, including betas, for the
combined company and certain Selected Companies which exhibited
similar business characteristics to the combined company, as
well as certain financial metrics for the United States equity
markets generally. The applied discount rates ranging from 9.0%
to 11.0% were based upon Goldman Sachs’ judgment of an
illustrative range based upon the above analysis. Based on the
Forecasts, this analysis assumed pretax Synergies of
$150 million achieved in 2011, Synergies of
$175 million achieved in 2012 and each year thereafter, and
total pretax integration costs of $125 million between 2010
and 2011. This analysis further assumed that
(1) Valeant’s 8.375% senior notes due 2016
(aggregate principal amount $365,000,000), its
7.625% senior notes due 2020 (aggregate principal amount
$400,000,000) and its existing credit facility due December 2010
(aggregate principal amount $30,000,000) will be refinanced,
(2) debt will be raised to fund the pre-merger special
dividend, (3) a $250 million term loan will be drawn
down in the fourth quarter of 2010 to fund the post-merger
special dividend, with the balance of such dividend to be paid
with cash on the combined company’s balance sheet and
(4) free cash flow will be used to pay down the combined
company’s debt. This analysis resulted in a range of
illustrative total equity values per share of $24 to $36 for the
combined company’s common shares.
76
Goldman Sachs then calculated the implied value of the exchange
ratio, together with the pre-merger special dividend per share
of Valeant common stock, by multiplying the illustrative equity
values per share of the combined company’s common shares,
as determined pursuant to the preceding paragraph, by the
exchange ratio, and adding the pre-merger special dividend. This
calculation resulted in an illustrative range of implied values
per share of $59 to $80 for Valeant’s common stock.
Goldman Sachs also calculated an illustrative range of implied
prices per share of Valeant common stock and of combined company
common shares using the illustrative terminal values in the year
2014, as determined above, based on perpetuity growth rates
ranging from 2.00% to 3.00%. The range of perpetuity growth
rates was estimated by Goldman Sachs utilizing its professional
judgment and experience, taking into account the Forecasts and
market expectations regarding long-term growth of gross domestic
product and inflation. Goldman Sachs also cross-checked such
estimates of perpetuity growth rates against the EBITDA
multiples that are implied by such growth rates and a range of
discount rates to be applied to Valeant’s future unlevered
cash flow based upon the Forecasts. These illustrative terminal
values were then discounted using illustrative discount rates
ranging from 9.0% to 11.0%, and added to the net present value
of the free cash flows for Valeant and the combined company,
respectively, for the years 2010 through 2014 to calculate an
illustrative range of implied indications of present values for
each of a share of Valeant common stock and a share of combined
company common shares discounted to September 30, 2010.
This analysis resulted in a range of illustrative present values
of $55 to $83 per share of Valeant common stock, and $25 to $42
per share of combined company common shares.
Goldman Sachs then calculated the implied value of the
transaction per share of Valeant common stock by multiplying the
illustrative present values per share of the combined
company’s common shares, as determined pursuant to the
preceding paragraph, by the exchange ratio, and adding the
pre-merger special dividend. This analysis resulted in an
illustrative range of implied values per share of $62 to $91 for
Valeant’s common stock.
Illustrative
Present Value of Future Share Price Analysis
Goldman Sachs performed illustrative analyses of the present
value of the future price per share of common stock of Valeant,
using the Forecasts for each of the fiscal years 2010 to 2013
and publicly available Wall Street research.
Illustrative
Present Value of Future Share Price Analysis — EBITDA
Analysis
For this analysis, Goldman Sachs first calculated the
illustrative future values per share of Valeant common stock
prior to the merger by applying EV to estimated 2010 EBITDA
multiples ranging from 6.5x to 11.4x to estimates of EBITDA for
Valeant, based on the Forecasts, for the applicable forward
fiscal year for each of fiscal years 2011 through 2013. The EV
to estimated 2010 EBITDA multiples were selected taking into
account corresponding multiples of Valeant, of certain key peer
companies in the specialty pharmaceuticals industry including
Warner Chilcott Plc, Mylan Inc. and Watson Pharmaceuticals Inc.,
and of the Selected Companies, respectively. The illustrative
future values per share of Valeant common stock in each year
were then discounted back to June 18, 2010, using a
discount rate of 11.0%, derived by utilizing a cost of equity
analysis based on the capital asset pricing model and taking
into account certain financial metrics, including betas, for
Valeant and the Selected Companies, as well as certain financial
metrics for the United States equity markets generally. The
applied discount rate of 11.0% was based upon Goldman
Sachs’ judgment based upon the above analysis.
Goldman Sachs then calculated the illustrative future values per
share of common shares of the combined company by applying EV to
a range of estimated 2010 EBITDA multiples ranging from 6.5x to
11.4x to estimates of EBITDA for the combined company, based on
the Forecasts, for the applicable forward fiscal year for each
of fiscal years 2011 through 2013. The EV to estimated 2010
EBITDA multiples were selected taking into account corresponding
multiples of Valeant, of certain key peer companies in the
specialty pharmaceuticals industry including Warner Chilcott
Plc, Mylan Inc. and Watson Pharmaceuticals Inc., and of the
Selected Companies, respectively. The illustrative future values
per share of common shares of the combined company in each year
were then discounted back to June 18, 2010, using a
discount rate of 11.0%, derived by utilizing a cost of equity
analysis based on the capital asset pricing model and taking
into account certain financial metrics, including betas, for the
combined company and the Selected Companies, as well as certain
financial metrics for the United States equity
77
markets generally. The applied discount rate of 11.0% was based
upon Goldman Sachs’ judgment based upon the above analysis.
Goldman Sachs multiplied the resulting illustrative present
values by the exchange ratio and added the pre-merger special
dividend to determine a range of illustrative present values per
share of Valeant common stock following the merger.
The results of these analyses are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Illustrative Ranges of
|
|
|
Illustrative Ranges of
|
|
|
|
Present Value of
|
|
|
Implied Present
|
|
|
|
Future Share
|
|
|
Value per Share of
|
|
|
|
Price for Valeant
|
|
|
Valeant Common Stock
|
|
Fiscal Year
|
|
Prior to the Merger
|
|
|
Following the Merger
|
|
|
2011
|
|
$
|
34.50 — $63.00
|
|
|
$
|
39.00 — $65.50
|
|
2012
|
|
$
|
41.00 — $71.50
|
|
|
$
|
43.00 — $69.50
|
|
2013
|
|
$
|
50.50 — $84.00
|
|
|
$
|
46.50 — $73.50
|
|
Illustrative
Present Value of Future Share Price Analysis —
Price/Cash Earnings Per Share Analysis
For this analysis, Goldman Sachs first calculated the
illustrative future values per share of Valeant common stock
prior to the merger by applying price / cash earnings
per share (referred to as “P/E”) multiples ranging
from 9.4x to 14.1x to estimates of cash earnings per share for
Valeant, based on the Forecasts, for the applicable forward
fiscal year for each of fiscal years 2011 through 2013. The P/E
multiples were selected taking into account corresponding
multiples of Valeant, of certain key peer companies in the
specialty pharmaceuticals industry including Warner Chilcott
Plc, Mylan Inc. and Watson Pharmaceuticals Inc., and of the
Selected Companies, respectively. The illustrative future values
per share of Valeant common stock in each year were then
discounted back to June 18, 2010, using a discount rate of
11.0%, derived by utilizing a cost of equity analysis based on
the capital asset pricing model and taking into account certain
financial metrics, including betas, for Valeant and the Selected
Companies, as well as certain financial metrics for the United
States equity markets generally. The applied discount rate of
11.0% was based upon Goldman Sachs’ judgment based upon the
above analysis.
Goldman Sachs then calculated the illustrative future values per
share of common shares of the combined company by applying P/E
multiples ranging from 9.4x to 14.1x to estimates of cash
earnings per share for the combined company, based on the
Forecasts, for the applicable forward fiscal year for each of
fiscal years 2011 through 2013. The P/E multiples were selected
taking into account corresponding multiples of Valeant, of
certain key peer companies in the specialty pharmaceuticals
industry including Warner Chilcott Plc, Mylan Inc. and Watson
Pharmaceuticals Inc., and of the Selected Companies,
respectively. The illustrative future values per share of common
shares of the combined company in each year were then discounted
back to June 18, 2010, using a discount rate of 11.0%,
derived by utilizing a cost of equity analysis based on the
capital asset pricing model and taking into account certain
financial metrics, including betas, for the combined company and
the Selected Companies, as well as certain financial metrics for
the United States equity markets generally. The applied discount
rate of 11.0% was based upon Goldman Sachs’ judgment based
upon the above analysis. Goldman Sachs multiplied the resulting
illustrative present values by the exchange ratio and added the
pre-merger special dividend to determine a range of illustrative
present values per share of Valeant common stock following the
merger.
The results of these analyses are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
Illustrative Ranges of
|
|
|
Illustrative Ranges of
|
|
|
|
Present Value of
|
|
|
Implied Present
|
|
|
|
Future Share
|
|
|
Value per Share of
|
|
|
|
Price for Valeant
|
|
|
Valeant Common Stock
|
|
Fiscal Year
|
|
Prior to the Merger
|
|
|
Following the Merger
|
|
|
2011
|
|
$
|
37.50 — $56.00
|
|
|
$
|
53.00 — $71.00
|
|
2012
|
|
$
|
40.50 — $60.50
|
|
|
$
|
54.50 — $73.50
|
|
2013
|
|
$
|
45.50 — $68.00
|
|
|
$
|
54.50 — $75.00
|
|
78
Selected
Transactions Analysis
Goldman Sachs analyzed certain information relating to the
following selected transactions in the specialty pharmaceuticals
industry:
|
|
|
|
•
|
H. Lundbeck A/S’ acquisition of Ovation Pharmaceuticals,
Inc., announced on February 9, 2009;
|
|
|
•
|
Shionogi & Co., Ltd.’s acquisition of Sciele
Pharma, Inc., announced on September 1, 2008;
|
|
|
•
|
Nycomed International Management GmbH’s acquisition of
Bradley Pharmaceuticals, Inc., announced on October 30,
2007;
|
|
|
•
|
Abbott Laboratories’ acquisition of Solvay Pharmaceuticals,
Inc., announced on September 29, 2009;
|
|
|
•
|
Sepracor Inc.’s merger with Dainippon Sumitomo Pharma
America, Inc., announced on September 3, 2009; and
|
|
|
•
|
Warner Chilcott PLC’s acquisition of Proctor &
Gamble Company’s global branded prescription
pharmaceuticals business, announced on August 24, 2009.
|
While none of the businesses or companies that participated in
these selected transactions are directly comparable to
Valeant’s or Biovail’s current businesses and
operations, the businesses and companies that participated in
the selected transactions are businesses and companies with
operations that, for the purposes of analysis, may be considered
similar to certain of Valeant’s or Biovail’s results,
market size, product profile and end market exposure.
For each of the selected transactions, Goldman Sachs calculated
and compared, based on publicly available information, the EV of
the transaction as a multiple of the last twelve months’
(referred to as “LTM”) EBITDA. The following table
presents the results of this analysis:
|
|
|
|
|
|
|
EV as a Multiple
|
|
|
Selected Transactions
|
|
of LTM EBITDA
|
|
|
|
H. Lundbeck A/S’ acquisition of Ovation Pharmaceuticals,
Inc.
|
|
14.0x
|
|
|
Shionogi & Co., Ltd.’s acquisition of Sciele
Pharma, Inc.
|
|
13.7x
|
|
|
Nycomed International Management GmbH’s acquisition of
Bradley Pharmaceuticals, Inc.
|
|
11.2x
|
|
|
Abbott Laboratories’ acquisition of Solvay Pharmaceuticals,
Inc.
|
|
7.7x
|
|
|
Sepracor Inc.’s merger with Dainippon Sumitomo Pharma
America, Inc.
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7.6x
|
|
|
Warner Chilcott PLC’s acquisition of Proctor &
Gamble Company’s global branded prescription
pharmaceuticals business
|
|
4.0x
|
|
|
Median of selected transactions
|
|
9.4x
|
|
|
Valeant (standalone, as of June 18, 2010)
|
|
13.2x
|
|
|
The preparation of a fairness opinion is a complex process and
is not necessarily susceptible to partial analysis or summary
description. Selecting portions of the analyses or of the
summary set forth above, without considering the analyses as a
whole, could create an incomplete view of the processes
underlying Goldman Sachs’ opinion. In arriving at its
fairness determination, Goldman Sachs considered the results of
all of its analyses and did not attribute any particular weight
to any factor or analysis considered by it. Rather, Goldman
Sachs made its determination as to fairness on the basis of its
experience and professional judgment after considering the
results of all of its analyses. No company or transaction used
in the above analyses as a comparison is directly comparable to
Valeant or Biovail or the contemplated transaction.
Goldman Sachs prepared these analyses for purposes of Goldman
Sachs’ providing its opinion to the board of directors of
Valeant that, as of June 20, 2010 and based upon and
subject to the factors and assumptions set forth therein, the
exchange ratio, together with the pre-merger special dividend to
be paid to the holders (other than Biovail and its affiliates)
of outstanding shares of Valeant’s common stock, pursuant
to the merger agreement was fair from a financial point of view
to such holders. These analyses do not purport to be appraisals
nor do they necessarily reflect the prices at which businesses
or securities actually may be sold. Analyses based upon
forecasts
79
of future results are not necessarily indicative of actual
future results, which may be significantly more or less
favorable than suggested by these analyses. Because these
analyses are inherently subject to uncertainty, being based upon
numerous factors or events beyond the control of the parties or
their respective advisors, none of Valeant, Biovail, Goldman
Sachs or any other person assumes responsibility if future
results are materially different from those forecast.
The exchange ratio and pre-merger special dividend were
determined through arm’s-length negotiations between
Valeant and Biovail and were approved by the board of directors
of Valeant. Goldman Sachs provided advice to Valeant during
these negotiations. Goldman Sachs did not, however, recommend
any specific exchange ratio or pre-merger special dividend to
Valeant or its board of directors or recommend that any specific
exchange ratio and pre-merger special dividend constituted the
only appropriate exchange ratio and pre-merger special dividend
for the transaction.
As described above, Goldman Sachs’ opinion to the board of
directors of Valeant was one of many factors taken into
consideration by the board of directors of Valeant in making its
determination to approve the merger agreement. The foregoing
summary does not purport to be a complete description of the
analyses performed by Goldman Sachs in connection with the
fairness opinion and is qualified in its entirety by reference
to the written opinion of Goldman Sachs attached as Annex C.
Goldman Sachs and its affiliates are engaged in investment
banking and financial advisory services, commercial banking,
securities trading, investment management, principal investment,
financial planning, benefits counseling, risk management,
hedging, financing, brokerage activities and other financial and
non-financial activities and services for various persons and
entities. In the ordinary course of these activities and
services, Goldman Sachs and its affiliates may at any time make
or hold long or short positions and investments, as well as
actively trade or effect transactions, in the equity, debt and
other securities (or related derivative securities) and
financial instruments (including bank loans and other
obligations) of third parties, Valeant, Biovail and any of their
respective affiliates or any currency or commodity that may be
involved in the transaction contemplated by the merger agreement
for their own account and for the accounts of their customers.
Goldman Sachs acted as financial advisor to Valeant in
connection with, and participated in certain of the negotiations
leading to, the merger agreement. At the request of the board of
directors of Valeant, (a) an affiliate of Goldman Sachs has
entered into financing commitments with Valeant and Biovail to
provide Valeant with senior secured credit facilities including
a revolving credit facility and term loan credit facilities in
connection with the merger, subject to the terms of such
commitments, and pursuant to which one or more affiliates of
Goldman Sachs will receive customary fees and (b) Goldman Sachs
has entered into an engagement letter with Valeant to serve as
joint lead underwriter, joint initial purchaser, joint
bookrunner, joint arranger or joint placement agent in
connection with a potential issuance or sale for cash of notes
of Valeant and/or one or more of its affiliates in connection
with the merger, pursuant to which Goldman Sachs may receive
customary fees. In addition, Goldman Sachs has provided certain
investment banking and other financial services to Valeant and
its affiliates from time to time for which its investment
banking division has received, and may receive, compensation,
including having acted as Valeant’s financial advisor in
connection with the sale of its Western Europe, Eastern Europe,
Middle East and Africa businesses in September 2008; as a joint
bookrunning manager with respect to Valeant’s
8.375% Senior Unsecured Notes due June 2016 (aggregate
principal amount $365,000,000) in June 2009; as a joint
bookrunning manager with respect to Valeant’s
7.625% Senior Unsecured Notes due March 2020 (aggregate
principal amount $400,000,000) in April 2010; and as sole lead
arranger, administrative agent, collateral agent and lender with
respect to Valeant’s existing credit facility due December
2010 (aggregate principal amount $30,000,000) in May 2010.
Goldman Sachs also may provide investment banking and other
financial services to Valeant and Biovail and their respective
affiliates in the future for which its investment banking
division may receive compensation. Concurrent with the issuance
of the Valeant Convertible Notes (as defined in the merger
agreement) in November 2003, Valeant entered into convertible
note hedge and written call option transactions with respect to
shares of Valeant’s common stock (referred to as the
“Hedging Transactions”) with Goldman Sachs Financial
Markets L.P. (“GSFM”), an affiliate of Goldman Sachs,
and another financial institution consisting of the purchase by
Valeant of call options on 12,653,440 shares of
Valeant’s common stock and the sale by Valeant of call
options on 12,653,440 shares of Valeant’s common
stock. GSFM was counterparty to 50% of each of the Hedging
Transactions.
80
Certain of the Hedging Transactions remain in place as of the
date hereof. The number of shares of Valeant’s common stock
covered by the specific Hedging Transactions to which GSFM is a
counterparty is approximately 772,904 in the case of each of the
convertible note hedge and written call option transactions
corresponding to Valeant’s 3.0% Convertible
Subordinated Notes due 2010 (the “2010 Options”) and
approximately 3,163,360 in the case of each of the convertible
note hedge and written call option transactions expiring in 2011
and corresponding to Valeant’s 4.0% Convertible
Subordinated Notes due 2013 (the “2011 Options”). The
convertible note hedge transactions have strike prices of
approximately $34.61 and $35.36 for the 2010 Options and 2011
Options, respectively. The written call option transactions each
have a strike price of approximately $39.52.
The treatment of the Hedging Transactions to which GSFM is a
counterparty following the consummation of the merger is subject
to ongoing discussions among Valeant and GSFM and its
affiliates. The Hedging Transactions may remain outstanding
(subject to fair value adjustment) or be terminated at fair
value. Discussions among the parties are in preliminary stages
and the result of the negotiations, including any fair value
adjustment or termination payment, will depend on the facts and
circumstances, including interest rates, stock price and
volatility, at the time of the termination or the consummation
of the merger.
The board of directors of Valeant selected Goldman Sachs as its
financial advisor because it is an internationally recognized
investment banking firm that has substantial experience in
transactions similar to the transaction. Pursuant to a letter
agreement dated June 20, 2010, Valeant engaged Goldman
Sachs to act as its financial advisor in connection with the
contemplated transaction. Pursuant to the terms of this
engagement letter, Valeant has agreed to pay Goldman Sachs a
transaction fee of 0.65% of the aggregate consideration paid in
the transaction, all of which is contingent upon consummation of
the transaction, and Valeant has agreed to reimburse Goldman
Sachs for its expenses arising, and indemnify Goldman Sachs
against certain liabilities that may arise, out of its
engagement.
Opinion
of Jefferies & Company, Inc.
Valeant retained Jefferies to act as a financial advisor to
Valeant in connection with the merger and to render to the
Valeant board of directors an opinion as to the fairness to the
holders of Valeant common stock of the exchange ratio of 1.7809
pursuant to the merger agreement, together with the pre-merger
special dividend of $16.77 per share to be paid to the holders
of Valeant common stock. At the meeting of the Valeant board of
directors on June 20, 2010, Jefferies rendered its opinion
to the Valeant board of directors to the effect that, as of that
date and based upon and subject to the various considerations
set forth in its opinion, the exchange ratio of 1.7809 pursuant
to the merger agreement, together with the pre-merger special
dividend of $16.77 to be paid to the holders of Valeant common
stock, was fair, from a financial point of view, to such holders.
The full text of the written opinion of Jefferies, dated as
of June 20, 2010, is attached as Annex D to this joint
proxy statement/prospectus. Jefferies’ opinion sets forth,
among other things, the assumptions made, procedures followed,
matters considered and limitations on the scope of the review
undertaken by Jefferies in rendering its opinion. Valeant
encourages its stockholders to read the opinion carefully and in
its entirety. Jefferies’ opinion was directed to the
Valeant board of directors and addresses only the fairness from
a financial point of view of the exchange ratio, together with
the pre-merger special dividend, as of the date of the opinion.
It does not address any other aspects of the merger and does not
constitute a recommendation as to how any holder of Valeant
common stock should vote on the merger or any matter related
thereto. The summary of the opinion of Jefferies set forth below
is qualified in its entirety by reference to the full text of
the opinion.
In arriving at its opinion, Jefferies, among other things:
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•
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reviewed a draft dated June 19, 2010 of the merger
agreement;
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•
|
reviewed certain publicly available financial and other
information about Valeant and Biovail;
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•
|
reviewed certain information furnished to Jefferies by the
management of each of Valeant and Biovail, including financial
forecasts and analyses, relating to the business, operations and
prospects of Valeant and Biovail, respectively, and estimates as
to the amount and timing of certain cost savings and related
expenses
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81
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|
jointly anticipated by the management of each of Valeant and
Biovail to result from the merger, which are referred to as the
“synergies”;
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•
|
held discussions with members of the senior management of each
of Valeant and Biovail concerning the matters described in the
two immediately preceding bullet points;
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•
|
reviewed the share trading price history and valuation multiples
for Valeant common stock and Biovail common shares and compared
them with those of certain publicly traded companies that
Jefferies deemed relevant;
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•
|
compared the proposed financial terms of the merger with the
financial terms of certain other transactions that Jefferies
deemed relevant;
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•
|
reviewed the relative financial contributions of Valeant and
Biovail to the future financial performance of the combined
company on a pro forma basis;
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•
|
considered the potential pro forma impact of the merger; and
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•
|
conducted such other financial studies, analyses and
investigations as Jefferies deemed appropriate.
|
In Jefferies’ review and analysis and in rendering its
opinion, Jefferies assumed and relied upon, but did not assume
any responsibility to independently investigate or verify, the
accuracy and completeness of all financial and other information
that was supplied or otherwise made available by Valeant and
Biovail to Jefferies or that was publicly available (including,
without limitation, the information described above), or that
was otherwise reviewed by it. In its review, Jefferies relied on
assurances of the managements of Valeant and Biovail that they
were not aware of any facts or circumstances that would make
such information inaccurate or misleading. In its review,
Jefferies did not obtain any independent evaluation or appraisal
of any of the assets or liabilities of, nor did Jefferies
conduct a physical inspection of any of the properties or
facilities of, Valeant or Biovail. Jefferies was not furnished
with any such evaluations or appraisals of such physical
inspections and did not assume any responsibility to obtain any
such evaluations or appraisals.
With respect to the financial forecasts provided to and examined
by Jefferies, Jefferies’ opinion noted that projecting
future results of any company is inherently subject to
uncertainty. Valeant and Biovail informed Jefferies, however,
and Jefferies assumed, that such financial forecasts were
reasonably prepared on bases reflecting the best currently
available estimates and good faith judgments of the management
of each of Valeant and Biovail as to the future financial
performance of Valeant and Biovail, respectively. In addition,
Valeant and Biovail informed Jefferies, and Jefferies assumed,
that the synergies were reasonably prepared on bases reflecting
the best currently available estimates and good faith judgments
of the management of each of Valeant and Biovail as to the
amount and timing of certain cost savings and related expenses
anticipated by the management of each of Valeant and Biovail to
result from the merger, and Jefferies relied upon the assessment
of the management of each of Valeant and Biovail as to the
ability of the combined company to achieve the synergies in the
amounts and at the times projected. Jefferies expressed no
opinion as to the financial forecasts or the synergies provided
to it by Valeant and Biovail, or the assumptions on which they
were made.
Jefferies’ opinion was based on economic, monetary,
regulatory, market and other conditions existing and which could
be evaluated as of the date of its opinion. Jefferies expressly
disclaimed any undertaking or obligation to advise any person of
any change in any fact or matter affecting Jefferies’
opinion of which Jefferies became aware after the date of its
opinion.
Jefferies made no independent investigation of any legal or
accounting matters affecting Valeant or Biovail, and Jefferies
assumed the correctness in all respects material to
Jefferies’ analysis of all legal and accounting advice
given to Valeant and the Valeant board of directors, including,
without limitation, advice as to the legal, accounting and tax
consequences of the terms of, and transactions contemplated by,
the merger agreement to Valeant and its stockholders. In
addition, in preparing its opinion, Jefferies did not take into
account any tax consequences of the merger to any holder of
Valeant common stock. In its review and analysis and in
rendering its opinion, Jefferies assumed that the pre-merger
special dividend will be declared and paid. In addition,
Jefferies assumed that the final form of the merger agreement
would be substantially similar to the last draft reviewed by it.
Jefferies also assumed that in the course of obtaining the
necessary regulatory or third party approvals, consents and
releases for the
82
merger, no delay, limitation, restriction or condition would be
imposed that would have an adverse effect on Valeant, Biovail or
the contemplated benefits of the merger.
Jefferies’ opinion was for the use and benefit of the
Valeant board of directors in its consideration of the merger,
and Jefferies’ opinion did not address the relative merits
of the transactions contemplated by the merger agreement as
compared to any alternative transaction or opportunity that
might be available to Valeant, nor did it address the underlying
business decision by Valeant to engage in the merger or the
terms of the merger agreement or the documents referred to
therein. Jefferies’ opinion did not constitute a
recommendation as to how any holder of Valeant common stock
should vote on the merger or any matter related thereto.
Jefferies’ opinion also did not address the fairness to, or
any other consideration of, the holders of any class of
securities, creditors, or other constituencies of Valeant, other
than the holders of Valeant common stock. Jefferies expressed no
opinion as to the price at which Valeant common stock or Biovail
common shares would trade at any time. Jefferies did not express
any view or opinion as to the fairness, financial or otherwise,
of the amount or nature of any compensation payable or to be
received by any of Valeant’s officers, directors or
employees, or any class of such persons, in connection with the
merger relative to the consideration to be received by any other
person. Jefferies’ opinion was authorized by the Fairness
Committee of Jefferies & Company, Inc.
In preparing its opinion, Jefferies performed a variety of
financial and comparative analyses. The preparation of a
fairness opinion is a complex process involving various
determinations as to the most appropriate and relevant
quantitative and qualitative methods of financial analysis and
the applications of those methods to the particular
circumstances and, therefore, is not necessarily susceptible to
partial analysis or summary description. Jefferies believes that
its analyses must be considered as a whole. Considering any
portion of Jefferies’ analyses or the factors considered by
Jefferies, without considering all analyses and factors, could
create a misleading or incomplete view of the process underlying
the conclusion expressed in Jefferies’ opinion. In
addition, Jefferies may have given various analyses more or less
weight than other analyses, and may have deemed various
assumptions more or less probable than other assumptions, so
that the range of valuations resulting from any particular
analysis described below should not be taken to be
Jefferies’ view of Valeant’s or Biovail’s actual
value. Accordingly, the conclusions reached by Jefferies are
based on all analyses and factors taken as a whole and also on
the application of Jefferies’ own experience and judgment.
In performing its analyses, Jefferies made numerous assumptions
with respect to industry performance, general business,
economic, monetary, regulatory, market and other conditions and
other matters, many of which are beyond Valeant’s,
Biovail’s and Jefferies’ control. The analyses
performed by Jefferies are not necessarily indicative of actual
values or actual future results, which may be significantly more
or less favorable than suggested by such analyses. In addition,
analyses relating to the per share value of Valeant common stock
or Biovail common shares do not purport to be appraisals or to
reflect the prices at which Valeant common stock or Biovail
common shares may actually be sold. The analyses performed were
prepared solely as part of Jefferies’ analysis of the
fairness, from a financial point of view, of the exchange ratio,
together with the pre-merger special dividend, and were provided
to the Valeant board of directors in connection with the
delivery of Jefferies’ opinion.
The following is a summary of the material financial and
comparative analyses performed by Jefferies in connection with
Jefferies’ delivery of its opinion. The financial analyses
summarized below include information presented in tabular
format. In order to fully understand Jefferies’ financial
analyses, the tables must be read together with the text of each
summary. The tables alone do not constitute a complete
description of the financial analyses. Considering the data
described below without considering the full narrative
description of the financial analyses, including the
methodologies and assumptions underlying the analyses, could
create a misleading or incomplete view of Jefferies’
financial analyses.
Comparable
Company Analysis
Using publicly available information and information provided by
the management of each of Valeant and Biovail, respectively,
Jefferies analyzed the trading multiples of Valeant, Biovail and
the following specialty pharmaceutical companies, which are
referred to as the “Selected Comparable Companies”:
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Allergan, Inc.;
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•
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Cephalon, Inc.;
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83
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•
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Endo Pharmaceuticals Holdings, Inc.;
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•
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Forest Laboratories, Inc.;
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•
|
King Pharmaceuticals, Inc;
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•
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Medicis Pharmaceutical Corporation;
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•
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Shire plc; and
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•
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Warner Chilcott plc.
|
In its analysis, Jefferies derived and compared multiples for
Valeant, Biovail and the Selected Comparable Companies,
calculated and referred to as follows:
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•
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the enterprise value divided by projected earnings before
interest, taxes, depreciation and amortization, or EBITDA, for
calendar year 2010, which is referred to as “Enterprise
Value/2010E EBITDA”;
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•
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the enterprise value divided by projected EBITDA for calendar
year 2011, which is referred to as “Enterprise Value/2011E
EBITDA”;
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•
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the enterprise value divided by projected EBITDA for calendar
year 2012, which is referred to as “Enterprise Value/2012E
EBITDA”;
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•
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the price per share divided by projected earnings per share, or
EPS, for calendar year 2010, which is referred to as
“Price/2010E EPS”;
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•
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the price per share divided by projected EPS for calendar year
2011, which is referred to as “Price/2011E
EPS”; and
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•
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the price per share divided by projected EPS for calendar year
2012, which is referred to as “Price/2012E EPS.”
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This analysis indicated the following:
Comparable
Company Multiples
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Benchmark
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High
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Low
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Median
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Enterprise Value/2010E EBITDA
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11.7
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x
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3.6
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x
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5.4x
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Enterprise Value/2011E EBITDA
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10.5
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x
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3.2
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x
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5.0x
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Enterprise Value/2012E EBITDA
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9.6
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x
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3.4
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x
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5.9x
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Price/2010E EPS
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19.4
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x
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7.0
|
x
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10.0x
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Price/2011E EPS
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17.1
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x
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6.7
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x
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9.3x
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Price/2012E EPS
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15.0
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x
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6.3
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x
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10.2x
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Using the reference ranges summarized in the table below for
each of Valeant’s and Biovail’s 2010E EBITDA, 2011E
EBITDA and 2012E EBITDA, Jefferies determined implied enterprise
values for each of Valeant and Biovail, then subtracted total
indebtedness and added cash and cash equivalents to determine
implied equity values for each of Valeant and Biovail. Jefferies
then determined a range of implied values per share for each of
Valeant and Biovail by dividing such implied equity values by
the fully diluted (calculated using the treasury stock method)
shares outstanding for each of Valeant and Biovail and, for
Valeant, subtracting the amount of the pre-merger special
dividend of $16.77 per share. The reference ranges used and
approximate implied values per share derived in this analysis
were as follows:
Enterprise
Value/EBITDA Analysis
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2010E EBITDA
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2011E EBITDA
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2012E EBITDA
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Valeant
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Biovail
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Valeant
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Biovail
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Valeant
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Biovail
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Reference Range
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8.0x — 10.0
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x
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6.0x — 7.5
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x
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7.0x — 9.0
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x
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5.5x — 7.0
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x
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6.5x — 8.5
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x
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5.0x — 6.5
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x
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Implied Value Per Share
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$18.54 — $28.45
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$12.68 — $16.07
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$19.13 — $30.80
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$11.53 — $15.08
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$22.96 — $36.64
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$11.07 — $14.87
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84
Using the reference ranges summarized in the table below for
each of Valeant’s and Biovail’s 2010E EPS, 2011E EPS
and 2012E EPS, Jefferies determined implied equity values for
each of Valeant and Biovail. Jefferies then determined a range
of implied values per share for each of Valeant and Biovail and,
for Valeant, subtracted the amount of the pre-merger special
dividend of $16.77 per share. The reference ranges used and
approximate implied values per share derived in this analysis
were as follows:
Price/EPS
Analysis
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2010E EPS
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2011E EPS
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2012E EPS
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Valeant
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Biovail
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Valeant
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Biovail
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Valeant
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Biovail
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Reference Range
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11.0x — 15.0
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x
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7.5x — 11.5
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x
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8.5x — 12.5
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x
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7.0x — 10.0
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x
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7.0x — 11.0
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x
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6.5x — 9.5
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x
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Implied Value Per Share
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$21.25 — $35.08
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$13.04 — $20.00
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$17.31 — $33.35
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$14.07 — $20.10
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$16.74 — $35.90
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$14.45 — $21.12
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After adjusting the implied equity values for Valeant common
stock for payment of the pre-merger special dividend of $16.77
per share, Jefferies then calculated implied exchange ratios
based upon the implied equity values for each of Valeant and
Biovail determined as described above by:
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dividing the lowest implied value per share of Valeant common
stock by the highest implied value per share of Biovail common
shares to arrive at the low end of the implied exchange ratio
range; and
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•
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dividing the highest implied value per share of Valeant common
stock by the lowest implied value per share of Biovail common
shares to arrive at the high end of the implied exchange ratio
range.
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This analysis indicated the following:
Implied
Exchange Ratios for
Enterprise Value/EBITDA and Price/EPS Analyses
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Benchmark
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Low
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High
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Enterprise Value/2010E EBITDA
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1.1536x
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2.2431x
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Enterprise Value/2011E EBITDA
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1.2687x
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2.6705x
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Enterprise Value/2012E EBITDA
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|
|
1.5446x
|
|
|
|
3.3090x
|
|
Price/2010E EPS
|
|
|
1.0625x
|
|
|
|
2.6890x
|
|
Price/2011E EPS
|
|
|
0.8611x
|
|
|
|
2.3698x
|
|
Price/2012E EPS
|
|
|
0.7929x
|
|
|
|
2.4843x
|
|
This analysis indicated, in each case compared to the exchange
ratio of 1.7809 pursuant to the merger agreement:
|
|
|
|
•
|
exchange ratios implied from enterprise value to EBITDA multiple
valuation ranging from 1.1536x to 3.3090x; and
|
|
|
•
|
exchange ratios implied from price to EPS multiple valuation
ranging from 0.7929x to 2.6890x.
|
No company utilized in the comparable company analysis is
identical to Valeant or Biovail. In evaluating the selected
companies, Jefferies made judgments and assumptions with regard
to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond
the control of Valeant, Biovail and Jefferies. Mathematical
analysis, such as determining the mean or median, is not in
itself a meaningful method of using comparable company data.
Comparable
Transaction Analysis
Using publicly available and other information, Jefferies
examined 14 transactions involving specialty pharmaceutical
companies announced since October 2004. Using publicly available
estimates and other information for each transaction, Jefferies
derived and compared the transaction value, or TV, as a multiple
of EBITDA
85
projections for “FY+1” (which indicates the projected
EBITDA for the current fiscal year if the merger closed prior to
the fourth quarter, or the forward fiscal year if the
transaction closed during the fourth quarter). The transactions
considered, the month and year each transaction was announced,
and the transaction value as a multiple of FY+1 EBITDA for each
transaction, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
TV as a
|
|
|
|
|
Month and
|
|
Multiple of
|
Target
|
|
Acquiror
|
|
Year Announced
|
|
FY+1 EBITDA*
|
|
Mepha AG
|
|
Cephalon, Inc.
|
|
February 2010
|
|
N/A
|
Sepracor, Inc.
|
|
Dainippon Sumitono
Pharma Co., Ltd.
|
|
September 2009
|
|
6.4x
|
P&G Company (Pharma Segment)
|
|
Warner Chilcott plc
|
|
August 2009
|
|
N/A
|
Noven Pharmaceuticals Inc.
|
|
Hisamitsu Pharmaceutical Co. Inc.
|
|
July 2009
|
|
7.6x
|
Stiefel Laboratories, Inc.
|
|
GlaxoSmithKline plc
|
|
April 2009
|
|
N/A
|
OVATION Pharmaceuticals, Inc.
|
|
H. Lundbeck A/S
|
|
February 2009
|
|
N/A
|
Sciele Pharma Inc.
|
|
Shionogi & Co. Ltd.
|
|
September 2008
|
|
7.9x
|
Alpharma, Inc.
|
|
King Pharmaceuticals Inc.
|
|
August 2008
|
|
10.3x
|
Axcan Pharma Inc.
|
|
TPG
|
|
November 2007
|
|
8.9x
|
Aspreva Pharmaceuticals Corporation
|
|
Galenica Ltd.
|
|
October 2007
|
|
2.5x
|
Schwarz Pharma AG
|
|
UCB SA
|
|
September 2006
|
|
N/M
|
ALTANA Pharma AG
|
|
Nycomed Pharma AS
|
|
September 2006
|
|
6.1x
|
Fournier Pharma
|
|
Solvay SA
|
|
July 2005
|
|
N/A
|
Warner Chilcott plc
|
|
Private Equity Consortium
|
|
October 2004
|
|
9.3x
|
|
|
|
*
|
|
“N/A” indicates that the
data was not publicly available, and “N/M” indicates
that the data was not meaningful.
|
This analysis indicated the following:
Selected
Comparable Transaction Multiples
|
|
|
|
|
|
|
|
|
|
|
|
|
Benchmark
|
|
High
|
|
|
Low
|
|
|
Median
|
|
|
TV/FY+1 EBITDA
|
|
|
10.3x
|
|
|
|
2.5x
|
|
|
|
7.8x
|
|
Using a reference range of 7.0x to 8.5x Biovail’s 2010E
EBITDA based on the selected comparable transaction multiples
set forth above and 8.0x to 10.0x Valeant’s 2010E EBITDA
based on the multiples set forth above in the comparable company
analysis, Jefferies determined implied enterprise values for
Biovail and Valeant, then subtracted total indebtedness and
added cash and cash equivalents to determine the implied equity
value for each of Biovail and Valeant. After adjusting the
implied equity values for Valeant common stock for payment of
the pre-merger special dividend of $16.77 per share, Jefferies
calculated a range of implied values per share for Valeant of
approximately $18.54 – $28.45 and a range of implied
values per share for Biovail of approximately $15.04 –
$18.13, and then calculated implied exchange ratios based
upon the implied equity values for each of Biovail and Valeant
determined as described above by:
|
|
|
|
•
|
dividing the lowest implied value per share of Valeant common
stock by the highest implied value per share of Biovail common
shares to arrive at the low end of the implied exchange ratio
range; and
|
|
|
•
|
dividing the highest implied value per share of Valeant common
stock by the lowest implied value per share of Biovail common
shares to arrive at the high end of the implied exchange ratio
range.
|
This analysis indicated implied exchange ratios ranging from
1.0225x to 1.8917x, compared to the exchange ratio of 1.7809
pursuant to the merger agreement.
No transaction utilized as a comparison in the comparable
transaction analysis is identical to the merger. In evaluating
the merger, Jefferies made numerous judgments and assumptions
with regard to industry performance, general business, economic,
market, and financial conditions and other matters, many of
which are beyond Valeant’s, Biovail’s and
Jefferies’ control. Mathematical analysis, such as
determining the average or the median, is not in itself a
meaningful method of using comparable transaction data.
86
Discounted
Cash Flow Analysis
Jefferies performed a discounted cash flow analysis to estimate
the present value of the unlevered free cash flows of Valeant
and Biovail through the fiscal year ending December 31,
2014. In this analysis, unlevered free cash flow, which is the
relevant company’s projected EBIT, minus taxes (calculated
by multiplying the tax rate for the relevant company contained
in the forecasts provided to Jefferies by the relevant
company’s projected earnings before interest and taxes),
minus its projected capital expenditures, minus the projected
increase in net working capital and plus depreciation and
amortization, was calculated using the forecasts provided to
Jefferies. Using financial projections provided by the
management of each of Valeant and Biovail, discount rates
ranging from 8.0% to 10.0% for Valeant and from 8.5% to 10.5%
for Biovail and, for the purpose of calculating the terminal
value for each of Valeant and Biovail at the end of the forecast
period, EBITDA terminal multiples ranging from 7.5x to 8.5x for
Valeant and from 6.5x to 7.5x for Biovail, Jefferies derived a
range of implied enterprise values for each of Valeant and
Biovail. EBITDA terminal multiples were based upon the multiples
observed in the foregoing comparable company analysis and upon
Jefferies’ judgment as to how those multiples would apply
to Valeant and Biovail in their respective terminal years.
Jefferies then subtracted total indebtedness and added cash and
cash equivalents to determine a range of implied equity values
for each of Valeant and Biovail. After adjusting the implied
equity values for Valeant common stock for payment of the
pre-merger special dividend of $16.77 per share, Jefferies
calculated a range of implied values per share for Valeant of
approximately $43.87 – $55.39 and a range of implied
values per share for Biovail of approximately $18.37 –
$21.04, and then calculated implied exchange ratios based upon
the implied equity values for each of Biovail and Valeant
determined as described above by:
|
|
|
|
•
|
dividing the lowest implied value per share of Valeant common
stock by the highest implied value per share of Biovail common
shares to arrive at the low end of the implied exchange ratio
range; and
|
|
|
•
|
dividing the highest implied value per share of Valeant common
stock by the lowest implied value per share of Biovail common
shares to arrive at the high end of the implied exchange ratio
range.
|
This analysis indicated implied exchange ratios ranging from
2.0848x to 3.0148x, compared to the exchange ratio of 1.7809
pursuant to the merger agreement.
Pro Forma
Relative Contribution Analysis
Based on information provided by the management of each of
Valeant and Biovail, Jefferies compared the standalone
contribution of each of Valeant and Biovail to projected EBITDA
and net income excluding amortization of intangibles and
non-recurring charges, or cash net income, for fiscal years
2010, 2011 and 2012 for the combined company excluding any
adjustments resulting from the merger. Based on the relative
contributions of each company, Jefferies derived an equity value
for each company by multiplying the cumulative total enterprise
value of the two standalone companies by the respective
contribution percentages and subtracting net debt attributable
to each standalone company. After adjusting Valeant’s
equity value for payment of the pre-merger special dividend of
$16.77 per share, Jefferies calculated implied exchange ratios
by dividing the dividend-adjusted equity value of Valeant by the
implied equity value of Biovail. Jefferies then used these
implied dividend-adjusted exchange ratios to calculate an
implied ownership for Valeant and Biovail. This analysis
indicated implied exchange ratios and implied ownership as
follows:
|
|
|
|
|
|
|
|
|
|
|
Dividend
|
|
Implied
|
|
|
Adjusted Implied
|
|
Ownership
|
Metric
|
|
Exchange Ratio
|
|
(Biovail/Valeant)
|
|
2010P EBITDA
|
|
|
1.4202
|
x
|
|
|
56.9%/43.1%
|
|
2011P EBITDA
|
|
|
1.6307
|
x
|
|
|
53.5%/46.5%
|
|
2012P EBITDA
|
|
|
1.7775
|
x
|
|
|
51.4%/48.6%
|
|
2010P Cash Net Income
|
|
|
1.4030
|
x
|
|
|
57.2%/42.8%
|
|
2011P Cash Net Income
|
|
|
1.4169
|
x
|
|
|
57.0%/43.0%
|
|
2012P Cash Net Income
|
|
|
1.5194
|
x
|
|
|
55.3%/44.7%
|
|
87
This analysis indicated implied exchange ratios ranging from
1.4030x to 1.7775x, compared to the exchange ratio of 1.7809
pursuant to the merger agreement.
Implied
Historical Exchange Ratio
Based on the daily closing prices per share of Biovail common
shares and Valeant common stock during the one-year period
ending June 18, 2010, and after adjusting the daily closing
prices per share of Valeant common stock for payment of the
pre-merger special dividend of $16.77 per share, Jefferies
calculated a range of implied historical exchange ratios by
dividing the dividend-adjusted daily closing price per share of
the Valeant common stock by the daily closing price per share of
the Biovail common shares. This analysis indicated implied
historical exchange ratios during this period ranging from
0.4495x to 2.1112x, compared to the exchange ratio of 1.7809
pursuant to the merger agreement.
Jefferies’ opinion was one of many factors taken into
consideration by the Valeant board of directors in its
consideration of the merger and should not be considered alone
to have been determinative of the views of the Valeant board of
directors with respect to the merger.
Jefferies was selected by the Valeant board of directors based
on Jefferies’ qualifications, expertise and reputation.
Jefferies is an internationally recognized investment banking
and advisory firm. Jefferies, as part of its investment banking
business, is regularly engaged in the valuation of businesses
and securities in connection with mergers and acquisitions,
negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private
placements, financial restructurings and other financial
services.
Jefferies has, in the past, provided financial advisory services
to Valeant and may continue to do so and has received, and may
receive, fees for the rendering of such services. Jefferies
maintains a market in the securities of Valeant and Biovail, and
in the ordinary course of business, Jefferies and its affiliates
may trade or hold securities of Valeant or Biovail
and/or
their
respective affiliates for its own account and for the accounts
of its customers and, accordingly, may at any time hold long or
short positions in those securities. In addition, Jefferies may
seek to, in the future, provide financial advisory and financing
services to Valeant, Biovail or entities that are affiliated
with Valeant or Biovail, for which Jefferies would expect to
receive compensation. Jefferies and its affiliates may arrange
and/or
provide a portion of the financing to Valeant in connection with
the pre-merger special dividend and the refinancing of existing
indebtedness for customary compensation.
Pursuant to a letter agreement dated as of June 20, 2010,
Valeant engaged Jefferies to act as a financial advisor in
connection with the merger. Pursuant to that letter agreement,
Valeant has agreed to pay Jefferies a fee for its services, a
portion of which was payable upon delivery of Jefferies’
opinion and a significant portion of which is payable contingent
upon consummation of the merger and is based upon, in part, the
value of the consideration to be paid in the merger, which fee
is expected to be approximately $15.0 million, of which
approximately $14.0 million is payable contingent upon
consummation of the merger, as of the date of this joint proxy
statement/prospectus. In addition, Valeant has agreed to
reimburse Jefferies for expenses incurred. Valeant also has
agreed to indemnify Jefferies against liabilities arising out of
or in connection with the services rendered and to be rendered
by it under its engagement.
Certain
Valeant Prospective Financial Information
Valeant does not as a matter of course make public long-term
forecasts as to future performance or other prospective
financial information beyond the current fiscal year, and
Valeant is especially wary of making forecasts or projections
for extended periods due to the unpredictability of the
underlying assumptions and estimates. However, as part of the
due diligence review of Valeant in connection with the merger,
Valeant’s management prepared and provided to Biovail, as
well as to Morgan Stanley, Goldman Sachs and Jefferies in
connection with their respective evaluation of the fairness of
the merger consideration, non-public, internal financial
forecasts regarding Valeant’s projected future operations
for the 2010 through 2014 fiscal years. Valeant has included
below a summary of these forecasts for the purpose of providing
stockholders and investors access to certain non-public
information that was furnished to third parties and such
information may not be appropriate for other purposes. These
forecasts were also considered by the Valeant board of directors
for purposes of evaluating the merger. The Valeant board of
directors also considered non-public, financial forecasts
prepared by Biovail regarding Biovail’s
88
anticipated future operations for the 2010 through 2014 fiscal
years for purposes of evaluating Biovail and the merger. See
“The Merger — Certain Biovail Prospective
Financial Information” beginning on page 67 for more
information about the forecasts prepared by Biovail.
The Valeant internal financial forecasts were not prepared with
a view toward public disclosure, nor were they prepared with a
view toward compliance with published guidelines of the SEC, the
guidelines established by the American Institute of Certified
Public Accountants for preparation and presentation of financial
forecasts, the guidelines established by the Canadian Institute
of Chartered Accountants Handbook, rules relating to future
oriented financial information under Canadian securities laws or
generally accepted accounting principles in the United States or
Canada. PricewaterhouseCoopers LLP has not examined, compiled or
performed any procedures with respect to the accompanying
prospective financial information and, accordingly,
PricewaterhouseCoopers LLP does not express an opinion or any
other form of assurance with respect thereto. The
PricewaterhouseCoopers LLP reports incorporated by reference in
this joint proxy statement/prospectus relate to Valeant’s
historical financial information. They do not extend to the
prospective financial information and should not be read to do
so. The summary of these internal financial forecasts included
below is not being included to influence your decision whether
to vote for the merger and the transactions contemplated in
connection with the merger, but because these internal financial
forecasts were provided by Valeant to Biovail and Morgan
Stanley, Goldman Sachs and Jefferies.
While presented with numeric specificity, these internal
financial forecasts were based on numerous variables and
assumptions (including, but not limited to, those related to
industry performance and competition and general business,
economic, market and financial conditions and additional matters
specific to Valeant’s businesses) that are inherently
subjective and uncertain and are beyond the control of
Valeant’s management. Important factors that may affect
actual results and cause these internal financial forecasts to
not be achieved include, but are not limited to, risks and
uncertainties relating to Valeant’s business (including its
ability to achieve strategic goals, objectives and targets over
applicable periods), industry performance, general business and
economic conditions and other factors described in the
“Risk Factors” section of Valeant’s Annual Report
on
Form 10-K,
as updated by subsequent Quarterly Reports on
Form 10-Q,
all of which are filed with the SEC and incorporated by
reference into this joint proxy statement/prospectus. These
internal financial forecasts also reflect numerous variables,
expectations and assumptions available at the time they were
prepared as to certain business decisions that are subject to
change. As a result, actual results may differ materially from
those contained in these internal financial forecasts.
Accordingly, there can be no assurance that the forecasted
results summarized below will be realized.
89
The inclusion of a summary of these internal financial forecasts
in this joint proxy statement/prospectus should not be regarded
as an indication that any of Valeant, Biovail or their
respective affiliates, advisors or representatives considered
these internal financial forecasts to be predictive of actual
future events, and these internal financial forecasts should not
be relied upon as such nor should the information contained in
these internal financial forecasts be considered appropriate for
other purposes. None of Valeant, Biovail or their respective
affiliates, advisors, officers, directors, partners or
representatives can give you any assurance that actual results
will not differ materially from these internal financial
forecasts, and none of them undertakes any obligation to update
or otherwise revise or reconcile these internal financial
forecasts to reflect circumstances existing after the date these
internal financial forecasts were generated or to reflect the
occurrence of future events, even in the event that any or all
of the assumptions underlying these forecasts are shown to be in
error. Since the forecasts cover multiple years, such
information by its nature becomes less meaningful and predictive
with each successive year. Valeant does not intend to make
publicly available any update or other revision to these
internal financial forecasts. None of Valeant or its affiliates,
advisors, officers, directors, partners or representatives has
made or makes any representation to any shareholder or other
person regarding Valeant’s ultimate performance compared to
the information contained in these internal financial forecasts
or that the forecasted results will be achieved. Valeant has
made no representation to Biovail, in the merger agreement or
otherwise, concerning these internal financial forecasts. The
below forecasts do not give effect to the merger. Valeant urges
all stockholders to review Valeant’s most recent SEC
filings for a description of Valeant’s reported financial
results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year
|
|
|
2010
|
|
2011
|
|
2012
|
|
2013
|
|
2014
|
|
|
($ in millions)
|
|
Revenue
|
|
$
|
1,169
|
|
|
$
|
1,353
|
|
|
$
|
1,513
|
|
|
$
|
1,758
|
|
|
$
|
1,954
|
|
Operating Income(1)
|
|
$
|
152
|
(2)
|
|
$
|
541
|
|
|
$
|
638
|
|
|
$
|
791
|
|
|
$
|
889
|
|
EBITDA
|
|
$
|
483
|
|
|
$
|
558
|
|
|
$
|
656
|
|
|
$
|
810
|
|
|
$
|
908
|
|
Net Income
|
|
$
|
236
|
|
|
$
|
352
|
|
|
$
|
373
|
|
|
$
|
498
|
|
|
$
|
521
|
|
Unlevered Free Cash Flow(3)
|
|
$
|
113
|
(4)
|
|
$
|
343
|
|
|
$
|
453
|
|
|
$
|
564
|
|
|
$
|
573
|
|
|
|
|
(1)
|
|
Operating income excludes amortization expense.
|
|
(2)
|
|
For the quarterly period ended December 31, 2010 only.
|
|
(3)
|
|
Calculated as earnings before interest and tax (EBIT), plus (a)
depreciation and amortization, minus (b) taxes, capital
expenditures and changes in working capital.
|
|
(4)
|
|
For the quarterly period ended December 31, 2010 only.
|
Board of
Directors and Management After the Merger
Under the terms of the merger agreement, upon the effective time
of the merger, Mr. Pearson (currently Chairman of the Valeant
board of directors and Chief Executive Officer of Valeant) will
be appointed the Chief Executive Officer of the combined
company, Mr. Wells (currently Chief Executive Officer of Biovail
and a Biovail director) will be appointed as non-executive
Chairman of the board of directors of the combined company, Mr.
Ingram (currently Lead Director of the Valeant board of
directors) will be appointed as Lead Director of the board of
directors of the combined company and Mr. Van Every (currently
Chairman of the audit committee of the Biovail board of
directors and a resident Canadian) will continue as Chairman of
the audit committee of the board of directors of the combined
company.
Under the terms of the merger agreement, the board of directors
of the combined company will consist of Messrs. Pearson, Wells,
Ingram and Van Every, three additional directors selected by
Valeant, three additional directors selected by Biovail (one of
whom is a resident Canadian), and one independent director who
is recruited by a search firm mutually retained by Valeant and
Biovail, which director shall be selected by Valeant from a list
of candidates presented by such firm, shall be subject to the
approval of Biovail and shall be a resident Canadian.
Upon the effective time of the merger, until the 2011 annual
shareholders’ meeting, (1) the Chairman of the
compensation committee of the board of directors of the combined
company will be a Biovail-selected director, (2) the
Chairman of the risk and compliance committee of the board of
directors of the combined company will be a Valeant-selected
director, (3) the Chairman of the nominating and corporate
governance committee of the board of directors of the combined
company will be a Valeant-selected director, (4) each
committee of the board of directors
90
of the combined company (other than the compensation committee)
will have an equal number of Valeant-selected directors and
Biovail-selected directors (such committees may also include the
new independent director), (5) the compensation committee
of the board of directors of the combined company will consist
of three members, two of whom will be Valeant-selected
directors, and (6) no other committees of the board of
directors of the combined company will be formed prior to the
first meeting of the board of directors of the combined company
following such time as the Valeant-selected directors are
appointed, without the written consent of Valeant.
A “Valeant-selected director” is either Mr. Ingram or
one of the three directors selected to serve on the board of
directors of the combined company by Valeant. A
“Biovail-selected director” is either Mr. Van Every or
one of the three directors selected to serve on the board of
directors of the combined company by Biovail.
Biovail has selected Dr. Laurence E. Paul, Mr. Robert
N. Power and Mr. Lloyd M. Segal (who is a resident
Canadian) to continue as members of the board of directors of
the combined company.
Valeant has selected Theo Melas-Kyriazi, G. Mason Morfit and
Norma A. Provencio to serve as members of the board of directors
of the combined company.
Treatment
of Valeant Restricted Stock Units and Options
Restricted
Stock Units
Accelerating Units.
Except as described below
with respect to Mr. Pearson, any Valeant restricted stock
unit award that is outstanding on the day prior to the payment
of the pre-merger special dividend and that, in accordance with
its existing terms, provides for vesting, in whole or in part,
upon a change in control (the “accelerated restricted stock
units”) will vest at the level provided for under the terms
of the award on the day prior to the payment of the pre-merger
special dividend as if that day was the closing date of the
merger (and any performance metrics applicable to the
accelerated restricted stock units will be measured as of that
day). Any portion of the accelerated restricted stock units that
does not vest on the day prior to the payment of the pre-merger
special dividend will be forfeited on that day for no
consideration. In connection with the merger, the vested portion
of the accelerated restricted stock units will be cancelled in
exchange for (1) a number of common shares of the combined
company equal to the number of shares underlying the cancelled
units multiplied by the exchange ratio and (2) an amount in
cash equal to the number of shares underlying the cancelled
units multiplied by the pre-merger special dividend. Assuming
the
pre-merger
special dividend is paid on September 27, 2010 and the per
share price of Valeant common stock on the business day prior to
the payment of the pre-merger special dividend is $57.75, which
was the closing price per share of Valeant common stock on
August 13, 2010, 2,264,936 restricted stock units,
including restricted stock units held by Valeant’s
executive officers (other than Mr. Pearson) and
non-employee
directors, will vest and be settled through the issuance of an
aggregate of 4,033,632 common shares of the combined company; an
aggregate cash payment of $37,982,980 will be made to
Valeant’s employees, including Valeant’s executive
officers (other than Mr. Pearson), and
non-employee
directors in respect of the pre-merger special dividend; and the
opportunity to earn 12,843 additional restricted stock units
will be forfeited.
Continuing Units.
Except as described below
with respect to Mr. Pearson, any Valeant restricted stock
unit award that is outstanding immediately prior to the payment
of the pre-merger special dividend and that, in accordance with
its existing terms, does not provide for vesting, in whole or in
part, upon a change in control (the “continuing restricted
stock unit awards”) will be adjusted to take into account
the pre-merger special dividend by multiplying the number of
shares underlying the continuing restricted stock unit award by
the pre-merger special dividend adjustment ratio of 1.5710
(rounded down to the nearest whole share). As contemplated by
the merger agreement, upon the closing of the merger, each
outstanding continuing restricted stock unit award (as adjusted
to take into account the pre-merger special dividend) held by
Valeant’s employees, including Valeant’s executive
officers (other than Mr. Pearson), and
non-employee
directors will be converted into an award to acquire common
shares of the combined company, on the same terms and conditions
as were applicable to the award prior to the merger. The number
of common shares of the combined company subject to the award
following the merger will be determined by multiplying the
number of shares of Valeant common stock underlying the
continuing restricted stock unit award (as adjusted to take into
account the pre-merger special dividend) by the exchange ratio.
Assuming the merger occurs on September 28, 2010, 807,981
restricted stock units (prior to adjustment for the
pre-merger
special dividend), including restricted stock units held by
Valeant’s executive officers (other than Mr. Pearson)
and
91
non-employee
directors, will be converted into awards to acquire an aggregate
of 2,260,564 common shares of the combined company.
As discussed in “— Financial Interests of Valeant
Directors and Officers in the Merger,” Mr. Pearson has
agreed to waive accelerated vesting of his restricted stock
units that would have occurred at the merger under the terms of
his existing employment agreement. Instead, each of
Mr. Pearson’s restricted stock units (including
performance-based and time-based awards) will be treated as
continuing restricted stock unit awards except that, with
respect to the performance-based restricted stock units granted
to Mr. Pearson in 2008, (1) the number of shares
underlying the grant will not be adjusted to reflect the
pre-merger special dividend, and (2) to the extent these
units vest at the end of the applicable performance period
(February 2011) based on performance, Mr. Pearson will
receive a cash payment at such time equal to the number of
vested units multiplied by the pre-merger special dividend.
Stock
Options
In connection with the payment of the pre-merger special
dividend, all Valeant stock options granted under the equity
plans of Valeant which are outstanding as of immediately prior
to the payment of the pre-merger special dividend, whether
vested or unvested, will be adjusted to take into account the
pre-merger special dividend by multiplying the number of shares
of Valeant common stock underlying the stock option by the
pre-merger special dividend adjustment ratio (rounded down to
the nearest whole share) and dividing the per share exercise
price of the stock option by the pre-merger special dividend
adjustment ratio (rounded up to the nearest whole cent).
As contemplated by the merger agreement, upon the closing of the
merger, each outstanding Valeant option (as adjusted to take
into account the pre-merger special dividend) will be converted
into an option to acquire common shares of the combined company,
on the same terms and conditions as were applicable to the stock
option prior to the merger (except that, as discussed in
“ — Financial Interests of Valeant Directors
and Officers in the Merger,” Mr. Pearson has agreed to
waive accelerated vesting of his stock options that would have
occurred at the merger under the terms of his existing
employment agreement). The number of common shares of the
combined company subject to the option following the merger will
be determined by multiplying the number of shares of Valeant
common stock subject to the Valeant stock option (as adjusted to
take into account the pre-merger special dividend) by the
exchange ratio, and the per share exercise price of each option
will be determined by dividing the per share exercise price of
the Valeant stock option (as adjusted to take into account the
pre-merger special dividend) by the exchange ratio. Except as
discussed in “— Financial Interests of Valeant
Directors and Officers in the Merger,” Valeant stock
options will not vest solely as a result of the merger. Assuming
the merger occurs on September 28, 2010 and that no options
are exercised prior to the merger, an aggregate of 4,796,589
options to acquire Valeant common stock (prior to adjustment for
the pre-merger special dividend), including stock options held
by Valeant’s executive officers (other than
Mr. Pearson) and non-employee directors, will be converted
into options to acquire an aggregate of 13,420,036 common shares
of the combined company, 7,579,811 of which options will be
unvested.
Financial
Interests of Biovail Directors and Officers in the
Merger
In considering the recommendation of the Biovail board of
directors that you vote to approve the share issuance resolution
and the name change resolution, you should be aware that some of
Biovail’s directors and executive officers have financial
interests in the merger that are in addition to those of Biovail
shareholders generally. The Biovail board of directors was aware
of and considered these potential interests, among other
matters, in evaluating the merger agreement and the merger, and
in recommending to you that you approve the share issuance
resolution and the name change resolution.
Positions
with the Combined Company
Following the completion of the merger, certain members of the
Biovail board of directors will continue to be directors of the
combined company, and Mr. Wells will serve as non-executive
Chairman of the board of directors of the combined company, as
described under “— Board of Directors and
Management After the Merger.”
92
Deferred
Share Units of Terminating Directors
As part of their overall compensation for services on the
Biovail board of directors, Biovail’s non-management
directors receive annual equity grants of fully vested deferred
share units, and they may elect to receive additional fully
vested deferred share units in lieu of cash compensation. In
connection with the termination of the services of the
non-management Biovail directors who will not remain on the
board of directors of the combined company (the
“terminating directors”) and in accordance with the
terms of Biovail’s Deferred Share Unit Plans for
non-management directors, the deferred share units of the
terminating directors will be redeemed, entitling each
terminating director to a payment of the cash value of his
deferred share units (based on the price per share of the
combined company on the date of redemption of the units). Each
United States terminating director will receive such cash amount
as a lump sum payment within 30 days following the
termination of his service upon the completion of the merger.
Each Canadian terminating director will receive such cash amount
in one or two payments, shortly following dates specified by
such Canadian terminating director, which dates may be no later
than December 15, 2011.
The following table summarizes the outstanding deferred share
units expected to be held by each of Biovail’s terminating
directors, as of September 28, 2010.
|
|
|
|
|
|
|
Number of Deferred
|
Non-Management Directors
|
|
Share Units
|
|
Dr. Douglas J.P. Squires
|
|
|
41,283
|
|
J. Spencer Lanthier
|
|
|
46,390
|
(1)
|
Serge Gouin
|
|
|
45,519
|
(1)
|
David H. Laidley
|
|
|
45,519
|
(1)
|
Mark Parrish
|
|
|
43,605
|
|
Frank Potter
|
|
|
24,614
|
(1)
|
Sir Louis Tull
|
|
|
16,650
|
(1)
|
|
|
|
(1)
|
|
Assumes an allocation of additional deferred share units in
respect of dividends payable on October 4, 2010 to
shareholders of record on September 1, 2010. Calculation
based on August 13, 2010 Biovail closing price on the NYSE
of $22.50.
|
Non-Executive
Chairman and BLS President Agreement with William M.
Wells
On June 20, 2010, Biovail, BLS and Mr. Wells entered
into the Biovail Non-Executive Chairman and BLS President
Agreement (the “chairman agreement”). The chairman
agreement provides that, upon completion of the merger, the
combined company will terminate Mr. Wells’s employment
without cause under his existing employment agreement dated
May 1, 2008 (the “prior employment agreement”),
and appoint Mr. Wells as non-executive Chairman of the
board of directors of the combined company, as described under
“— Board of Directors and Management After the
Merger.” Mr. Wells will continue to serve as President
and Chairman of BLS until the end of the transition period (as
defined below).
The chairman agreement will be effective upon completion of the
merger and can be terminated by the combined company (or BLS
during the transition period) for any reason upon
60 days’ notice to Mr. Wells or for cause (as
defined in the prior employment agreement) with immediate
effect. Mr. Wells may terminate the chairman agreement for
any reason upon 60 days’ notice to the combined
company (and BLS if during the transition period). No severance
benefits will be payable to Mr. Wells upon termination of
the chairman agreement.
Under the prior employment agreement, Mr. Wells was
entitled to enhanced severance benefits in the event of a
termination of his employment without cause following a change
in control of Biovail. Although the merger does not
automatically qualify as a change in control of Biovail under
the prior employment agreement, the board of directors of
Biovail has determined that it should be deemed to be, and (as
described under “— Summary of the Merger
Agreement — Equity Awards; Change in Control
Provisions”) the merger agreement provides that it will be
treated as, a change in control for purposes of all Biovail
employee benefit plans and agreements. The board of directors of
Biovail made this determination in light of the relative parity
in holdings of shares of the combined company between former
Biovail shareholders and former Valeant stockholders and the
composition of the board of
93
directors of the combined company (an equal number of whom will
be former Valeant directors and former Biovail directors), as
discussed under “— Board of Directors and
Management After the Merger,” and in order to motivate
employees both before and after the completion of the merger.
Consequently, the termination of Mr. Wells’s
employment without cause under the prior employment agreement
upon completion of the merger will trigger the following
severance benefits (as modified by the chairman agreement):
(1) a lump-sum cash payment equal to two times the sum of
Mr. Wells’s base salary and his target bonus for the
fiscal year prior to the year in which the merger occurs;
(2) a pro-rated bonus based on his target bonus for the
fiscal year in which the merger occurs (or a greater amount if
the board of directors of Biovail so determines in its
discretion based on performance); (3) two years of
continued welfare benefits; and (4) accelerated vesting of
any unvested equity awards held by Mr. Wells as of the
completion of the merger (other than deferred share units that
he holds in his capacity as a director of Biovail). For a
quantification of such severance benefits, see
“— Payments on Termination of Employment
Following the Merger.” The extent of the vesting of
Mr. Wells’s performance-based restricted share units
will be determined based on performance during the applicable
performance period through the completion of the merger. For
purposes of determining the multiplier used to determine the
number of such performance-based restricted share units that
will vest, the price per Biovail common share on the day the
merger is completed will be increased by the value of the
post-merger special dividend. Such performance-based restricted
share units will be settled shortly following the completion of
the merger.
Mr. Wells will be entitled to receive $350,000 per year
during the term of the chairman agreement for his service as
non-executive Chairman, to be paid quarterly in the form of
deferred share units. Such deferred share units will be granted
under, and subject to the terms and conditions of, the
applicable equity compensation plan of the combined company.
In addition to his duties as non-executive Chairman,
Mr. Wells will have certain responsibilities during the
period (the “transition period”) extending from the
completion of the merger until 15 days after
Mr. Pearson attains residency status in Barbados and
becomes President and Chairman of BLS. Mr. Pearson may
request the board of directors of the combined company to extend
the transition period for up to nine additional months, but in
no event beyond the
12-month
anniversary of the completion of the merger, and Mr. Wells
may terminate any such extension upon 30 days’ notice.
Mr. Wells’s responsibilities during the transition
period will include serving as President and Chairman of BLS,
including maintaining his residence in Barbados and providing
support with respect to transaction integration, investor
relations and Barbados tax processes and procedures.
Mr. Wells will be entitled to receive $40,000 per month in
cash for his services during the transition period, at the end
of which he will be entitled to receive a lump-sum cash payment
equal to (1) $860,000 minus (2) the aggregate monthly
fees received prior to such time, in each case, subject to
Mr. Wells performing the required services during the
transition period. Mr. Wells’s compensation for any
subsequent extension period will be mutually agreed upon by the
parties.
During the transition period, Mr. Wells will continue to
receive the Barbados-related benefits to which he is entitled
under the prior employment agreement, including his current
housing, automobile and travel benefits.
Mr. Wells will continue to hold his deferred share units
for the duration of the term of the chairman agreement,
consistent with his tenure as a member of the board of directors
of the combined company. Mr. Wells has also agreed not to
sell 75,000 Biovail common shares currently owned by him so long
as he remains Chairman of the board of directors of the combined
company.
The chairman agreement provides that Mr. Wells remains
bound by the terms of the confidentiality agreement he entered
into, dated April 21, 2008, as well as the non-competition
and non-solicitation provisions of the prior employment
agreement.
Employment
Agreements with Executive Officers
Biovail previously entered into an employment agreement with
each of its executive officers that provides for the payment of
enhanced severance benefits if the executive’s employment
is terminated under certain circumstances within 12 months
following a change in control. Although the merger does not
automatically qualify as a change in control of Biovail under
these employment agreements, in accordance with the merger
agreement and as
94
described under “— Non-Executive Chairman and BLS
President Agreement with William M. Wells,” Biovail will
consider the merger a change in control for purposes of these
employment agreements.
Pursuant to the employment agreements, the executive officers
will receive enhanced severance benefits upon an involuntary
termination of employment by the combined company without cause
or a voluntary termination by the executive for good reason, in
each case within the 12 months following a change in
control. Under the employment agreements, “good
reason” is defined as (1) the assignment to the
executive officer of any duties that are materially inconsistent
with the executive officer’s position, (2) a material
reduction in the executive officer’s authority,
responsibilities or status or (3) a material reduction in
the executive officer’s base salary.
Upon such a termination, each executive officer is entitled to
receive (1) two times the executive’s base salary
(calculated using the highest annual base salary in the three
years prior to the date of employment termination); (2) two
times the executive’s target level of annual incentive
compensation under Biovail’s Short-Term Incentive Plan for
the year prior to the year in which the termination occurs; and
(3) acceleration of any unvested equity compensation awards
held by the executive. In connection with the merger, as
described above with respect to Mr. Wells’s
performance-based restricted share units, the board of directors
of Biovail has taken action so that the extent of the vesting of
each executive officer’s performance-based restricted share
units will be determined based on performance during the
applicable performance period through termination of employment
and, if termination of employment occurs prior to payment of the
post-merger special dividend, for purposes of determining the
multiplier used to determine the number of such
performance-based restricted share units that will vest, the
price per Biovail common share on the day of termination of
employment will be increased by the value of the post-merger
special dividend. Such performance-based restricted share units
will be settled shortly following termination of employment. In
addition, Gilbert Godin and Mark Durham are entitled to a
gross-up
for
any excise taxes imposed as a result of Section 280G of the
Code, although no such taxes are expected to be imposed on
Biovail executive officers in connection with the merger. The
receipt of the payments described above is subject to the
executive officer executing a release of claims against Biovail.
Payments on Termination of Employment Following the
Merger
The following table sets forth the severance benefits that each
Biovail executive officer would receive if (or, in the case of
Mr. Wells, will receive when) a qualifying termination of
employment occurs upon completion of the merger. The following
table assumes that the merger occurs on September 28, 2010,
that each executive officer experiences a simultaneous
qualifying termination of employment and that each executive
officer’s performance-based restricted share units vest at
200% of target.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Shares Subject to
|
|
|
|
|
|
|
|
|
|
|
Accelerated
|
|
Accelerated
|
|
|
|
|
|
|
Continued
|
|
Number of
|
|
Time-Based
|
|
Performance-Based
|
|
|
Cash
|
|
Pro-Rated
|
|
Welfare
|
|
Accelerated
|
|
Restricted Share
|
|
Restricted Share
|
Name
|
|
Severance
|
|
Bonus
|
|
Benefits
|
|
Options
|
|
Units(1)
|
|
Units(1)
|
|
William M. Wells
|
|
$
|
3,440,000
|
|
|
$
|
645,000
|
(2)
|
|
$
|
36,648
|
|
|
|
237,584
|
|
|
|
19,552
|
|
|
|
551,388
|
|
Margaret J. Mulligan
|
|
$
|
1,315,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
125,000
|
|
|
|
13,031
|
|
|
|
102,714
|
|
Gilbert Godin
|
|
$
|
1,650,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
175,000
|
|
|
|
23,286
|
|
|
|
154,072
|
|
Gregory D. Gubitz
|
|
$
|
1,412,800
|
|
|
|
—
|
|
|
|
—
|
|
|
|
158,659
|
|
|
|
20,677
|
|
|
|
102,714
|
|
Mark Durham
|
|
$
|
1,083,539
|
|
|
|
—
|
|
|
|
—
|
|
|
|
150,000
|
|
|
|
20,677
|
|
|
|
102,714
|
|
H. Christian Fibiger
|
|
$
|
1,440,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
100,000
|
|
|
|
14,424
|
|
|
|
102,714
|
|
Christine C. Mayer
|
|
$
|
1,081,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
150,000
|
|
|
|
21,439
|
|
|
|
102,714
|
|
Michel Chouinard
|
|
$
|
993,470
|
|
|
|
—
|
|
|
|
—
|
|
|
|
108,659
|
|
|
|
12,942
|
|
|
|
102,714
|
|
|
|
|
(1)
|
|
Assumes the allocation of additional restricted share units in
respect of dividends payable on October 4, 2010 to
shareholders of record on September 1, 2010. Calculation
based on August 13, 2010 Biovail closing price on the NYSE
of $22.50.
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|
|
|
(2)
|
|
Assumes Biovail board of directors does not determine, pursuant
to the chairman agreement, to pay a greater amount based on
performance.
|
95
Financial
Interests of Valeant Directors and Officers in the
Merger
In considering the recommendation of the Valeant board of
directors that you vote “FOR” the adoption of the
merger agreement and the adjournment proposal, you should be
aware that Valeant’s directors and executive officers have
financial interests in the merger that are in addition to those
of Valeant stockholders generally. The Valeant board of
directors was aware of and considered these potential interests,
among other matters, in evaluating the merger agreement and the
merger.
Positions
with the Combined Company
Following the completion of the merger, certain members of the
Valeant board of directors will continue to be directors of the
combined company, and Mr. Pearson will serve as Chief
Executive Officer of the combined company, as described under
“— Board of Directors and Management After the
Merger.”
Director
Restricted Stock Units
As part of their overall compensation for services on the
Valeant board of directors, Valeant’s non-employee
directors receive annual equity grants of restricted stock units
subject to service-based vesting conditions (“annual
RSUs”), and they may elect to receive additional, fully
vested restricted stock units in lieu of none, some or all of
their cash compensation (“elective RSUs”). Except for
annual RSUs granted in 2010, which constitute accelerated
restricted stock units, the annual RSUs and elective RSUs will
be treated in the same manner as continuing restricted stock
units, as described under “— Treatment of Valeant
Restricted Stock Units and Options.” Each restricted stock
unit, other than restricted stock units granted to
Valeant’s non-employee directors in 2010, to the extent
vested at the time that the Valeant non-employee director
terminates services with the Valeant board of directors (which,
as described under “— Board of Directors and
Management After the Merger,” will occur for certain
directors at the time of the merger), will be settled in common
shares of the combined company on the first anniversary of the
director’s termination of service. Restricted stock units
granted to Valeant non-employee directors in 2010 (as adjusted
for the exchange ratio and, as applicable, the pre-merger
special dividend adjustment ratio) will be settled in common
shares of the combined company within thirty days following the
merger. See the table entitled “Treatment of Outstanding
Valeant Equity Awards,” at the end of this section, for a
summary of outstanding restricted stock units held by
Valeant’s non-employee directors.
Employment
Agreement with J. Michael Pearson
In connection with entering into the merger agreement, Biovail
and BLS entered into an employment agreement (the “CEO
agreement”) with Mr. Pearson, which will become
effective on the completion of the merger and will supersede
Mr. Pearson’s current employment agreement with
Valeant. Under the CEO agreement, Mr. Pearson will serve as
Chief Executive Officer of the combined company and, once
Mr. Pearson establishes his principal residence in Barbados
and is legally entitled to be employed in Barbados pursuant to
relevant Barbados law, as President of BLS. Mr. Pearson
will also serve as a member of the board of directors of the
combined company. The term of the CEO agreement expires
February 1, 2014, at which time the parties may negotiate
in good faith the terms of a new agreement.
Except as described below with respect to the treatment of
Mr. Pearson’s equity awards, the material terms of the
CEO agreement are substantially similar to
Mr. Pearson’s current employment agreement with
Valeant, as amended and restated on March 23, 2010. Under
the CEO agreement, Mr. Pearson’s base salary will
remain at $1,500,000, his target bonus opportunity will remain
at 100% of his base salary, and his maximum bonus opportunity
will remain at 200% of his base salary. The CEO agreement
provides for employee benefits and perquisites that are
generally made available by the combined company and BLS to
their senior executives plus reimbursement for additional
relocation, travel, finance, housing and security expenses
associated with Mr. Pearson’s residency in Barbados.
As under Mr. Pearson’s current employment agreement
with Valeant, pursuant to the CEO agreement, Mr. Pearson
would be entitled to a cash severance payment on a qualifying
termination of employment by the combined company without Cause
(as defined in the CEO agreement) or by Mr. Pearson for
Good Reason (as defined below) equal to the sum of two times
Mr. Pearson’s base salary plus $3,000,000, a pro-rated
annual bonus based on actual performance of the combined
company, and accelerated vesting of any unvested equity
compensation awards held by Mr. Pearson as of the date of
termination (with his
96
performance-based restricted stock units vesting based on
performance through the date of termination). Good Reason is
defined in the CEO agreement as: (1) diminution of
responsibility, including (A) any material reduction in his
duties or responsibilities as in effect immediately prior
thereto, (B) removal of Mr. Pearson from the position
of Chief Executive Officer of the combined company or President
of BLS, except in connection with the termination of his
employment for disability, Cause, as a result of his death or by
Mr. Pearson other than for Good Reason, or (C) any
failure to re-nominate Mr. Pearson to the board of
directors (including by reason of the failure to obtain any
supermajority approval of directors); or (2) any reduction
in Mr. Pearson’s base salary or target bonus
opportunity; or (3) any other material breach by the
combined company or BLS of any material provision of the CEO
agreement. Mr. Pearson will be subject to covenants not to
compete with the combined company or BLS, and not to solicit
employees, during his employment and for a period of
12 months thereafter.
Under the terms of Mr. Pearson’s current employment
agreement with Valeant, certain of Mr. Pearson’s
outstanding Valeant equity awards were scheduled to vest upon a
change in control (which would include the completion of the
merger). Assuming the pre-merger special dividend is paid on
September 27, 2010, the merger closes on September 28,
2010 and the per share price of Valeant common stock on the
business day prior to the payment of the pre-merger special
dividend is $57.75, the vesting of 1,012,295 of
Mr. Pearson’s options and 1,336,246 of
Mr. Pearson’s performance-based restricted stock units
would have accelerated. In connection with the merger,
Mr. Pearson has agreed to waive this accelerated vesting.
Therefore, as described above in “— Treatment of
Valeant Restricted Stock Units and Options,”
Mr. Pearson’s outstanding equity awards will be
equitably converted into equity awards of the combined company
to take into account both the pre-merger special dividend and
the merger;
provided
, that with respect to the
performance-based restricted stock units that were granted to
Mr. Pearson in 2008, (1) the number of shares
underlying the grant will not be adjusted to reflect the
pre-merger special dividend, and (2) to the extent these
units vest at the end of the applicable performance period
(February 2011) based on performance, Mr. Pearson will
receive a cash payment at such time equal to the number of
vested units multiplied by the pre-merger special dividend. See
the table entitled “Treatment of Outstanding Valeant Equity
Awards,” at the end of this section, for a summary of the
treatment of outstanding Valeant equity awards held by
Mr. Pearson.
In addition, in connection with entering into the CEO agreement
and agreeing to waive existing rights to acceleration, and to
further incentivize Mr. Pearson, Mr. Pearson will be
granted a new award of 486,114 performance-based restricted
share units of the combined company under Biovail’s 2007
Equity Compensation Plan, as amended on May 28, 2009 (the
“Biovail 2007 Plan”), that will vest based on the
achievement of compound annual total shareholder return of the
combined company between 45% and 60% through February 1,
2014, measured off a base price of $13.37 per share (which was
determined based on the base price of the performance share
units he was awarded by Valeant in 2009 as adjusted to reflect
the pre-merger special dividend and the exchange ratio). The
Biovail 2007 Plan limits the maximum number of Biovail’s
shares issuable from treasury in respect of performance-based
awards in any one calendar year to any one participant to 90,000
(the “90,000 Limit”). On August 3, 2010, the
Biovail board of directors, in accordance with the provisions of
the Biovail 2007 Plan, resolved to suspend the application and
effect of the 90,000 Limit with respect to the grant of 486,114
performance-based restricted share units in the combined company
to Mr. Pearson.
Mr. Pearson’s equity awards in the combined company
will have substantially the same terms and conditions as the
pre-merger Valeant awards except that Mr. Pearson’s
equity awards in the combined company will be subject to future
accelerated vesting only on a subsequent termination of
Mr. Pearson’s employment by the combined company
without Cause or by Mr. Pearson for Good Reason (as opposed
to immediate accelerated vesting on a change in control). In
addition, the CEO agreement restricts Mr. Pearson’s
ability to sell, assign, transfer or otherwise dispose of shares
acquired upon the settlement or exercise of any equity awards
until the earliest of February 1, 2014, a change in control
(excluding the merger and any subsequent change in control where
Mr. Pearson serves as the chief executive officer of the
ultimate parent company), death, disability, and involuntary
termination of employment without Cause or for Good Reason.
Executive
Severance Agreement with Peter Blott
Valeant is a party to a severance agreement (the “executive
severance agreement”) with Mr. Blott, dated as of
March 21, 2007. The executive severance agreement expires
on December 31, 2010 and will automatically be
97
extended for successive one-year periods unless, no later than
six months prior to a scheduled expiration date, Valeant
notifies Mr. Blott that the executive severance agreement
will not be extended.
If, in contemplation of the merger or within 12 months
after the merger, Mr. Blott’s employment is terminated
without Cause (as defined in his severance agreement), or he
terminates his employment with Good Reason (as defined below),
and he agrees not to engage in prohibited activities for a
period of one year following termination, he will be entitled to
(1) a pro-rated portion of his annual target bonus that
would have otherwise been payable in the year of termination;
(2) an amount equal to two times the sum of (a) his
annual base salary plus (b) the higher of the average of
the annual incentive program bonuses paid to him for the five
prior years (or such shorter period if he has not been eligible
to participate in the annual incentive program for five years)
and his target bonus at the time of the completion of the
merger; and (3) up to an aggregate of $20,000 for
outplacement services. In addition, for one year after such
termination following the merger or such longer period as may be
provided by the terms of the appropriate benefit plans,
Mr. Blott and his family will be provided with medical,
dental and life insurance and retirement (including 401(k)
matching) benefits at least equal to those which would have been
provided had he not been terminated. Mr. Blott’s
executive severance agreement provides that payments and
benefits under the agreement and all other related arrangements
will not exceed the maximum amount that may be paid to him
without triggering “excess parachute payment”
penalties under Section 280G of the Code, as amended, but
only if this would increase the net amount he would realize
after payment of income and excise taxes.
Good Reason is defined as: (1) the assignment to
Mr. Blott of duties inconsistent in any material respect
with Mr. Blott’s position (including status, offices,
and reporting requirements), authority or responsibilities as
previously existing (except for an assignment to Mr. Blott
of duties for an affiliate or subsidiary of the combined company
unless such duties are inconsistent in any material respect with
Mr. Blott’s previous position, authority or
responsibilities); (2) a reduction in Mr. Blott’s
annual base salary or level of eligible (or target) bonus plan
participation; (3) the combined company requiring
Mr. Blott to be based at any place outside either
(a) a
30-mile
radius from his current principal work location, or (b) the
combined company’s executive offices, except for reasonably
required business travel; (4) the failure by the combined
company to continue in effect any material compensation or
benefit plan in which Mr. Blott was participating,
including, but not limited to, the deferred compensation plan
and 401(k) plan, any life insurance, medical, health, and
accident or disability plan and any vacation or automobile
program or policy, if any, in which Mr. Blott participates,
unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) is made available to him on a
basis not materially less favorable than the basis previously
existing; (5) the failure of the combined company to obtain
the agreement from any successor to the combined company to
assume and agree to perform the executive severance agreement;
or (6) any other breach by the combined company of any
material provision of the executive severance agreement.
Except for the performance-based restricted stock units granted
to Mr. Blott in 2010, subject to Mr. Blott executing a
release of his claims against Valeant, all outstanding options
to purchase shares of Valeant common stock held by
Mr. Blott and each outstanding restricted stock unit award
received by Mr. Blott shall be fully vested or exercisable at
the merger and will be treated as described in
‘‘— Treatment of Valeant Restricted Stock
Units and Options.” The vesting of the performance-based
restricted stock units granted to Mr. Blott in 2010 shall
be in accordance with the same terms as described below for
performance-based restricted stock units held by other executive
officers.
See the table entitled “Treatment of Outstanding Valeant
Equity Awards,” at the end of this section, for a summary
of the treatment of outstanding Valeant equity awards held by
Mr. Blott.
Employment
Offer Letters for Other Executive Officers
Pursuant to the employment offer letters and amendments thereto
(each, an “offer letter”) for the executive officers
other than Messrs. Pearson and Blott (Dr. Chaudhuri,
Messrs. De Silva and Min, and Ms. Karlson), if, in
contemplation of the merger or within 12 months after the
merger, the employment of an executive officer is terminated
without Cause (as defined in the offer letters), or the
executive officer terminates employment for Good Reason (as
defined below), the executive officer will be entitled to a
payment equal to the sum of (a) a pro-rated bonus for the
year of termination based on a target-level bonus, (b) two
times the sum of (1) the executive officer’s annual
base salary then in effect and (2) the executive
officer’s annual target bonus for the year of termination,
and (c) up to an aggregate of $20,000 for outplacement
services. In addition, for one year after such termination or
such longer period as may be provided by the terms of the
appropriate benefit plans, the executive officer and
his/her
family will be
98
provided with health, medical, dental and vision benefits at
least equal to those which would have been provided had such
officer not been terminated, in accordance with the applicable
benefit plans in effect on the termination date.
For purposes of the offer letters, “Good Reason” is
defined as (1) diminution of responsibility, including
(A) any material reduction in the executive officers’
duties or responsibilities as in effect immediately prior
thereto, or (B) removal of the executive officer from his
or her current position, except in connection with the
termination of the executive officer’s employment for
disability, Cause, as a result of death or by the executive
officer other than for Good Reason; (2) any material
reduction in base salary or target bonus opportunity; or
(3) any other material breach by the combined company of
any material provision of the offer letters.
If the executive officer’s employment is terminated without
Cause, or the executive officer terminates employment for Good
Reason in contemplation of the merger or within 12 months
following the merger, then the executive officer’s options
will immediately vest on the date of termination and any
time-based restricted stock units granted to the executive
officer in connection with the executive officer’s purchase
of Valeant common stock will immediately vest and Mr. De
Silva is entitled to immediate vesting of all outstanding
time-based restricted stock units, in each case with respect to
the equity awards set forth in their respective offer letters.
The receipt of the payments described above is subject to the
executive officer executing a release of
his/her
claims against Valeant.
With respect to each performance-based restricted stock unit
granted under the executive officers’ offer letters, the
performance measures will be applied as though the date of the
pre-merger special dividend payment were the end of the
measurement period and the units will vest based on performance
through such date and any unvested portion of the award will be
forfeited. Unvested time-based restricted stock units granted
under the executive officers’ offer letters, other than
Mr. Blott, will not vest solely as a result of the merger.
See the table below entitled “Treatment of Outstanding
Valeant Equity Awards,” for a summary of the treatment of
outstanding Valeant equity awards held by the executive officers.
The following table sets forth, for each non-employee director
and executive officer, as of August 13, 2010, (1) the
aggregate number of shares of Valeant common stock subject to
outstanding unvested options to purchase shares of Valeant
common stock that will be converted into options to purchase
common shares of the combined company (and the weighted average
exercise price of those options), (2) the aggregate number
of time-based Valeant restricted stock units that will vest at
the merger, (3) the aggregate number of time-based Valeant
restricted stock units (vested or unvested) that will be
converted into restricted share units of the combined company
and will remain outstanding following the merger, (4) the
aggregate number of Valeant performance-based restricted stock
units that will vest at the merger, (5) the aggregate
number of Valeant performance-based restricted stock units that
will be converted into restricted share units of the combined
company and will remain outstanding following the merger, and
(6) the amount of cash that will be received in respect of
restricted stock units in connection with the payment of the
pre-merger special dividend. The amounts shown represent awards
denominated in shares of Valeant common stock prior to any
applicable equitable conversion as a result of the pre-merger
special dividend or the merger. The information set forth in the
table assumes the pre-merger special dividend is paid on
September 27, 2010, the merger occurs on September 28,
2010 and, for purposes of determining the extent to which
performance metrics have been met with respect to
performance-based restricted stock units which are being
accelerated, a Valeant stock price of $57.75 on the business day
prior to the payment of the pre-merger special dividend.
99
Treatment
of Outstanding Valeant Equity Awards
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Number of
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Cash
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Number of Time-
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Performance-
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Payment in
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Weighted Average
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Based Restricted
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Based Restricted
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Respect of
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Number of
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Exercise Price per
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Stock Units
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Stock Units
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Pre-Merger
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Unvested
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Unvested Option
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(Accelerated/
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(Accelerated/
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Special
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Name
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Options
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Share
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Converted)
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Converted)
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Dividend
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Non-Employee Directors
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Brandon B. Boze
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0
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N/A
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|
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0/0
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0/0
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$
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0
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Robert A. Ingram
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0
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N/A
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3,500/75,553
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0/0
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$
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58,695
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Richard H. Koppes
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0
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N/A
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2,677/66,846
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|
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0/0
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$
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44,893
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Lawrence N. Kugelman
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0
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N/A
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2,677/62,912
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0/0
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$
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44,893
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Anders Lönner
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0
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N/A
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2,677/10,089
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0/0
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$
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44,893
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Theo Melas-Kyriazi
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0
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N/A
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2,677/57,950
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0/0
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$
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44,893
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G. Mason Morfit(1)
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0
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|
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N/A
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2,677/22,010
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|
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0/0
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$
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44,893
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Norma A. Provencio
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0
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N/A
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2,677/36,897
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0/0
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$
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44,893
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Stephen F. Stefano
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0
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N/A
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2,677/8,225
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0/0
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$
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44,893
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Executive Officers
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J. Michael Pearson
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1,012,295
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$
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24.65
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0/350,759
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0/1,336,246
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(2)
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$
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13,667,483
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(3)
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Peter J. Blott(4)
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134,198
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$
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32.40
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31,637/0
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185,252/0
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$
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3,106,676
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Bhaskar Chaudhuri
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213,353
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$
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24.27
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0/19,728
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313,710/0
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$
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5,260,917
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Rajiv De Silva
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163,223
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$
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29.90
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0/26,329
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230,544/0
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$
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3,866,223
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Steve T. Min
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133,604
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$
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30.53
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0/5,736
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207,333/0
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$
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3,476,974
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Elisa Karlson
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118,470
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$
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26.34
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0/8,978
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209,685/0
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$
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3,516,417
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(1)
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Pursuant to an agreement with ValueAct Capital Management L.P.,
such awards are held for the benefit of ValueAct Capital.
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(2)
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With respect to Mr. Pearson’s performance awards, the
number of units included in the table is based on the maximum
number of shares that may still be earned.
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(3)
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As discussed above, under the terms of the CEO Agreement, cash
equal to the pre-merger special dividend payment will be paid to
Mr. Pearson in respect of any performance awards that vest
in February 2011 at the time of such vesting. No cash in respect
of the pre-merger special dividend will be paid to
Mr. Pearson at the merger with respect to those awards. The
amount set forth in the table is based on the assumption that
Mr. Pearson’s 2008 performance award, which is
scheduled to vest in February 2011, will vest at a maximum
performance target.
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(4)
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In accordance with the terms of Mr. Blott’s executive
severance agreement, the vesting of each of
Mr. Blott’s options will accelerate at the merger.
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100
The following table sets forth, for each executive officer, the
estimated amounts payable as of the closing date of the merger,
assuming a qualifying termination of each executive
officer’s employment upon that date. For purposes of the
table, it has been assumed that the pre-merger special dividend
is paid on September 27, 2010, the merger occurs on
September 28, 2010 and, for purposes of determining the
extent to which performance metrics have been met with respect
to performance-based restricted stock units, a Valeant stock
price of $57.75 on the business day prior to the payment of the
pre-merger special dividend.
Payments
on Termination of Employment Following the Merger
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Number of
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Number of
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Accelerated
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Accelerated
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Performance
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Number of
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Time-Based
|
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-Based
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Cash
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Pro-Rated
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Benefits and
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Accelerated
|
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Restricted
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Restricted
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Name
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Severance
|
|
Bonus(1)
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Perquisites(2)
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Options(3)
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Stock Units(3)
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Stock Units(3)
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J. Michael Pearson
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$
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9,000,000
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$
|
1,204,500
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|
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$
|
69,397
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|
|
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1,012,295
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350,759
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|
|
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1,336,246
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Peter J. Blott
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$
|
1,280,000
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|
|
$
|
192,720
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|
|
$
|
86,916
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Bhaskar Chaudhuri
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|
$
|
1,599,922
|
|
|
$
|
240,900
|
|
|
$
|
53,275
|
|
|
|
213,353
|
|
|
|
19,728
|
|
|
|
0
|
|
Rajiv De Silva
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|
$
|
1,360,000
|
|
|
$
|
204,765
|
|
|
$
|
44,566
|
|
|
|
163,223
|
|
|
|
26,329
|
|
|
|
0
|
|
Steve T. Min
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|
$
|
1,088,000
|
|
|
$
|
163,759
|
|
|
$
|
53,113
|
|
|
|
133,604
|
|
|
|
2,867
|
|
|
|
0
|
|
Elisa Karlson
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|
$
|
960,000
|
|
|
$
|
144,540
|
|
|
$
|
53,787
|
|
|
|
118,470
|
|
|
|
8,978
|
|
|
|
0
|
|
|
|
|
(1)
|
|
The amounts shown in this column are based on performance
achieved at target. Mr. Pearson’s actual amount would
be based on actual performance.
|
|
(2)
|
|
The amounts shown in this column represent certain benefits and
perquisites that the executive officers would receive, including
medical insurance coverage, 401(k) matching contributions, life
insurance coverage and outplacement services.
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(3)
|
|
The amounts shown represent awards denominated in shares of
Valeant common stock prior to any equitable conversion as a
result of the pre-merger special dividend or the merger. The
amounts shown do not include awards that vest at the merger,
regardless of the officer’s subsequent termination of
employment. Awards that vest at the merger, regardless of the
officer’s subsequent termination of employment, are shown
in the prior table.
|
Director
and Officer Indemnification and Insurance
For six years after the completion of the merger, the combined
company will assume and honor the obligations of Valeant and
Biovail with respect to all rights to indemnification and
exculpation from liabilities, including advancement of expenses,
for acts or omissions occurring at or prior to the completion of
the merger now existing in favor of the current or former
directors or officers of Valeant and Biovail. In addition, for
six years after the completion of the merger, the combined
company will maintain a directors’ and officers’
insurance policy covering each person currently covered by
Valeant’s and Biovail’s directors’ and
officers’ insurance policy on terms with respect to such
coverage and amounts no less favorable than the directors’
and officers’ insurance policy maintained by Valeant or
Biovail on the date of the merger agreement. Alternatively, each
of Valeant and Biovail may, following consultation with the
other party, purchase a six-year “tail”
directors’ and officers’ liability insurance policy
and fiduciary liability insurance policy covering Valeant or
Biovail, as applicable, and its current and former directors and
officers who are covered by the directors’ and
officers’ and fiduciary liability insurance coverage
currently maintained by Valeant or Biovail, as applicable, at
existing coverage levels.
Effect of
the Merger on Valeant’s Convertible Notes
As of June 30, 2010, Valeant had outstanding
$225.0 million aggregate principal amount of
4.0% Convertible Notes. Holders of 4% Convertible
Notes may convert their notes at any time and receive shares of
Valeant common stock. In the event a holder of
4% Convertible Notes converts its notes into shares of
Valeant common stock pursuant to the terms of the indenture
pursuant to which the notes were issued prior to the effective
time of the merger, those shares will be treated in the merger
like all other shares of Valeant common stock.
101
In the event a holder of 4% Convertible Notes does not
convert its notes prior to the effective time of the merger,
those 4% Convertible Notes will remain outstanding and will
become convertible into the merger consideration payable in
respect of the Valeant common stock into which such
4% Convertible Notes would have been convertible prior to
the merger, and the conversion rate for the 4% Convertibles
Notes will be adjusted pursuant to the indenture pursuant to
which the notes were issued to account for the pre-merger
special dividend. Based on the exchange ratio for the merger,
the amount of the pre-merger special dividend (assuming a
“Current Market Price” (as defined in the indenture
pursuant to which the notes were issued) of $57.75 at the close
of business on the record date for the pre-merger special
dividend) and the terms of the indenture pursuant to which the
notes were issued, after the merger the 4% Convertible
Notes would have a conversion rate of 79.3904 Biovail
common shares per $1,000 principal amount of notes.
On August 16, 2010, Valeant’s 3% Convertible
Notes matured and the Valeant Warrants expired.
Material
U.S. Federal Income Tax Consequences
The following discussion summarizes the material
U.S. Federal income tax consequences of the merger and the
pre-merger special dividend to U.S. holders (as defined
below) of Valeant common stock and of the ownership and
disposition of the combined company common shares received by
such U.S. holders upon the consummation of the merger. The
discussion is based on and subject to the Code, the Treasury
regulations promulgated thereunder, administrative rulings and
court decisions in effect on the date hereof, all of which are
subject to change, possibly with retroactive effect, and to
differing interpretations. The discussion does not address all
aspects of U.S. Federal income taxation that may be
relevant to particular Valeant stockholders in light of their
personal circumstances or to such stockholders subject to
special treatment under the Code, such as, without limitation:
banks, thrifts, mutual funds and other financial institutions,
traders in securities who elect to apply a
mark-to-market
method of accounting, tax-exempt organizations and pension
funds, insurance companies, dealers or brokers in securities or
foreign currency, individual retirement and other deferred
accounts, persons whose functional currency is not the
U.S. dollar, persons subject to the alternative minimum
tax, stockholders who hold their shares as part of a straddle,
hedging, conversion or constructive sale transaction,
partnerships or other pass-through entities, stockholders
holding their shares through partnerships or other pass-through
entities, stockholders whose shares are not held as
“capital assets” within the meaning of
Section 1221 of the Code, and stockholders who received
their shares through the exercise of employee stock options or
otherwise as compensation. The discussion does not address any
non-income tax considerations or any foreign, state or local tax
consequences. For purposes of this discussion, a
U.S. holder means a beneficial owner of Valeant common
stock who is:
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•
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an individual who is a citizen or resident of the United States;
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•
|
a corporation (or other entity taxable as a corporation for
U.S. Federal income tax purposes) created or organized in
the United States or under the laws of the United States or any
subdivision thereof;
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•
|
an estate the income of which is includible in gross income for
U.S. Federal income tax purposes regardless of its
source; or
|
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a trust if (1) a court within the United States is able to
exercise primary supervision over the administration of the
trust and one or more U.S. persons have the authority to
control all substantial decisions of the trust, or (2) the
trust was in existence on August 20, 1996 and has properly
elected under applicable Treasury regulations to be treated as a
U.S. person.
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This discussion does not purport to be a comprehensive analysis
or description of all potential U.S. Federal income tax
consequences. Each Valeant stockholder is urged to consult with
such stockholder’s tax advisor with respect to the
particular tax consequences to such stockholder.
If a partnership, including for this purpose any entity that is
treated as a partnership for U.S. Federal income tax
purposes, holds Valeant common stock, the tax treatment of a
partner in the partnership will generally depend upon the status
of the partner and the activities of the partnership. A holder
that is a partnership and the partners in such partnership
should consult their tax advisors about the U.S. Federal
income tax consequences of the pre-merger special dividend and
the merger and the ownership and disposition of the combined
company common shares.
VALEANT STOCKHOLDERS ARE URGED TO CONSULT WITH THEIR TAX
ADVISORS REGARDING THE TAX CONSEQUENCES OF THE MERGER AND THE
PRE-MERGER SPECIAL
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DIVIDEND TO THEM, INCLUDING THE EFFECTS OF UNITED STATES
FEDERAL, STATE AND LOCAL, AND OTHER TAX LAWS.
The
Merger
The merger is intended to qualify as a reorganization within the
meaning of Section 368(a) of the Code with no gain or loss
recognition to U.S. holders of Valeant common stock for
U.S. Federal income tax purposes. It is a condition to
closing that, at the effective time of the merger, Skadden will
deliver to Valeant and Cravath will deliver to Biovail their
respective opinions to the effect that (1) the merger
should qualify for U.S. Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the
Code, and (2) U.S. holders of Valeant common stock
should not recognize gain under Section 367(a) of the Code
on the exchange of their Valeant common stock for Biovail common
shares in the merger. The opinions will rely on certain
assumptions, including assumptions regarding the absence of
changes in existing facts and law and the completion of the
merger in the manner contemplated by the merger agreement,
covenants and representations made by Valeant, Biovail, BAC and
Beach Merger Corp. including those contained in representation
letters of officers of Valeant, Biovail, BAC and Beach Merger
Corp. and letters provided by financial advisors to the parties.
If any of those assumptions, covenants or representations is
inaccurate, the opinions may be invalidated, and the
U.S. Federal income tax consequences of the merger could
differ from those discussed here. In addition, these opinions
are not binding on the IRS or any court, and none of Biovail,
Valeant, BAC or Beach Merger Corp. intends to request a ruling
from the IRS regarding the U.S. Federal income tax
consequences of the merger. Consequently, no assurance can be
given that the IRS will not challenge the conclusions reflected
in the opinions or that a court would not sustain such a
challenge.
Assuming the conclusions in the tax opinions are sustained, the
merger will have the following U.S. Federal income tax
consequences:
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none of Biovail, BAC, Beach Merger Corp., or Valeant will
recognize gain or loss in the merger;
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Valeant stockholders will not recognize gain or loss in the
merger, except with respect to cash received in lieu of
fractional Biovail common shares (as described below);
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the tax basis of the Biovail common shares received in the
merger (including fractional shares for which cash is received)
by a Valeant stockholder will be the same as the tax basis of
the shares of Valeant common stock exchanged therefor;
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the holding period for the Biovail common shares received in the
merger by a Valeant stockholder (including fractional shares for
which cash is received) will include the holding period of the
shares of Valeant common stock exchanged therefor; and
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Valeant stockholders who receive cash instead of fractional
Biovail common shares generally will recognize gain or loss
equal to the difference between the amount of cash received and
their basis in their fractional Biovail common shares (computed
as described above). Such gain or loss will be capital gain or
loss, and will be long-term capital gain or loss if the
fractional Biovail common shares are treated as having been held
for more than one year at the time of the merger. The
deductibility of capital losses is subject to limitation.
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The conclusions in the tax opinions will not be free from doubt
and there are significant factual and legal uncertainties
concerning these conclusions (including as to the impact of the
pre-merger special dividend described below under
“— The Pre-Merger Special Dividend” ). If
the merger were not treated as a reorganization within the
meaning of Section 368(a) of the Code, then each U.S.
holder of Valeant common stock would recognize gain or loss
equal to the difference between the sum of the fair market value
of the Biovail common shares and the amount of cash received in
the merger (including the pre-merger special dividend to the
extent it were not treated as a distribution within the meaning
of Section 301 of the Code, as described below under
“— The Pre-Merger Special Dividend,” and
cash received in lieu of fractional Biovail common shares) and
its tax basis in the Valeant shares surrendered in exchange
therefor. Any gain so recognized would generally be long-term
capital gain if the U.S. holder has held the Valeant common
stock for more than one year at the time the merger is
completed. Long-term capital gain of an individual generally is
subject to a maximum U.S. Federal income tax rate of 15%
with respect to taxable years beginning on or before
December 31, 2010. The deductibility of capital losses is
subject to limitations.
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Additionally, Section 367(a) of the Code and the applicable
Treasury regulations promulgated thereunder provide that where a
U.S. shareholder exchanges stock in a U.S. corporation
for stock in a
non-U.S. corporation
in a transaction that would otherwise qualify as a
reorganization within the meaning of Section 368(a) of the
Code, the U.S. shareholder is required to recognize gain,
but not loss, realized on such exchange unless certain
requirements are met. One such requirement is that the fair
market value of Biovail must equal or exceed the fair market
value of Valeant at the effective time of the merger. Whether
this requirement is satisfied will depend upon the measurement
of fair market value for these purposes and the facts as they
exist at the effective time of the merger. There is no specific
legislative, regulatory or other legal guidance as to the
methodology for determining fair market value in this context,
and therefore the IRS could disagree with various aspects of the
methodology used by the parties. Accordingly, it is not possible
to reach a definitive conclusion regarding the fair market
valuations of Biovail and Valeant at the effective time of the
merger and no assurance can be given that the IRS will not
challenge the conclusions reflected in the opinions or that a
court would not sustain such a challenge. If at the effective
time of the merger the fair market value of Valeant were found
to exceed that of Biovail, a U.S. holder of Valeant common
stock would recognize gain (but not loss) in an amount equal to
the excess, if any, of the fair market value as of the closing
date of the merger of Biovail common shares received in the
merger over such holder’s tax basis in the shares of
Valeant common stock surrendered by the holder in the merger.
Any gain so recognized would generally be long-term capital gain
if the holder has held the Valeant common stock for more than
one year at the time the merger is completed. Long-term capital
gain of an individual generally is subject to a maximum
U.S. Federal income tax rate of 15% with respect to taxable
years beginning on or before December 31, 2010.
For a holder who acquired different blocks of Valeant common
stock at different times and at different prices, realized gain
or loss generally must be calculated separately for each
identifiable block of shares exchanged in the merger, and a loss
realized (but not recognized) on the exchange of one block of
shares cannot be used to offset a gain realized on the exchange
of another block of shares. If a holder has differing bases or
holding periods in respect of Valeant common stock, the holder
should consult its tax advisor prior to the exchange with regard
to identifying the bases or holding periods of the particular
Biovail common shares received in the merger.
A U.S. HOLDER OF VALEANT COMMON STOCK WHO WILL OWN,
ACTUALLY OR CONSTRUCTIVELY, AT LEAST FIVE PERCENT OF THE
COMBINED COMPANY BY VOTE OR VALUE IMMEDIATELY AFTER THE MERGER
WILL QUALIFY FOR NON-RECOGNITION TREATMENT AS DESCRIBED HEREIN
ONLY IF THE STOCKHOLDER FILES A “GAIN RECOGNITION
AGREEMENT” WITH THE IRS. ANY SUCH STOCKHOLDER IS URGED TO
CONSULT WITH HIS OR HER TAX ADVISOR REGARDING THE DECISION TO
FILE A “GAIN RECOGNITION AGREEMENT” AND THE PROCEDURES
TO BE FOLLOWED IN CONNECTION WITH SUCH FILING.
The
Pre-Merger Special Dividend
Under the terms of the merger agreement, Valeant stockholders of
record as of the close of business on the business day
immediately preceding the effective time of the merger will be
paid a one-time special cash dividend of $16.77 per share on
such business day (the pre-merger special dividend).
The pre-merger special dividend is intended to be treated as a
distribution by Valeant within the meaning of Section 301
of the Code and not as consideration paid for Valeant stock in
the merger. The tax opinions that are to be delivered by
counsels to Valeant and Biovail as a condition to the closing of
the merger will be based in part on a determination that the
pre-merger special dividend should be treated as such. It is
possible that the IRS would disagree with the characterization
of the pre-merger special dividend as a distribution by Valeant
within the meaning of Section 301 of the Code and instead
seek to characterize the pre-merger special dividend as merger
consideration paid by Biovail in exchange for a portion of a
holder’s Valeant common stock. If this characterization
were to be sustained, the merger would fail to qualify as a
reorganization within the meaning of Section 368(a) of the
Code and a U.S. holder of Valeant common stock would
recognize gain or loss in the manner described above in the
third paragraph under “— The Merger.”
Assuming the pre-merger special dividend is characterized as a
distribution by Valeant under Section 301 of the Code, the
pre-merger special dividend will be treated as a dividend for
U.S. Federal income tax purposes to the extent paid out of
current or accumulated earnings and profits of Valeant.
Generally, individual holders who meet applicable holding period
requirements under the Code for “qualified dividends”
(generally more than 60 days during the
121-day
period surrounding the ex-dividend date) will be taxed on the
pre-merger special dividend at a
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maximum U.S. Federal income tax rate of 15% with respect to
taxable years beginning on or before December 31, 2010. To
the extent that the amount of any dividend exceeds
Valeant’s current and accumulated earnings and profits, the
excess will first be treated as a tax-free return of capital,
causing a reduction in the U.S. holder’s adjusted
basis in the Valeant common stock. If such basis is reduced to
zero, any remaining portion of the pre-merger special dividend
will be taxed as capital gain, which would be long-term capital
gain if the holder has held the Valeant common stock for more
than one year at the time the pre-merger special dividend is
received.
To the extent an individual holder of Valeant common stock
includes in income the pre-merger special dividend as a
qualified dividend and such dividend constitutes an
“extraordinary dividend” (generally, where the amount
of the dividend exceeds 10% of the holder’s tax basis in
its stock), any loss on the sale or exchange of such stock, to
the extent of such dividend, will be treated as long-term
capital loss. Holders of Valeant common stock should consult
their tax advisors regarding the possible applicability of the
extraordinary dividend provisions of the Code with respect to
the pre-merger special dividend and the potential effect of such
provisions on any losses realized with respect to Biovail stock
received in the merger.
In addition, holders that are corporations should consult their
tax advisors regarding the possible availability of a dividends
received deduction and the potential applicability of the
extraordinary dividend provisions of the Code with respect to
the pre-merger special dividend.
Holders should consult their tax advisors regarding any
alternative characterization of the pre-merger special dividend,
including as consideration received in exchange for their shares
of Valeant common stock.
Inversion
Transactions
Section 7874 of the Code (“Section 7874”)
would apply to the merger if, after the merger:
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at least 60% of the stock (by vote or value) of the combined
company is considered to be held by former stockholders of
Valeant by reason of holding stock in Valeant; and
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the expanded affiliated group which includes the combined
company does not have substantial business activities in Canada.
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In determining the amount of shares held by former stockholders
of Valeant, the pre-merger distribution is disregarded if it is
part of a plan a principal purpose of which is to avoid the
purposes of Section 7874.
After the effective time of the merger, the former stockholders
of Valeant are not expected to hold more than 60% of the stock
of the combined company by reason of being former stockholders
of Valeant. However, it is possible that the pre-merger special
dividend would be treated as a distribution that is part of a
plan a principal purpose of which is to avoid the purposes of
Section 7874. In such case, the former stockholders of
Valeant may be deemed to hold more than 60% (but less than 80%)
of the stock of the combined company.
In that case, if the expanded affiliated group which includes
the combined company does not have substantial business
activities in Canada, Section 7874 will impose a minimum
level of tax on any “inversion gain” of the
U.S. corporation after the acquisition. Generally,
inversion gain is defined as (i) the income or gain
recognized by reason of the transfer of property to a foreign
related person during the
10-year
period following the merger, and (ii) any income received
or accrued during such period by reason of a license of any
property by the U.S. corporation to a foreign related
person. In general, the effect of this provision is to deny the
use of net operating losses, foreign tax credits or other tax
attributes to offset the inversion gain.
Treatment
of Dissenters
The tax consequences to a Valeant stockholder who exercises
appraisal rights with respect to such shares and receives
payment for its Valeant common stock in cash generally will not
depend on the qualification of the merger as a reorganization
for U.S. Federal income tax purposes. A holder that
receives cash pursuant to the exercise of appraisal rights
generally will recognize a capital gain or loss for U.S. Federal
income tax purposes, measured by the difference between the
holder’s basis in such shares and the amount of cash
received that is treated as merger consideration. Any gain so
recognized would generally be long-term capital gain if the
holder has held the Valeant common stock for more than one year
at the time the merger is completed. Long-term capital gain of
an individual generally is subject to a maximum
U.S. Federal income tax rate of 15% with respect to taxable
years beginning on or before December 31, 2010. The
deductibility of capital losses is subject to limitations.
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Ownership
of the Combined Company Common Shares
The following discussion is a summary of certain material
U.S. Federal income tax consequences of the ownership and
disposition of the combined company common shares to
U.S. holders who receive such stock pursuant to the merger
and are not included in the first paragraph of
“— Material U.S. Federal Income Tax
Consequences.”
Taxation
of Dividends
Dividends (including the post-merger special dividend) will
generally be taxed as ordinary income to U.S. holders to
the extent that they are paid out of the combined company’s
current or accumulated earnings and profits, as determined under
U.S. Federal income tax principles. As such and subject to
the following discussion of special rules applicable to Passive
Foreign Investment Companies (“PFICs”), the gross
amount of the dividends, if any, paid by the combined company to
U.S. holders, without reduction for Canadian withholding
taxes, may be eligible to be taxed at lower rates applicable to
certain qualified dividends. The maximum U.S. Federal
income tax rate imposed on dividends received by individuals
from U.S. and certain foreign corporations is 15% with
respect to taxable years beginning on or before
December 31, 2010. Recipients of dividends from foreign
corporations will be taxed at this rate, provided that certain
holding period requirements are satisfied and certain other
requirements are met, if the dividends are received from certain
“qualified foreign corporations,” which generally
includes corporations eligible for the benefits of an income tax
treaty with the U.S. that the Secretary of the Treasury
determines is satisfactory and includes an information exchange
program. Dividends paid with respect to stock of a foreign
corporation which is readily tradable on an established
securities market in the U.S. will also be treated as
having been received from a “qualified foreign
corporation.” The U.S. Department of the Treasury and
the IRS have determined that the Canada-U.S. Income Tax
Treaty is satisfactory for this purpose. In addition, the
U.S. Department of the Treasury and the IRS have determined
that common stock is considered readily tradable on an
established securities market if it is listed on an established
securities market in the U.S. such as the NYSE.
Accordingly, dividends received by individual U.S. holders
should be entitled to favorable treatment as dividends received
with respect to stock of a “qualified foreign
corporation.” Dividends paid by the combined company will
not qualify for the dividends received deduction otherwise
available to corporate shareholders.
To the extent that the amount of any dividend exceeds the
combined company’s current and accumulated earnings and
profits for a taxable year, the excess will first be treated as
a tax-free return of capital, causing a reduction in the
U.S. holder’s adjusted basis in the combined company
common shares. The balance of the excess, if any, will be taxed
as capital gain, which would be long-term capital gain if the
holder has held the combined company common shares for more than
one year at the time the dividend is received (as described
below under “— Sale, Exchange or Other Taxable
Disposition”).
In certain circumstances, a U.S. holder may be eligible to
receive a foreign tax credit for the Canadian withholding taxes
payable in respect of dividends received by the U.S. holder
and, in the case of a corporate U.S. holder owning 10% or
more of the voting shares of the combined company, for a portion
of the Canadian taxes paid by the combined company.
It is possible that the combined company is, or at some future
time will be, at least 50% owned by U.S. persons. Dividends
paid by a foreign corporation that is at least 50% owned by
U.S. persons may be treated as U.S. source income
(rather than foreign source income) for foreign tax credit
purposes to the extent the foreign corporation has more than an
insignificant amount of U.S. source income. The effect of
this rule may be to treat a portion of any dividends paid by the
combined company as U.S. source income. Treatment of the
dividends as U.S. source income in whole or in part may
limit a U.S. holder’s ability to claim a foreign tax
credit for the Canadian withholding taxes payable in respect of
the dividends. The Code permits a U.S. holder entitled to
benefits under the Canada-U.S. Income Tax Treaty to elect
to treat any company dividends as foreign source income for
foreign tax credit purposes if the dividend income is separated
from other income items for purposes of calculating the
U.S. holder’s foreign tax credit. U.S. holders
should consult their own tax advisors about the desirability of
making, and the method of making, such an election.
The amount of any dividend paid in Canadian dollars will be the
U.S. dollar value of the Canadian dollars distributed by
the combined company, calculated by reference to the exchange
rate in effect on the date the dividend
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is includible in the U.S. holder’s income, regardless
of whether the payment is in fact converted into
U.S. dollars on the date of receipt. Generally, a
U.S. holder should not recognize any foreign currency gain
or loss if the Canadian dollars are converted into
U.S. dollars on the date the payment is received. However,
any gain or loss resulting from currency exchange fluctuations
during the period from the date the U.S. holder includes
the dividend payment in income to the date such U.S. holder
actually converts the payment into U.S. dollars will be
treated as ordinary income or loss. That currency exchange or
loss (if any) generally will be income or loss from
U.S. sources for foreign tax credit limitation purposes.
Sale,
Exchange or Other Taxable Disposition
Subject to the following discussion of special rules applicable
to PFICs, a U.S. holder will generally recognize taxable
gain or loss on the sale, exchange or other taxable disposition
of the combined company common shares in an amount equal to the
difference between the amount realized on the sale, exchange or
other taxable disposition and the holder’s tax basis in the
combined company common shares. Gain or loss, if any, will
generally be U.S. source income for foreign tax credit
limitation purposes.
Gain or loss realized on the sale, exchange or other taxable
disposition of the combined company common shares generally will
be capital gain or loss and will be long-term capital gain or
loss if the combined company common shares have been held for
more than one year. Long-term capital gain of an individual
generally is subject to a maximum U.S. Federal income tax
rate of 15% with respect to taxable years beginning on or before
December 31, 2010. The deduction of capital losses is
subject to limitations.
Passive
Foreign Investment Company Considerations
A PFIC is any foreign corporation if, after the application of
certain “look-through” rules, (a) at least 75% of
its gross income is “passive income” as that term is
defined in the relevant provisions of the Code, or (b) at
least 50% of the average value of its assets produce
“passive income” or are held for the production of
“passive income.” The determination as to PFIC status
is made annually. If a U.S. holder is treated as owning
PFIC stock, the U.S. Holder will be subject to special
rules generally intended to reduce or eliminate the benefit of
the deferral of U.S. Federal income tax that results from
investing in a foreign corporation that does not distribute all
of its earnings on a current basis. These rules may adversely
affect the tax treatment to a U.S. holder of dividends paid
by the combined company and of sales, exchanges and other
dispositions of the combined company common shares, and may
result in other adverse U.S. Federal income tax
consequences.
We believe that the combined company common shares should not be
treated as shares of a PFIC, and we do not expect that the
combined company will become a PFIC in the future. However,
there can be no assurance that the IRS will not successfully
challenge this position or that the combined company will not
become a PFIC at some future time as a result of changes in the
combined company’s assets, income or business operations.
Information
Reporting and Backup Withholding
In general, information reporting requirements will apply to the
pre-merger special dividend received by holders of Valeant
common stock, cash in lieu of fractional Biovail common shares
received by Valeant stockholders in the merger, dividends
received by U.S. holders of the combined company common
shares and the proceeds received on the disposition of the
combined company common shares effected within the
U.S. (and, in certain cases, outside the U.S.), paid to
U.S. holders other than certain exempt recipients (such as
corporations). Backup withholding (currently at a rate of 28%)
may apply to such amounts if the U.S. holder fails to
provide an accurate taxpayer identification number (generally on
an IRS
Form W-9
provided to the paying agent or the U.S. holder’s
broker) or is otherwise subject to backup withholding. The
amount of any backup withholding from a payment to a
U.S. holder will be allowed as a refund or as a credit
against the U.S. holder’s U.S. Federal income tax
liability, provided that the required information is timely
furnished to the IRS.
Assuming the merger is treated as a reorganization, a Valeant
stockholder who receives Biovail common shares as a result of
the merger will be required to retain records pertaining to the
merger. Each Valeant stockholder who is required to file a
U.S. Federal income tax return and who is a
“significant holder” that receives Biovail common
shares in the merger will be required to file a statement with
such U.S. Federal income tax return setting
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forth such stockholder’s basis in the Valeant common stock
surrendered and the fair market value of such stock immediately
before the merger. A “significant holder” is a Valeant
stockholder who, immediately before the merger, owned at least
5% of the outstanding stock of Valeant.
New
Legislation
Recently enacted legislation will require, after
December 31, 2012, withholding at a rate of 30% on
dividends in respect of, and gross proceeds from the sale of,
the combined company common shares held by or through certain
foreign financial institutions (including investment funds),
unless such institution enters into an agreement with the
Secretary of the Treasury to report, on an annual basis,
information with respect to accounts or interests in the
institution held by certain U.S. persons and by certain
non-U.S. entities
that are wholly or partially owned by U.S. persons.
Accordingly, the entity through which the combined company
common shares are held will affect the determination of whether
such withholding is required. Similarly, dividends in respect
of, and gross proceeds from the sale of, the combined company
common shares held by an investor that is a non-financial
non-U.S. entity
will be subject to withholding at a rate of 30%, unless such
entity either (1) certifies to the combined company that
such entity does not have any “substantial United States
owners” or (2) provides certain information regarding
the entity’s “substantial United States owners,”
which the combined company will in turn provide to the Secretary
of the Treasury.
Non-U.S. stockholders
are encouraged to consult with their tax advisors regarding the
possible implications of the legislation on their ownership and
disposition of the combined company common shares.
Certain
Canadian Federal Income Tax Considerations
Under the merger, holders of Valeant common stock (other than
those shares with respect to which appraisal rights are properly
exercised and not withdrawn) will receive Biovail common shares
(and cash in lieu of fractional shares). Such Biovail common
shares are referred to below as combined company common shares.
The following is a general summary, as of the date hereof, of
the principal Canadian federal income tax considerations under
the Income Tax Act (Canada) and the regulations thereunder (the
“Tax Act”) of the ownership and disposition of the
combined company common shares generally applicable to a holder
who, for the purposes of the Tax Act and at all relevant times,
(1) beneficially owns combined company common shares as
capital property, (2) deals at arm’s length with, and
is not affiliated with, the combined company, (3) is not
(and is not deemed to be) resident in Canada, and (4) will
not use or hold (and will not be deemed to use or hold) the
combined company common shares in, or in the course of, carrying
on a business or part of a business in Canada (a
“Non-Resident Holder”). The combined company common
shares will generally be considered to be capital property for
this purpose unless either the Non-Resident Holder holds (or
will hold) such combined company common shares in the course of
carrying on a business, or the Holder has acquired (or will
acquire) such combined company common shares in a transaction or
transactions considered to be an adventure or concern in the
nature of trade.
This summary is not applicable to: (a) a Non-Resident
Holder that is a “financial institution,” as defined
in the Tax Act for purposes of the
mark-to-market
rules; (b) a Non-Resident Holder, an interest in which
would be a “tax shelter investment,” as defined in the
Tax Act; (c) a Non-Resident Holder that is a
“specified financial institution,” as defined in the
Tax Act; (d) a Non-Resident Holder that is a corporation
that has elected in the prescribed form and manner and has
otherwise met the requirements to use functional currency tax
reporting as set out in the Tax Act; or (e) a Non-Resident
Holder that is a “registered non-resident insurer” or
an “authorized foreign bank,” both within the meaning
of the Tax Act. Any such Non-Resident Holder should consult its
own tax advisor.
This summary is based upon the current provisions of the Tax Act
and an understanding of the current published administrative and
assessing policies and practices of the Canada Revenue Agency.
The summary also takes into account all specific proposals to
amend the Tax Act and the Regulations that have been publicly
announced by or on behalf of the Minister of Finance (Canada)
prior to the date hereof (the “Tax Proposals”), and
assumes that all such Tax Proposals will be enacted in the form
proposed. No assurance can be given that the Tax Proposals will
be enacted in the form proposed or at all. This summary does not
otherwise take into account or anticipate any changes in law,
whether by way of legislative, judicial or administrative action
or interpretation, nor does it address any provincial,
territorial or foreign tax considerations.
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This summary is of a general nature only and is not intended
to be, nor should it be construed to be, legal or tax advice to
any particular person. Accordingly, Valeant stockholders are
urged to consult their own tax advisors about the specific tax
consequences to them of acquiring, holding and disposing of
combined company common shares.
Dividends
on combined company common shares
Canadian withholding tax at a rate of 25% (subject to reduction
under the provisions of any applicable income tax treaty or
convention) will be payable on dividends on combined company
common shares paid or credited, or deemed to be paid or
credited, to a Non-Resident Holder. The rate of withholding tax
applicable to a dividend paid on combined company common shares
to a Non-Resident Holder who is a resident of the U.S. for
purposes of the Canada-U.S. Income Tax Convention (the
“Convention”), beneficially owns the dividend and
qualifies for the benefits of the Convention will generally be
reduced to 15% or, if the Non-Resident Holder is a company that
owns at least 10% of the voting stock of the combined company,
to 5%. Not all persons who are residents of the U.S. for
purposes of the Convention will qualify for the benefits of the
Convention. Non-Resident Holders who are resident of the
U.S. are advised to consult their tax advisors in this
regard. The rate of withholding tax on dividends is also reduced
under certain other bilateral income tax treaties or conventions
to which Canada is a signatory.
Dispositions
of combined company common shares
A Non-Resident Holder will not be subject to tax under the Tax
Act in respect of any capital gain realized by such Non-Resident
Holder on a disposition of combined company common shares unless
the combined company common shares constitute “taxable
Canadian property” (as defined in the Tax Act) of the
Non-Resident Holder at the time of disposition and the holder is
not entitled to relief under the applicable income tax treaty or
convention. As long as the combined company common shares are
then listed on a “designated stock exchange,” which
currently includes the TSX and the NYSE, the combined company
common shares generally will not constitute taxable Canadian
property of a Non-Resident Holder, unless either they are
otherwise deemed to be taxable Canadian property or at any time
during the
60-month
period immediately preceding the disposition both (1) the
Non-Resident Holder, persons with whom the Non-Resident Holder
did not deal at arm’s length for the purposes of the Tax
Act, or the Non-Resident Holder together with all such persons,
owned 25% or more of the issued shares of any class or series of
shares of the capital stock of the combined company and
(2) the combined company common shares derived more than
50% of their fair market value from (i) real or immoveable
property situated in Canada, (ii) Canadian resource
properties, (iii) timber resource properties, and
(iv) options to acquire such property. If the combined
company common shares are considered taxable Canadian property
to a Non-Resident Holder, an applicable income tax treaty or
convention may exempt that Non-Resident Holder from tax under
the Tax Act in respect of the disposition thereof.
Accounting
Treatment of the Merger
The merger will be accounted for by applying the acquisition
method, which requires the determination of the acquirer, the
acquisition date, the fair value of assets and liabilities of
the acquiree and the measurement of goodwill. Financial
Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) 805, Business
Combinations, provides that in identifying the acquiring entity
in a combination effected through an exchange of equity
interests, all pertinent facts and circumstances must be
considered, including: the constituent company issuing its
equity interest in the business combination, the relative voting
rights of the stockholders of the constituent companies in the
combined entity, the composition of the board of directors and
senior management of the combined company, the relative size of
each company and the terms of the exchange of equity securities
in the business combination, including payment of any premium.
Based on existing Biovail shareholders holding approximately
50.5% of the fully diluted common shares and approximately 54%
of the outstanding common shares (measured by voting rights) of
the combined company, Biovail being the entity issuing its
equity interests in the merger, the similar size of the two
companies, the equal initial representation on the board of
directors and the fact that none of the other considerations
noted above provides a strong indication that Valeant is the
acquirer, Biovail is the acquirer of Valeant for accounting
purposes.
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This means that Biovail will allocate the transaction
consideration to the fair value of Valeant’s assets and
liabilities at the acquisition date, with any excess of the
transaction consideration over fair value being recorded as
goodwill.
Regulatory
Approvals Required for the Merger and Other Regulatory
Matters
Valeant and Biovail have agreed to use their reasonable best
efforts to obtain all governmental and regulatory approvals
required to complete the transactions contemplated by the merger
agreement.
United States Antitrust.
Under the HSR Act,
Biovail and Valeant must file notifications with the FTC and the
Antitrust Division of the Department of Justice and observe a
mandatory pre-merger waiting period before completing the
merger. Valeant and Biovail each filed its required HSR Act
notification and report form with respect to the merger on
July 6, 2010. On July 22, 2010, the FTC granted early
termination of the waiting period under the HSR Act with respect
to the proposed merger contemplated by the merger agreement.
Canada.
The merger is not notifiable under
Part IX of the Competition Act (Canada). The Commissioner
of Competition can, however, apply to the Competition Tribunal
on substantive grounds (namely whether the merger prevents or
lessens competition substantially or is likely to do so) for a
remedial order under Section 92 of the Competition Act
(Canada) at any time before the merger has been completed or, if
completed, within one year after it was substantially completed.
Other Jurisdictions.
In Poland, under the
Competition and Consumer Protection Act, Biovail is required to
submit a pre-merger notification. On July 2, 2010, Biovail
filed its notification with the Polish CCPO. In Mexico, under
the Federal Economic Competition Law, Biovail is required to
submit a pre-merger notification to the MFCC. On July 8,
2010, Biovail filed its notification with the MFCC. On
July 21, 2010, the MFCC cleared the transaction.
General.
In connection with obtaining the
approval of all necessary governmental authorities to complete
the merger, including but not limited to the governmental
authorities specified above, there can be no assurance that:
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governmental authorities will not impose any conditions on the
granting of their approval (including a requirement on Biovail,
Valeant, or the combined company to divest assets or provide
certain undertakings regarding their operations), and, if such
conditions are imposed, that Valeant or Biovail will be able to
satisfy or comply with such conditions;
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compliance or non-compliance will not have adverse consequences
on the combined company after completion of the merger; or
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the required regulatory approvals will be obtained within the
time frame contemplated by Valeant and Biovail or on terms that
will be satisfactory to Valeant and Biovail.
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We cannot assure you that a regulatory challenge to the merger
will not be made or that, if a challenge is made, it will not
prevail.
In the event that a governmental approval imposes conditions on,
or requires divestitures relating to, the operations or assets
of Valeant or Biovail, each party has agreed that the other
party would not be required, or permitted without prior written
consent, to take any actions with respect to such conditions or
divestitures if such actions would, or would reasonably be
expected to, result (after giving effect to any reasonably
expected proceeds of any divestiture or sale of assets) in a
Material Adverse Effect on the combined company. See “The
Merger — Summary of the Merger Agreement —
Efforts to Complete the Merger” on page 121.
Exchange
of Shares in the Merger
At or prior to the effective time of the merger, an exchange
agent will be appointed to handle the exchange of shares of
Valeant common stock for Biovail common shares. Shares of
Valeant common stock will be automatically converted into the
right to receive Biovail common shares without the need for any
action by the holders of Valeant common stock.
As promptly as practicable after the effective time of the
merger, the exchange agent will send to each Valeant stockholder
of record a letter of transmittal. The letter of transmittal
will specify that delivery will be effected, and risk of loss
and title to any certificates shall pass, only upon proper
delivery of such certificates to the exchange
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agent. The letter of transmittal will be accompanied by
instructions. Valeant stockholders should
not
return
stock certificates with the enclosed proxy card.
After the effective time of the merger, shares of Valeant common
stock will no longer be outstanding, will be automatically
cancelled and will cease to exist and be delisted from the NYSE
and deregistered under the Exchange Act, and each certificate,
if any, that previously represented shares of Valeant common
stock will represent only the right to receive the merger
consideration as described above. Until holders of Valeant
common stock have surrendered such stock to the exchange agent
for exchange, those holders will not receive the merger
consideration or any dividends or distributions on Biovail
common shares into which their shares of Valeant common stock
have been converted with a record date after the effective time
of the merger.
Valeant stockholders will not receive any fractional Biovail
common shares pursuant to the merger. Instead of any fractional
shares, Valeant stockholders who otherwise would have received a
fraction of a Biovail common share will receive an amount in
cash equal to such fractional amount multiplied by the average
of the volume weighted average price of Biovail common shares on
the NYSE on each of the 10 consecutive trading days ending with
the second complete trading day prior to the effective time of
the merger.
Biovail shareholders need not take any action with respect to
their share certificates.
Intended
Dividend Payment Post-Merger
The Biovail board of directors declared a quarterly cash
dividend of $0.095 per common share payable on October 4,
2010 to shareholders of record at the close of business on
September 1, 2010. The ex-dividend date for this dividend
is August 30, 2010. Holders of Valeant common stock will
not be entitled to this Biovail quarterly dividend even if the
merger is completed before October 4, 2010. Biovail paid a
quarterly cash dividend of $0.095 per common share in the second
quarter of 2010 and a quarterly cash dividend of $0.090 per
common share in the first quarter of 2010. During each of the
four quarters of 2009 and 2008, Biovail declared a quarterly
cash dividend on its common shares. Contingent upon the closing
of the merger and subject to the discretion of the board of
directors of the combined company and to compliance with
applicable law, it is anticipated that, on December 31,
2010, or such other date as the board of directors of the
combined company may determine, the combined company will pay
the $1.00 per common share post-merger special dividend to
shareholders of the combined company after which the combined
company does not intend to pay dividends. It is the intention of
the directors of Valeant and Biovail that will continue as
directors of the combined company to support the declaration and
payment of the post-merger special dividend at the applicable
time following the merger.
Listing
of Biovail Common Shares
It is a condition to the completion of the merger that the
Biovail common shares issuable in the merger or after the merger
in respect of Valeant equity awards be approved for listing on
the NYSE and TSX. It is expected that following the merger,
common shares of the combined company will trade on the NYSE
under the symbol “VRX” and on the TSX under a symbol
to be determined subject to Biovail satisfying certain listing
requirements of the NYSE and the TSX.
De-Listing
and Deregistration of Valeant Common Stock
When the merger is completed, the Valeant common stock currently
listed on the NYSE will cease to be listed on the NYSE and will
be deregistered under the Exchange Act.
Appraisal/Dissent
Rights
Under the merger agreement, the Valeant stockholders of record
who do not vote in favor of the adoption of the merger agreement
and who otherwise comply with the procedures for exercising
appraisal rights under Delaware law will be entitled to seek
appraisal rights in connection with the merger and, if the
merger is completed, obtain payment in cash of the fair value of
their shares of common stock as determined by the Delaware
Chancery Court, instead of the merger consideration. To exercise
appraisal rights, Valeant stockholders must strictly follow the
procedures described by Delaware law. Due to the complexity of
these procedures, Valeant stockholders who are
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considering exercising such rights are encouraged to seek the
advice of legal counsel. These procedures are summarized under
the heading, “Appraisal/Dissent Rights” beginning on
page 169 of this joint proxy statement/prospectus. In
addition, the text of the applicable provisions of Delaware law
is included as Annex F to this joint proxy
statement/prospectus. Failure to strictly comply with these
provisions will result in loss of the right of appraisal. See
“Appraisal/Dissent Rights” beginning on page 169.
Under the CBCA, the holders of Biovail common shares are not
entitled to dissent rights in connection with the merger or any
of the Biovail proposals.
Restrictions
on Sales of Shares by Certain Affiliates
The Biovail common shares to be issued in connection with the
merger will be freely transferable under the Securities Act,
except for shares issued to any Valeant stockholder who may be
deemed to be an “affiliate” of Valeant or Biovail.
Persons who may be deemed to be affiliates include Valeant
directors or executive officers who become directors or
executive officers of the combined company after the merger.
This joint proxy statement/prospectus does not cover resales of
Biovail common shares received by any person upon the completion
of the merger, and no person is authorized to make any use of
this joint proxy statement/prospectus in connection with any
resale.
The sale of Biovail common shares received pursuant to the
merger will be free from restriction under applicable Canadian
securities legislation on the first trade of such Biovail common
shares provided that (1) such sale is not a control
distribution, (2) no unusual effort is made to prepare the
market or to create a demand for the Biovail common shares,
(3) no extraordinary commission or consideration is paid to
a person or company in respect of such sale and (4) if the
selling security holder is an insider or officer of Biovail, the
selling security holder has no reasonable grounds to believe
that Biovail is in default of Canadian securities laws.
Litigation
Related to the Merger
On June 22, 2010, a stockholder of Valeant filed a
purported class action complaint in Superior Court for Orange
County, California, captioned
Deckter v. Valeant
Pharmaceuticals International, et al.
, Case
No. 30-2010-383335-CU-BT-CXC,
on behalf of himself and all other Valeant stockholders against
Valeant and eight of its directors. The complaint alleges that
the individual defendants, aided and abetted by Valeant,
breached their fiduciary duties of care, loyalty, candor and
independence to shareholders in connection with the proposed
merger of Valeant with Biovail. Among other things, the
complaint alleges that the merger agreement fixes a price per
share that is inadequate and unfair, and effectively caps the
value of Valeant’s stock and precludes competitive bidding
through measures such as a voting agreement with a Valeant
stockholder, ValueAct Capital. The complaint also alleges that
the individual defendants are using the proposed merger to
aggrandize their own financial position at the expense of
Valeant’s stockholders, have ignored purported conflicts of
interests, and have failed to provide stockholders with material
information necessary to make an informed decision whether to
vote in favor of the merger. The complaint seeks declaratory and
injunctive relief, including enjoining or rescinding the merger
to the extent already implemented and requiring the defendants
to effect a transaction which is in the best interests of
Valeant stockholders.
On July 1, 2010, a stockholder of Valeant filed a purported
class action complaint in Superior Court for Orange County,
California, captioned
Pronko v. Valeant Pharmaceuticals
International, et al.
, Case
No. 30-2010-386784-CU-SL-CXC,
on behalf of himself and all other Valeant stockholders against
Valeant and its directors. The complaint alleges that the
individual defendants, aided and abetted by Valeant, breached
their fiduciary duties of care and loyalty to shareholders in
connection with the proposed merger of Valeant with Biovail.
Among other things, the complaint alleges that the merger
agreement fixes a price per share that is inadequate and unfair,
and effectively caps the value of Valeant’s stock and
precludes competitive bidding through measures such as a
termination fee and non-solicitation and notification covenants.
The complaint also alleges that the individual defendants are
using the proposed merger to aggrandize their own financial
position at the expense of Valeant stockholders and have ignored
purported conflicts of interests. The complaint seeks damages
and declaratory and injunctive relief, including enjoining or
rescinding the merger to the extent already implemented and
requiring the defendants to effect a transaction which is in the
best interests of Valeant stockholders.
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On July 13, 2010, a stockholder of Valeant filed a
purported class action complaint in Superior Court for Orange
County, California, captioned
Martino v. Pearson, et
al.
, Case
No. 30-2010-389330-CU-SL-CXC,
on behalf of herself and all other Valeant stockholders against
Valeant and its directors. The complaint alleges that the
individual defendants, aided and abetted by Valeant, breached
their fiduciary duties of loyalty and good faith to shareholders
in connection with the proposed merger of Valeant with Biovail.
Among other things, the complaint alleges that the merger
agreement fixes a price per share that is inadequate and unfair,
and effectively caps the value of Valeant’s stock and
precludes competitive bidding through measures such as a
termination fee, a requirement that any prior or ongoing
discussions with other potential suitors be discontinued,
non-solicitation and notification covenants, and granting
Biovail the right to match any unsolicited proposal. The
complaint also alleges that the individual defendants are using
the proposed merger to aggrandize their own financial position
at the expense of Valeant stockholders and have ignored
purported conflicts of interests. The complaint seeks damages
and declaratory and injunctive relief, including enjoining or
rescinding the merger to the extent already implemented and
requiring the defendants to effect a transaction which is in the
best interests of Valeant stockholders.
On July 14, 2010, a stockholder of Valeant filed a
purported class action complaint in Superior Court for Orange
County, California, captioned
Haro v. Pearson, et
al.
, Case
No. 30-2010-389773-CU-BT-CXC,
on behalf of himself and all other Valeant stockholders against
Valeant, certain Valeant officers and directors, Biovail, BAC
and Beach Merger Corp. The complaint alleges that the individual
defendants, aided and abetted by Valeant, Biovail, BAC and Beach
Merger Corp., breached their fiduciary duties of care, loyalty,
good faith and independence to Valeant stockholders in
connection with the proposed merger of Valeant with Biovail.
Among other things, the complaint alleges that the merger
agreement fixes a price per share that is inadequate and unfair,
fails to guard against fluctuations in the price of Biovail
stock that would negatively affect Valeant stockholders, and
effectively caps the value of Valeant’s stock and precludes
competitive bidding through measures such as a voting agreement
with a Valeant stockholder, ValueAct Capital, a termination fee
and a non-solicitation covenant. The complaint also alleges that
the individual defendants are using the proposed merger to
aggrandize their own financial position at the expense of
Valeant stockholders and have ignored purported conflicts of
interests. The complaint seeks various forms of relief,
including a court order declaring that individual defendants
have breached their fiduciary duties, enjoining or rescinding
the merger to the extent already implemented and requiring the
defendants to effect a transaction which is in the best
interests of Valeant stockholders.
On July 16, 2010, a stockholder of Valeant filed a
purported class action complaint in the Chancery Court for the
State of Delaware captioned
Porto v. Valeant
Pharmaceuticals International, et al.
, C.A. No. 5644,
on behalf of himself and all other Valeant stockholders against
Valeant, Valeant’s directors, Biovail, BAC and Beach Merger
Corp. The complaint alleges that the individual defendants,
aided and abetted by Valeant, Biovail, BAC and Beach Merger
Corp., breached their fiduciary duties of care, loyalty, candor
and good faith to Valeant stockholders in connection with the
proposed merger of Valeant with Biovail. Among other things, the
complaint alleges that the merger agreement fixes a price per
share that is inadequate and unfair and precludes competing
offers through measures such as a voting agreement with a
Valeant stockholder, ValueAct Capital, a termination fee and a
non-solicitation covenant. The complaint also alleges that the
individual defendants have conflicts of interests regarding the
proposed merger because of arrangements for continued employment
of certain individual defendants.
On July 21, 2010, a stockholder of Valeant filed a
purported class action complaint in the Court of Chancery for
the State of Delaware captioned
Marion v. Pearson, et
al.
, Case No. 5658, on behalf of himself and all other
Valeant stockholders against Valeant and its directors. The
complaint alleges that the individual defendants, aided and
abetted by Valeant, breached their fiduciary duties of care,
loyalty and good faith to stockholders in connection with the
proposed merger of Valeant with Biovail. Among other things, the
complaint alleges that the merger agreement fixes a price per
share that is inadequate and unfair, and effectively caps the
value of Valeant’s stock and precludes competitive bidding
through measures such as a termination fee, a requirement that
any prior or ongoing discussions with other potential suitors be
discontinued, and non-solicitation and notification covenants.
The complaint also alleges that the individual defendants are
using the proposed merger to aggrandize their own financial
position at the expense of Valeant stockholders and have ignored
purported conflicts of interests. The complaint seeks various
forms of relief, including a court order declaring that the
individual defendants have breached their fiduciary duties,
enjoining or rescinding the merger to the extent already
implemented, requiring the
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defendants to effect a transaction which is in the best
interests of Valeant stockholders and requiring the defendants
to account to the plaintiff and the class for any damages
suffered as a result of the defendants’ alleged wrongdoing.
On July 22, 2010, a stockholder of Valeant filed a
purported class action complaint in the Court of Chancery for
the State of Delaware captioned
Soukup v. Valeant
Pharmaceuticals International, et al.
, C.A. No. 5664 on
behalf of himself and all other stockholders of Valeant against
Valeant, Valeant’s directors, Biovail, BAC and Beach Merger
Corp. The complaint alleges that the individual defendants,
aided and abetted by Valeant, Biovail, BAC and Beach Merger
Corp, breached their fiduciary duties of care, loyalty, candor,
good faith and independence to stockholders in connection with
the proposed merger of Valeant with Biovail. Among other things,
the complaint alleges that the merger agreement fixes a price
per share that is inadequate and unfair, and effectively caps
the value of Valeant’s stock and precludes competitive
bidding through measures such as a termination fee, a
requirement that any prior or ongoing discussions with other
potential suitors be discontinued, non-solicitation and
notification covenants, and granting Biovail the right to match
any unsolicited proposal. The complaint also alleged that the
individual defendants are using the proposed merger to
aggrandize their own financial position at the expense of
Valeant stockholders and have ignored purported conflicts of
interests. The complaint seeks various forms of relief,
including a court order declaring that the individual defendants
have breached their fiduciary duties, enjoining or rescinding
the merger to the extent already implemented, requiring the
defendants to effect a transaction which is in the best
interests of Valeant stockholders and requiring the defendants
to account to the plaintiff and the class for any damages
suffered as a result of the defendants’ alleged wrongdoing.
On July 27, 2010, the plaintiffs in the
Porto
action
and the
Marion
action filed amended complaints that
include the additional allegations that the defendants failed to
disclose adequate information to ensure an informed stockholder
vote and disclosed materially misleading information. The
amended complaints seek various forms of relief, including a
court order declaring that individual defendants have breached
their fiduciary duties, enjoining or rescinding the merger to
the extent already implemented, requiring the defendants to
effect a transaction which is in the best interests of Valeant
stockholders and requiring the defendants to account to the
plaintiffs and the class for any damages suffered as a result of
the defendants’ alleged wrongdoing.
On July 28, 2010, the plaintiff in the Porto action filed a
motion for a preliminary injunction and a motion to expedite the
proceedings.
On August 2, 2010, the Court of Chancery granted an order
consolidating the
Porto
,
Soukup
and
Marion
actions into a case captioned
In re Valeant Pharmaceuticals
International Shareholders Litigation
(the
“Consolidated Action”).
On August 3, 2010, the Court of Chancery entered a
stipulated case management and class certification order in the
Consolidated Action that conditionally certified the
Consolidated Action as a class action without opt-out rights.
The Class consists of all persons who held shares of stock of
Valeant (excluding defendants named in the lawsuit and their
immediate families) at any time during the period from and
including April 22, 2010, through the date of consummation
of the merger. Further, the order set an expedited schedule for
the Consolidated Action that anticipates a hearing on
Plaintiffs’ motion for a preliminary injunction on
September 15, 2010.
On August 4, 2010, the plaintiffs in the Consolidated
Action filed a Verified Consolidated Class Action Complaint
(the “Consolidated Complaint”) on behalf of the
holders of the common stock of Valeant against Valeant, the
directors of Valeant, BAC and Beach Merger Corp. The
Consolidated Complaint alleges that the directors of Valeant,
aided and abetted by BAC and Beach Merger Corp., breached their
fiduciary duties of care, loyalty, candor and good faith to
Valeant stockholders in connection with the proposed merger of
Valeant with Biovail. Among other things, the complaint alleges
that the Valeant directors failed to take steps to maximize the
value of Valeant to its public stockholders, by, among other
things, failing to adequately consider potential acquirers and
instead favoring their own or their fellow directors’ or
executive officers’ interests rather than interests of
Valeant’s stockholders; failed to secure safeguards on
behalf of Valeant stockholders against the decline in the value
of the stock component of the consideration to be paid to
Valeant’s stockholders in the proposed merger; and failed
to fully disclose all material information necessary to cast an
informed vote on the proposed merger. The Consolidated Complaint
seeks various forms of relief, including a court order declaring
that the action is properly maintainable as a class action and
certifying certain plaintiffs as class representatives;
enjoining the Valeant directors and all persons acting in
concert with them from consummating the proposed merger unless
Valeant
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implements a procedure to obtain a merger agreement providing
the best possible terms for stockholders; rescinding, to the
extent already implemented, the proposed merger or any of the
terms thereof; and directing the Valeant directors to account to
the class for all damages suffered as a result of the Valeant
directors’ alleged wrongdoing.
Amendments
to Biovail’s Articles of Continuance
In connection with the merger, the Biovail board of directors
has recommended that Biovail’s shareholders vote in favor
of the resolution to amend the Biovail articles of continuance
to change Biovail’s name to “Valeant Pharmaceuticals
International, Inc.” The approval of this amendment is a
condition to the merger. Further, in the event this proposal is
adopted by Biovail shareholders, but the merger is not
completed, Biovail will not file articles of amendment
effectuating this amendment.
Summary
of the Merger Agreement
Set forth below is a summary of the material provisions of the
merger agreement which is included as Annex A to this joint
proxy statement/prospectus and is incorporated herein by
reference in its entirety. The rights and obligations of Valeant
and Biovail are governed by the express terms and conditions of
the merger agreement and not by this summary or any other
information contained in this joint proxy statement/prospectus.
This summary may not contain all of the information about the
merger agreement that is important to you. Biovail shareholders
and Valeant stockholders are urged to read the merger agreement
carefully and in its entirety as well as this joint proxy
statement/prospectus before making any decisions regarding the
merger, the issuance of Biovail common shares necessary to
complete the merger and the issuance of such other Biovail
common shares as contemplated by the merger agreement or the
amendment of Biovail’s articles of continuance to effect
Biovail’s name change.
The merger agreement is included in this joint proxy
statement/prospectus to provide you with information regarding
its terms and is not intended to provide any factual information
about Valeant or Biovail. The merger agreement contains
representations and warranties by each of the parties to the
merger agreement. These representations and warranties were made
solely for the benefit of the other parties to the merger
agreement and (1) were not intended to be treated as
categorical statements of fact, but rather as a way of
allocating the risk to one of the parties if those statements
prove to be inaccurate; (2) may have been qualified in the
merger agreement by disclosures that were made to the other
party in connection with the negotiation of the merger
agreement; (3) may apply contract standards of
“materiality” that are different from
“materiality” under the applicable securities laws;
and (4) were made only as of the date of the merger
agreement or such other date or dates as may be specified in the
merger agreement.
Valeant and Biovail each 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 joint proxy statement/prospectus not misleading.
Accordingly, the representations and warranties and other
provisions of the merger agreement should not be read alone, but
instead should be read together with the information provided
elsewhere in this joint proxy statement/prospectus and in the
documents incorporated by reference into this joint proxy
statement/prospectus. See “Where You Can Find More
Information” beginning on page 175.
This summary is qualified in its entirety by reference to the
merger agreement a copy of which is included as Annex A to
this joint proxy statement/prospectus.
Terms
of the Merger; Merger Consideration
In order to effect the combination of Valeant and Biovail, the
merger agreement provides for the merger of Beach Merger Corp.
with and into Valeant pursuant to Delaware law. Valeant will be
the surviving corporation in the merger and will become a wholly
owned subsidiary of BAC. Prior to the merger, Valeant intends to
pay to its stockholders of record as of the close of business on
the business day immediately preceding the effective time of the
merger the pre-merger special dividend. The payment of the
pre-merger special dividend is a condition to the
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completion of the merger. In the merger, each share of Valeant
common stock issued and outstanding immediately prior to the
completion of the merger, except for any shares of Valeant
common stock held by Valeant, as treasury stock, Biovail, BAC or
Beach Merger Corp. (which will be cancelled) and other than
those shares of Valeant common stock with respect to which
appraisal rights are properly exercised and not withdrawn, will
be converted into the right to receive 1.7809 Biovail common
shares.
Biovail will not issue any fractional Biovail common shares in
the merger. Instead, a Valeant stockholder who otherwise would
have received a fraction of a Biovail common share will receive
an amount in cash equal to such fractional amount multiplied by
the average of the volume weighted average price of Biovail
common shares on the NYSE on each of the 10 consecutive trading
days ending with the second complete trading day prior to the
effective time of the merger.
The certificate of incorporation and the bylaws of Beach Merger
Corp., as in effect immediately prior to the effective time of
the merger, will be the certificate of incorporation and the
bylaws of Valeant after the effective time of the merger.
Completion
of the Merger
Unless the parties agree otherwise, the closing of the merger
will take place no later than the second business day after all
conditions to the completion of the merger have been satisfied
or waived (if permissible by applicable law). The merger will be
effective at the time specified in the certificate of merger
filed with the Secretary of State of the State of Delaware.
As of the date of this joint proxy statement/prospectus, Valeant
and Biovail currently expect to complete the merger before the
end of 2010, subject to receipt of required shareholder and
regulatory approvals and the satisfaction or waiver of the
conditions to the merger described in the merger agreement.
There can be no assurance as to when, or if, the merger will
occur. If the merger is not completed by February 28, 2011,
either Valeant or Biovail may terminate the merger agreement,
except that the right to terminate the merger agreement under
such circumstances will not be available to any party if such
failure of the merger to be completed is a result of a breach of
the merger agreement by such party or the failure of any
representation or warranty of such party contained in the merger
agreement to be true and correct. See
“— Termination of the Merger Agreement”
beginning on page 126.
Representations
and Warranties
The merger agreement contains reciprocal representations and
warranties, many of which are qualified by materiality or
Material Adverse Effect.
“Material Adverse Effect” is defined in the merger
agreement generally to mean a fact, circumstance, effect,
change, event or development that materially adversely affects
the business, properties, financial condition or results of
operations of a party and its subsidiaries, taken as a whole,
except that the definition of Material Adverse Effect excludes
any effect that results from or arises in connection with:
(a) changes or conditions generally affecting the
industries in which the applicable party operates (unless the
effect has a materially disproportionate effect on such party
and its subsidiaries taken as a whole relative to others in such
industries); (b) general economic or regulatory,
legislative or political conditions or securities, credit,
financial or other capital markets conditions (unless the effect
has a materially disproportionate effect on such party and its
subsidiaries taken as a whole relative to others in its
industries); (c) any failure, in and of itself, to meet any
internal or published projections, forecasts, estimates or
predictions in respect of revenues, earnings or other financial
or operating metrics for any period (it being understood that
the facts or occurrences giving rise to or contributing to such
failure may be deemed to constitute, or be taken into account in
determining whether there has been or will be, a Material
Adverse Effect); (d) the execution or delivery or pendency
of the merger agreement or the announcement of the merger or
completion of the merger; (e) any change, in and of itself,
in the market price, credit rating or trading volume of such
party’s securities (it being understood that the facts or
occurrences giving rise to or contributing to such change may be
deemed to constitute, or be taken into account in determining
whether there has been or will be, a Material Adverse Effect);
(f) any change in applicable law or generally accepted
accounting principles (unless the effect has a materially
disproportionate effect on such party and its subsidiaries taken
as a whole relative to others in the industries in which such
party operates); (g) geopolitical
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conditions, the outbreak or escalation of hostilities or any
acts of war, sabotage or terrorism threatened or underway as of
June 20, 2010; or (h) any hurricane, tornado, flood,
earthquake or other natural disaster.
The representations and warranties relate to, among other
topics, the following:
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organization, standing and corporate power;
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ownership of subsidiaries;
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capital structure;
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authority relative to the execution and delivery of the merger
agreement, and the execution, delivery and enforceability of the
merger agreement;
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absence of conflicts with, or violations of, organizational
documents and other agreements or obligations and required
consents;
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SEC (and, in the case of Biovail, Canadian Securities
Authorities) documents and financial statements;
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absence of undisclosed liabilities and off-balance-sheet
arrangements;
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internal controls and disclosure controls and procedures;
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accuracy of information supplied or to be supplied for use in
this joint proxy statement/prospectus;
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absence of certain changes and events from January 1, 2010,
to the date of execution of the merger agreement;
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tax matters;
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benefits matters and ERISA compliance;
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litigation;
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compliance with applicable laws and permits;
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environmental matters;
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material contracts;
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owned and leased real property;
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intellectual property;
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regulatory matters;
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insurance matters;
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collective bargaining agreements and other labor matters;
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brokers’ and financial advisors’ fees payable in
connection with the merger;
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opinions from financial advisors;
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affiliate transactions; and
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no representations being made by the parties other than those
contained in the merger agreement.
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The merger agreement also contains certain representations and
warranties of Biovail with respect to its direct wholly owned
subsidiary, BAC, and its indirect wholly owned subsidiary, Beach
Merger Corp., including Beach Merger Corp.’s lack of prior
business activities.
Conduct
of Business
Each of Valeant and Biovail has agreed to certain covenants in
the merger agreement restricting the conduct of its respective
business between the date of the merger agreement and the
effective time of the merger. In general, each of Valeant and
Biovail has agreed to (a) conduct its business in the
ordinary course in all material respects and
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(b) use reasonable best efforts to preserve intact its
business organization and advantageous business relationships
and keep available the services of its current officers and
employees.
In addition, and without limiting the generality of the
foregoing, each of Valeant and Biovail has agreed to various
specific restrictions relating to the conduct of its business
between the date of the merger agreement and the effective time
of the merger, including the following (subject in each case to
exceptions specified in the merger agreement or previously
disclosed in writing to the other party as provided in the
merger agreement):
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declaring or paying dividends or other distributions, other than
regular quarterly cash dividends not exceeding $0.095 per share,
in the case of Biovail, and the pre-merger special dividend, in
the case of Valeant;
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splitting, combining, subdividing or reclassifying any of its
capital stock or issuing of any other securities in substitution
for shares of its capital stock;
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repurchasing, redeeming or otherwise acquiring its own capital
stock;
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issuing, selling or otherwise encumbering shares of capital
stock, voting securities or other equity interests;
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amending its charter or bylaws or equivalent organizational
documents;
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making changes in employee benefit plans or increasing
compensation and benefits paid to employees;
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making any change in financial accounting methods, except as
required by a change in GAAP;
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acquiring any equity interest in, or business of, any person, or
any material property or assets, or entering into any
in-licensing agreement or similar agreement or arrangement
relating to rights to any active pharmaceutical ingredient
(including any formulation or product containing such active
pharmaceutical ingredient) if the aggregate amount of
consideration paid in connection with all such transactions
would exceed $50 million;
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out-licensing or otherwise encumbering any rights in any
material intellectual property;
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selling, leasing, encumbering or otherwise disposing of any
properties or assets that have a fair market value, individually
or in the aggregate, of greater than $25 million;
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incurring greater than $25 million in the aggregate of
indebtedness in the ordinary course of business or any
indebtedness outside the ordinary course of business other than
indebtedness in place of existing indebtedness and guarantees of
indebtedness of any wholly owned subsidiary;
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making capital expenditures in excess of specified amounts;
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entering into or amending any contracts, or taking other
actions, that would reasonably be expected to prevent or
materially impede or delay the completion of the merger or
adversely affect in a material respect the expected benefits
(taken as a whole) of the merger;
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entering into or amending any material contract to the extent
that completion of the merger or compliance with the merger
agreement would reasonably be expected to conflict with or cause
a default, create a lien, or cause a loss of a material benefit
under such material contract;
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waiving, releasing or assigning any material claims;
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settling any claims or litigations other than those resulting in
the payment of monetary damages that would not exceed
$15 million in the aggregate;
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taking certain actions with respect to taxes; or
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authorizing or committing to any, or participating in any
discussions with any other person regarding any, of the
foregoing actions.
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No
Solicitation of Alternative Proposals
Each of Valeant and Biovail has agreed that, from the time of
the execution of the merger agreement until the completion of
the merger, none of Valeant or Biovail shall, nor shall it
authorize or permit any of its affiliates or any of its or their
respective directors, officers or employees or any of its or
their respective investment bankers, accountants, attorneys or
other advisors, agents or representatives to, (a) directly
or indirectly solicit, initiate or knowingly encourage, induce
or facilitate any takeover proposal or any inquiry or proposal
that may reasonably be expected to lead to a takeover proposal,
(b) directly or indirectly participate in any discussions
or negotiations with any person regarding, or furnish to any
person any information with respect to, or cooperate in any way
with any person with respect to any takeover proposal or any
inquiry or proposal that may reasonably be expected to lead to a
takeover proposal, or (c) waive, terminate, modify or fail
to enforce any provision of any confidentiality or
“standstill” or similar obligation with respect to
such party or its subsidiaries. A “takeover proposal”
with respect to a party essentially means any proposal or offer
with respect to any (1) merger, amalgamation, arrangement,
consolidation, share exchange, other business combination or
similar transaction involving such party or its subsidiaries,
(2) sale, lease, contribution or other disposition,
directly or indirectly, of any business or assets representing
20% or more of the consolidated revenues, net income or assets
of such party and its subsidiaries, taken as a whole,
(3) issuance, sale or other disposition, directly or
indirectly, to any person or group of securities representing
20% or more of the voting power of such party,
(4) transaction in which any person shall acquire, directly
or indirectly, beneficial ownership, or the right to acquire
beneficial ownership, or the formation of any group which
beneficially owns or has the right to acquire beneficial
ownership of, 20% or more of such party’s common shares or
(5) any combination of the foregoing.
The board of directors of each of Valeant and Biovail will be
permitted, prior to the receipt of the relevant shareholder
approval required to complete the merger, to furnish information
with respect to Valeant or Biovail, as applicable, and their
respective subsidiaries to a person making a bona fide written
takeover proposal and participate in discussions and
negotiations with respect to such bona fide written takeover
proposal if the board of directors of such party determines in
good faith (after consultation with outside counsel and a
financial advisor of nationally recognized reputation) that such
proposal constitutes or is reasonably likely to lead to a
superior proposal. A “superior proposal” with respect
to a party essentially means any binding bona fide written
proposal or offer with respect to any (1) merger,
amalgamation, arrangement, consolidation, share exchange, other
business combination or similar transaction involving such party
or its subsidiaries, (2) sale, lease, contribution or other
disposition, directly or indirectly, of any business or assets
representing 50% or more of the consolidated revenues, net
income or assets of such party and its subsidiaries, taken as a
whole, (3) issuance, sale or other disposition, directly or
indirectly, to any person or group of securities representing
50% or more of the voting power of such party,
(4) transaction in which any person shall acquire, directly
or indirectly, beneficial ownership, or the right to acquire
beneficial ownership, or the formation of any group which
beneficially owns or has the right to acquire beneficial
ownership of, 50% or more of the such party’s common shares
or (5) any combination of the foregoing, which (a) the
board of directors of such party determines in good faith (after
consultation with outside counsel and a financial advisor of
nationally recognized reputation) is on terms superior from a
financial point of view to the holders of common shares of such
party than the merger, taking into account all the terms and
conditions of such proposal and the merger agreement (including
any changes proposed by the other party to the terms of the
merger agreement), and (b) is fully financed or reasonably
capable of being fully financed, reasonably likely to receive
all required governmental approvals on a timely basis and
otherwise reasonably capable of being completed on the terms
proposed.
The merger agreement requires that the parties notify each other
of the receipt of any takeover proposals and of the material
terms and conditions of any such takeover proposal. The merger
agreement also requires both Valeant and Biovail to cease and
cause to be terminated all discussions or negotiations with any
person conducted prior to execution of the merger agreement with
respect to any takeover proposal, or any inquiry or proposal
that may reasonably be expected to lead to a takeover proposal,
request the prompt return or destruction of all confidential
information previously furnished in connection therewith,
immediately terminate all physical and electronic dataroom
access previously granted to any such person, and take all steps
necessary to terminate any approval under any confidentiality or
“standstill” or similar provision that may have been
previously given by such party under any provisions authorizing
any such person to make a takeover proposal.
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Changes
in Board Recommendations
The boards of directors of each of Valeant and Biovail have
agreed that they will not (a) withdraw or modify in any
manner adverse to the other party, or propose publicly to
withdraw or modify in any manner adverse to the other party, the
approval, recommendation or declaration of advisability by such
board with respect to the merger agreement, (b) approve,
recommend or declare advisable, or propose publicly to approve,
recommend or declare advisable, any takeover proposal, or
(c) approve, recommend or declare advisable, or propose
publicly to approve, recommend or declare advisable, or allow
such party to execute or enter into, any agreement constituting
or related to, or that is intended to or would reasonably be
expected to lead to, any takeover proposal, or requiring, or
reasonably expected to cause, such party to abandon, terminate,
delay or fail to consummate, or that would otherwise impede,
interfere with or be inconsistent with, the merger or any of the
other transactions contemplated by the merger agreement or
requiring, or reasonably expected to cause, such party to fail
to comply with the merger agreement.
Notwithstanding the foregoing, at any time prior to obtaining
the applicable shareholder approval, the board of directors of
Valeant or Biovail, as applicable, may withdraw or modify its
recommendation or recommend an alternative takeover proposal
(a) following receipt of a takeover proposal following the
execution of the merger agreement that such party’s board
of directors or an authorized and empowered committee thereof
determines in good faith, after consultation with its outside
financial and legal advisors, constitutes a superior proposal,
or (b) solely in response to any material event,
development, circumstance, occurrence or change in circumstances
or fact not related to any takeover proposal, and that first
occurred after June 20, 2010, in each case only if such
board determines in good faith (after consultation with outside
counsel and a financial advisor of nationally recognized
reputation) that the failure to do so would be inconsistent with
its duties under applicable law. Prior to taking any such
action, such board of directors must inform the other party of
its decision to change its recommendation and give the other
party written notice five business days prior to taking any such
action. In determining whether to take any such action, such
board of directors will take into account any changes to the
terms of the merger agreement proposed by the other party.
If the board of directors of Valeant or Biovail withdraws or
modifies its recommendation, or recommends any alternative
takeover proposal, such party will nonetheless (subject to
termination by the other party) continue to be obligated to hold
its special meeting and submit the proposals described in this
joint proxy statement/prospectus to its stockholders or
shareholders, as applicable.
Efforts
to Obtain Required Shareholder Votes
Biovail has agreed to hold its special meeting and to use its
reasonable best efforts to obtain shareholder approval of the
issuance of Biovail common shares necessary to complete the
merger and the issuance of such other Biovail common shares as
contemplated by the merger agreement and the proposal to amend
the Biovail articles of continuance to change Biovail’s
name to “Valeant Pharmaceuticals International, Inc.”
The merger agreement requires Biovail to submit these proposals
to a shareholder vote even if its board of directors no longer
recommends the proposals (unless Valeant terminates the merger
agreement in accordance with its terms). The Biovail board of
directors has approved the merger, the issuance of Biovail
common shares necessary to complete the merger and the issuance
of such other Biovail common shares as contemplated by the
merger agreement and the amendment of Biovail’s articles of
continuance to effect the name change and has adopted
resolutions directing that such proposals be submitted to
Biovail shareholders for their consideration.
Valeant has also agreed to hold its special meeting and to use
its reasonable best efforts to obtain stockholder adoption of
the merger agreement. The merger agreement requires Valeant to
submit the adoption of the merger agreement to a stockholder
vote even if its board of directors no longer recommends the
merger (unless Biovail terminates the merger agreement in
accordance with its terms). The board of directors of Valeant
has declared the merger advisable and adopted resolutions
directing that the merger be submitted to the Valeant
stockholders for their consideration.
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Efforts
to Complete the Merger
Valeant and Biovail have agreed to each use reasonable best
efforts to:
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take all actions, and do and assist and cooperate with the other
party in doing, all things reasonably appropriate to consummate
and make effective, as soon as reasonably possible, the merger
and the other transactions contemplated by the merger agreement;
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take all actions reasonably appropriate to ensure that no
takeover statute or similar statute or regulation is or becomes
applicable to the merger agreement or any transaction
contemplated by the merger agreement;
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if any takeover statute or similar statute or regulation becomes
applicable to the merger agreement or any transaction
contemplated by the merger agreement, take all action reasonably
appropriate to ensure that the merger and the other transactions
contemplated by the merger agreement may be consummated as
promptly as practicable on the terms contemplated by the merger
agreement;
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promptly following the execution and delivery of the merger
agreement, enter into discussions with the governmental entities
from whom consents, waivers, permits or nonactions are required
to be obtained in connection with the transactions contemplated
by the merger agreement in order to obtain such consents,
waivers, permits or nonactions so as to enable the closing of
the merger to occur as soon as reasonably possible; and
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to the extent necessary, jointly propose, negotiate, commit to
and effect, by consent decree, hold separate order or otherwise,
the sale, divestiture or disposition of, or prohibition or
limitation on the ownership or operation by either party or any
of their respective subsidiaries of, any portion of the
business, properties or assets of such party or any of its
respective subsidiaries.
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Notwithstanding the foregoing, Valeant and Biovail are not
required under the merger agreement to propose, commit or effect
any action that is not conditioned upon the consummation of the
merger or that would reasonably be expected to result (after
giving effect to any reasonably expected proceeds of any
divestiture or sale of assets) in a Material Adverse Effect on
the combined company.
Additionally, Valeant and Biovail have agreed to:
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make, in consultation with the other and as promptly as
practicable after June 20, 2010, all necessary
registrations, declarations, notices, applications and filings
related to merger under antitrust, competition, foreign
investment, trade regulation and similar laws;
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use reasonable best efforts to furnish to the other all
assistance, cooperation and information required for any such
filing;
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give the other reasonable prior notice of any such filing, and
to the extent reasonably practicable, of any communication with
any governmental entity regarding the merger;
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respond as promptly as practicable under the circumstances to
any inquiries received from governmental entities or any other
authority enforcing applicable antitrust, competition, foreign
investment, trade regulation or similar laws for additional
documentation in connection with such matters; and
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unless prohibited by applicable law or by the applicable
governmental entity, to the extent reasonably practicable, not
participate in or attend any meeting, or engage in any
substantive conversation with any governmental entity in respect
of the merger without the other and give the other reasonable
prior notice of any such meeting or conversation, in the event
one party is prohibited by applicable law or by the applicable
governmental entity from participating in or attending any such
meeting or engaging in any such conversation, keep such party
reasonably apprised with respect thereto, cooperate in the
filing of any substantive memoranda, white papers, filings,
correspondence or other written communications explaining or
defending the merger agreement and the merger, and furnish the
other party with copies of all correspondence, filings and
communications (and memoranda setting forth the substance
thereof) between it and its affiliates and their respective
representatives on the one hand, and any governmental entity, on
the other hand, with respect to the merger agreement and the
merger.
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Governance
Biovail is required to take all necessary action to cause,
effective at the effective time of the merger, Mr. Pearson
to be appointed the Chief Executive Officer of the combined
company, Mr. Wells to be appointed as non-executive Chairman of
the board of directors of the combined company, Mr. Ingram to be
appointed as Lead Director of the board of directors of the
combined company, and Mr. Van Every to continue as Chairman of
the audit committee of the board of directors of the combined
company.
Biovail is required to take all necessary action to cause,
effective at the effective time, the board of directors of the
combined company to consist of Messrs. Pearson, Wells, Ingram
and Van Every (a resident Canadian), three additional directors
selected by Valeant, three additional directors selected by
Biovail (one of whom is a resident Canadian), and one
independent director who is recruited by a search firm mutually
retained by Valeant and Biovail, which director shall be
selected by Valeant from a list of candidates presented by such
firm, shall be subject to the approval of Biovail and shall be a
resident Canadian.
Biovail is required to take all necessary action to cause,
effective at the effective time,
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the Chairman of the compensation committee of the board of
directors of the combined company to be a Biovail-selected
director;
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the Chairman of the risk and compliance committee of the board
of directors of the combined company to be a Valeant-selected
director;
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the Chairman of the nominating and corporate governance
committee of the board of directors of the combined company to
be a Valeant-selected director;
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each committee of the board of directors of the combined company
(other than the compensation committee) to have an equal number
of Valeant-selected directors and Biovail-selected directors
(such committees may also include the new independent director);
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the compensation committee of the board of directors of the
combined company to consist of three members, two of whom must
be Valeant-selected directors;
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no other committees of the board of directors of the combined
company be formed prior to the first meeting of the board of
directors of the combined company following such time as the
Valeant-selected directors are appointed, without the written
consent of Valeant.
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A “Valeant-selected director” is either Mr. Ingram or
one of the three directors selected to serve on the board of
directors of the combined company by Valeant. A
“Biovail-selected director” is either Mr. Van Every or
one of the three directors selected to serve on the board of
directors of the combined company by Biovail.
Valeant and Biovail have agreed to take all action necessary so
that the name of the combined company shall be Valeant
Pharmaceuticals International, Inc. on the closing date of the
merger.
Equity
Awards; Change in Control Provisions
Options.
The merger agreement provides that,
prior to the payment of the pre-merger special dividend, the
board of directors of Valeant shall take all actions reasonably
necessary to provide that all outstanding Valeant options
granted under the equity plans of Valeant, whether vested or
unvested, will remain outstanding and will be adjusted to take
into account the pre-merger special dividend by multiplying the
number of shares underlying the option by the pre-merger special
dividend adjustment ratio of 1.5710 (rounded down to the nearest
whole share) and dividing the per share exercise price of the
option by the pre-merger special dividend adjustment ratio
(rounded up to the nearest whole cent). The merger agreement
also provides that, prior to the merger, the board of directors
of Valeant shall take all actions reasonably necessary to
provide that, at the merger, each option will be converted into
an option to acquire common shares of the combined company, on
the same terms and conditions as were applicable to the award
prior to the merger. The number of common shares of the combined
company subject to the option following the merger will be
determined by multiplying the number of shares of Valeant common
stock underlying the option (as adjusted to take into account
the pre-merger special dividend) by the exchange ratio (rounded
down to
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the nearest whole share) and dividing the per share exercise
price of the option (as adjusted to take into account the
pre-merger special dividend) by the exchange ratio (rounded up
to the nearest whole cent).
Time-Based Restricted Stock Units.
The merger
agreement provides that, prior to the merger, the board of
directors of Valeant shall take all actions reasonably necessary
to provide that, unless otherwise agreed to by an award holder,
(1) each time-based restricted stock unit that
automatically vests, in whole or in part, upon a change in
control (a “single-trigger restricted stock unit”)
will vest to the extent provided under its current terms on the
day immediately preceding the payment of the pre-merger special
dividend as if such day was the merger, and will represent the
right to receive the same number of shares of Valeant common
stock underlying the accelerated restricted stock unit plus an
amount of cash equal to the product of the pre-merger special
dividend and the number of shares of Valeant common stock
underlying the accelerated restricted stock unit, (2) each
single-trigger restricted stock unit that accelerates at the
merger will be settled in common shares of the combined company,
rounded down to the nearest whole share, determined by
multiplying the number of shares of Valeant common stock subject
to such award of Valeant by the exchange ratio and
(3) single-trigger restricted stock units that do not
accelerate at the merger will be forfeited. The merger agreement
also provides that, unless otherwise agreed to by an award
holder, (1) prior to the payment of the pre-merger special
dividend, the board of directors of Valeant shall take all
actions reasonably necessary to provide that each outstanding
Valeant time-based restricted stock unit that is not a
single-trigger restricted stock unit (a “double-trigger
restricted stock unit”), whether vested or unvested, will
remain outstanding and will be adjusted to take into account the
pre-merger special dividend by multiplying the number of shares
subject to the double-trigger restricted stock unit by the
pre-merger special dividend adjustment ratio (rounded down to
the nearest whole share) and that (2) prior to the merger,
the board of directors of Valeant shall take all actions
reasonably necessary to provide that, at the merger, each
double-trigger restricted stock unit will be converted into a
restricted share unit of the combined company, on the same terms
and conditions as were applicable to the award prior to the
merger. The number of common shares of the combined company
subject to the double-trigger restricted share unit following
the merger will be determined by multiplying the number of
shares of Valeant common stock underlying the award (as adjusted
to take into account the pre-merger special dividend) by the
exchange ratio (rounded down to the nearest whole share).
Performance-Based Restricted Stock Units.
The
merger agreement provides that, prior to the merger, the board
of directors of Valeant shall take all actions reasonably
necessary to provide that, unless otherwise agreed to by an
award holder, (1) the performance period applicable to each
performance-based restricted stock unit will end on the day
immediately preceding the payment of the pre-merger special
dividend as if such day was the merger and the performance-based
restricted stock units will be adjusted to reflect performance
through that day, (2) each performance-based restricted
stock unit earned in accordance with its terms, as adjusted as
described above, will represent the right to receive the same
number of shares of Valeant common stock underlying the earned
restricted stock unit plus an amount of cash equal to the
product of the pre-merger special dividend and the number of
shares of Valeant common stock underlying the accelerated
restricted stock unit, (3) performance-based restricted
stock units that are not earned at the merger will be forfeited,
and (4) each performance-based restricted stock unit earned
in accordance with its terms, as adjusted as described above,
will be settled in common shares of the combined company,
rounded down to the nearest whole share, determined by
multiplying the number of shares of Valeant common stock subject
to such award of Valeant by the exchange ratio.
Employee Stock Purchase Plan.
The merger
agreement provides that, prior to the merger, the Valeant board
of directors shall take all actions reasonably necessary to
provide that no future offering periods will be commenced under
the 2009 Valeant Employee Stock Purchase Plan, and that the plan
will terminate at the merger.
Change in Control.
The merger agreement
provides that the merger will be treated as a change in control
for purposes of all Biovail and Valeant employee benefit plans
and agreements.
Assumption
of Equity Plans
Pursuant to the merger agreement, Biovail has agreed to assume
all the obligations of Valeant under Valeant’s stock plans,
each Valeant stock option and each Valeant restricted stock unit
outstanding at the effective time of the merger and the
agreements evidencing the grants thereof. As soon as practicable
after the effective time of the merger, Biovail has agreed to
deliver to the holders of Valeant stock options and Valeant
restricted stock units appropriate notices setting forth such
holders’ rights pursuant to the respective Valeant stock
plans, and the
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agreements evidencing the grants of such Valeant stock options
and Valeant restricted stock units shall continue in effect on
the same terms and conditions.
Biovail has agreed to take all corporate action necessary to
reserve for issuance a sufficient number Biovail common shares
for delivery upon exercise or settlement of the Valeant stock
options and Valeant restricted stock units assumed, as described
above. As soon as reasonably practicable after the completion of
the merger, Biovail has agreed to file a registration statement
on
Form S-8
covering the Biovail common shares subject to Valeant stock
options and Valeant restricted stock units.
Financing
Valeant and Biovail have agreed to use their reasonable best
efforts to take all actions and to do all things necessary,
proper or advisable to arrange the financing and related
transactions described in the commitment letter, including using
reasonable best efforts to:
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negotiate and enter into definitive agreements with respect to
the financing and related transactions on the terms and
conditions contemplated by the commitment letter;
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satisfy on a timely basis all conditions to obtaining the
financing and related transactions set forth therein; and
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consummate the financing and related transactions at or prior to
the closing of the merger.
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Valeant and Biovail have agreed to refrain from taking any
action that would reasonably be expected to result in the
failure of any of the conditions contained in the commitment
letter or in any definitive agreement related to the financing
or related transactions. In the event any portion of the
financing becomes unavailable on the terms and conditions set
forth in the commitment letter, Valeant and Biovail have agreed
to use their reasonable best efforts to obtain alternative
financing from alternative sources as promptly as reasonably
practicable following the occurrence of such event. The parties
have agreed to give each other prompt notice of any material
breach by any party to the commitment letter of which such party
becomes aware.
Section 16
Matters
Each of Valeant and Biovail, before the effective time of the
merger, has agreed that it will take all steps as may be
required to cause to be exempt under
Rule 16b-3
under the Exchange Act any (a) dispositions of Valeant common
stock resulting from the merger by individuals who will be
subject to the reporting requirements of Section 16(a) of
the Exchange Act with respect to Valeant immediately prior to
the effective time of the merger and (b) acquisitions of Biovail
common shares resulting from the merger by individuals who may
become subject to the reporting requirements of
Section 16(a) of the Exchange Act with respect to Biovail.
Other
Covenants and Agreements
The merger agreement contains certain other covenants and
agreements, including covenants relating to:
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cooperation between Valeant and Biovail in the preparation of
this joint proxy statement/prospectus;
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confidentiality of, and access by each party to, certain
information about the other party during the period prior to the
effective time of the merger;
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the use of each party’s reasonable best efforts to cause
the merger to qualify as a reorganization under the Code with no
gain recognition to U.S. holders of Valeant common stock
for U.S. Federal income tax purposes;
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cooperation between Valeant and Biovail in the defense or
settlement of any shareholder litigation relating to the merger;
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cooperation between Valeant and Biovail in connection with
public announcements; and
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the use of reasonable best efforts by Biovail to cause the
Biovail common shares to be issued in the merger, and the
Biovail common shares to be issued following the merger in
respect of certain Valeant convertible
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notes and equity awards, to be approved for listing on the NYSE
and the TSX, and Valeant cooperating with Biovail in connection
with the foregoing.
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For a period of six years after the effective time of the
merger, Biovail has also agreed to maintain in effect the
exculpation, indemnification and advancement of expenses
provisions of (a) any organization documents of each of Biovail,
Valeant and each party’s respective subsidiaries in effect
immediately prior to the effective time of the merger with
respect to acts or omissions prior to such time and (b) any
indemnification agreement of Biovail, Valeant or their
respective subsidiaries with any of their respective directors,
officers or employees in effect immediately prior to the
effective time of the merger and with respect to acts or
omissions prior to such time. Further, Biovail has agreed that,
for a period of six years after the effective time of the
merger, Biovail will indemnify and hold harmless Valeant and
Biovail’s current and former officers, directors and
employees with respect to all acts or omissions by such persons
occurring prior to the effective time of the merger, to the
extent such indemnification is provided under Valeant’s or
Biovail’s certificate of incorporation or bylaws, as
applicable. Biovail has also agreed to maintain for six years
from the effective time of the merger a directors’ and
officers’ liability insurance policy for Biovail, Valeant
and their current and former directors and officers and
employees who are currently covered by the liability insurance
coverage currently maintained by Valeant, or, subject to
consultation with the other party, each party may purchase a
six-year “tail” directors’ and officers’
liability insurance policy covering such directors and officers
at existing coverage levels.
Conditions
to Completion of the Merger
The obligations of Valeant and Biovail to complete the merger
are subject to the satisfaction or waiver of the following
conditions:
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the adoption by Valeant’s stockholders of the merger
agreement;
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the approval of Biovail’s shareholders of the issuance of
Biovail common shares necessary to complete the merger and the
issuance of such other Biovail common shares as contemplated by
the merger agreement and the amendment of Biovail’s
articles of continuance to change Biovail’s name to
“Valeant Pharmaceuticals International, Inc.”;
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the approval of the listing of the Biovail common shares to be
issued in the merger or to be issued in respect of Valeant
equity awards on the NYSE and the TSX;
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the receipt of all material authorizations, consents, orders or
approvals of, or declarations or filings with, or expirations of
waiting periods imposed by, any governmental entity necessary
under any antitrust law;
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the absence of (a) any applicable law or judgment, or other
legal restraint or prohibition or (b) suit, action or other
proceeding instituted by any governmental entity and remain
pending which is reasonably likely to result in any law or
judgment, other legal restrain or prohibition, in each case,
preventing the consummation of the merger or that is
(x) seeking to prohibit, materially restrain or otherwise
materially interfere with the merger or the ownership or
operation of all or any material portion of the business or
assets of Valeant or Biovail or to compel Biovail to dispose of
or hold separate all or any material portion of the business or
assets of Valeant or Biovail or their respective subsidiaries,
or (y) seeking divestiture of any shares of Valeant common
stock or seeking to impose or confirm limitations on the ability
of Biovail effectively to exercise full rights of ownership of
the shares of Valeant common stock, in each case, which would
reasonably be expected (after giving effect to any reasonably
expected proceeds of any divestiture or sale of assets) to have
a Material Adverse Effect on the combined company;
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the effectiveness of the registration statement of which this
joint proxy statement/prospectus forms a part under the
Securities Act;
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the consummation of the financing and related transactions
described in the commitment letter; and
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the payment to Valeant’s stockholders of record of the
pre-merger special dividend (which shall be deemed to have been
paid to holders of shares of Valeant common stock at the time
Valeant irrevocably transfers cash for the pre-merger special
dividend to the relevant agent for the benefit of such
stockholders).
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In addition, each of Valeant’s and Biovail’s
obligations to effect the merger is subject to the satisfaction
or waiver of the following additional conditions:
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certain of the representations and warranties of the other party
being true and correct, subject to an overall Material Adverse
Effect qualification;
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certain of the representations and warranties of the other party
being true and correct, subject to an overall materiality
qualification;
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the other party having performed or complied with, in all
material respects, all obligations required to be performed or
complied with by it under the merger agreement;
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the absence, since the date of the merger agreement, of any
fact, circumstance, effect, change, event or development that,
individually or in the aggregate, has had or would reasonably be
expected to have a Material Adverse Effect on the other
party; and
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the receipt of an opinion of that party’s outside legal
counsel to the effect that the merger should qualify as a
reorganization under the Code with no gain recognition to
U.S. holders of Valeant common stock for U.S. Federal
income tax purposes.
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Termination
of the Merger Agreement
The merger agreement may be terminated at any time prior to the
effective time of the merger under the following circumstances:
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by mutual written consent of Valeant and Biovail;
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by either Valeant or Biovail:
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if the merger is not completed by February 28, 2011, except
that the right to terminate under such circumstances will not be
available to any party if such failure of the merger to be
completed is the result of a breach of the merger agreement by
such party or the failure of any representation or warranty of
such party contained in the merger agreement to be true and
correct;
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if the condition set forth in the fifth bullet point under
“— Conditions to Completion of the Merger”
above is not satisfied and the legal restraint giving rise to
such non-satisfaction shall have become final and non-appealable;
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if the Biovail shareholders fail to approve either the issuance
of Biovail common shares necessary to complete the merger and
the issuance of such other Biovail common shares as contemplated
by the merger agreement or the amendment of Biovail’s
articles of continuance to change Biovail’s name to
“Valeant Pharmaceuticals International, Inc.” at the
Biovail special meeting; or
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if the Valeant stockholders fail to adopt the merger agreement
at the Valeant special meeting;
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by Biovail upon a breach of any covenant or agreement on the
part of Valeant, or if any representation or warranty of Valeant
fails to be true, in either case such that the conditions to
Biovail’s obligations to complete the merger would not then
be satisfied and such breach is not reasonably capable of being
cured by February 28, 2011, or Valeant does not cure such
breach within 45 days;
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by Valeant upon a breach of any covenant or agreement on the
part of Biovail, BAC, or Beach Merger Corp. or if any
representation or warranty of Biovail, BAC, or Beach Merger
Corp. fails to be true, in either case such that the conditions
to Valeant’s obligations to complete the merger would not
then be satisfied and is not reasonably capable of being cured
by February 28, 2011 or Biovail, BAC, or Beach Merger Corp.
does not cure such breach within 45 days;
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by Biovail if the board of directors of Valeant withdraws or
modifies in any adverse manner, or proposes publicly to withdraw
or modify in any adverse manner, its approval or recommendation
with respect to the merger, or approves or recommends, or
proposes publicly to approve or recommend, any alternative
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takeover proposal with a third party, except that the right to
terminate under such circumstance will not be available if the
Valeant stockholders adopt the merger agreement at the Valeant
special meeting; or
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by Valeant if the board of directors of Biovail withdraws or
modifies in any adverse manner, or proposes publicly to withdraw
or modify in any adverse manner, its approval or recommendation
with respect to the issuance of shares by Biovail necessary to
complete the merger and the issuance of such other Biovail
common shares as contemplated by the merger agreement or the
amendment to Biovail’s articles of continuance, or approves
or recommends, or proposes publicly to approve or recommend, any
alternative takeover proposal with a third party, except that
the right to terminate under such circumstance will not be
available if the relevant shareholder approval is obtained at
the Biovail special meeting.
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Expenses
and Termination Fees; Liability for Breach
Except as provided below, each party shall pay all fees and
expenses incurred by it in connection with the merger and the
other transactions contemplated by the merger agreement.
If the merger agreement is validly terminated, the merger
agreement will become void and have no effect, without any
liability or obligation on the part of any party, other than
with respect to certain obligations under the merger agreement,
and except for fraud or any intentional misrepresentation by a
party or any intentional breach by a party of any covenant or
agreement set forth in the merger agreement.
Valeant will be obligated to pay a termination fee of
$100 million to Biovail if:
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Biovail terminates the merger agreement after Valeant’s
board of directors withdraws or adversely modifies its
recommendation of the merger agreement or approves or recommends
a takeover proposal to its shareholders;
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Valeant or Biovail terminates the merger agreement following
Valeant’s stockholder approval not being obtained at a duly
convened meeting, provided that at the time such termination
occurs, Valeant’s board of directors had withdrawn or
adversely modified its recommendation of the merger agreement or
approved or recommended a takeover proposal to its
stockholders; or
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(a) prior to the Valeant special meeting, a takeover
proposal shall have been made to Valeant or its stockholders or
shall have otherwise become publicly known or publicly
announced, (b) the merger agreement has been terminated by
Valeant following February 28, 2011 (provided that Valeant
failed to hold its special meeting on or prior to the fifth
business day prior to such termination) or Valeant’s
stockholder approval not being obtained at a duly convened
meeting, and (c) within 12 months following such
termination, Valeant enters into a definitive agreement to
consummate, or consummates, a takeover proposal transaction
(except for purposes of this clause (c), all references to
“20%” in the definition of takeover proposal shall be
deemed to be references to “40%”).
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Biovail will be obligated to pay a termination fee of
$100 million to Valeant if:
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Valeant terminates the merger agreement after Biovail’s
board of directors withdraws or adversely modifies its
recommendation of the merger agreement or approves or recommends
a takeover proposal to its shareholders;
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Valeant or Biovail terminates the merger agreement following
Biovail’s shareholder approval not being obtained at a duly
convened meeting, provided that at the time such termination
occurs, Biovail’s board of directors had withdrawn or
adversely modified its recommendation of the merger agreement or
approved or recommended a takeover proposal to its
shareholders; or
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(a) prior to the Biovail special meeting, a takeover
proposal shall have been made to Biovail or its shareholders or
shall have otherwise become publicly known or publicly
announced, (b) the merger agreement has been terminated by
Biovail following February 28, 2011 (provided that Biovail
failed to hold its special meeting on or prior to the fifth
business day prior to such termination), or Biovail’s
shareholder approval not being obtained at a duly convened
meeting, and (c) within 12 months following such
termination, Biovail enters into a definitive agreement to
consummate, or consummates, a takeover
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proposal transaction (except for purposes of this clause (c),
all references to “20%” in the definition of takeover
proposal shall be deemed to be references to “40%”).
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Alternative
Structure
Valeant and Biovail have agreed to cooperate in the
consideration of alternative transaction structures to implement
the transactions contemplated by the merger agreement, so long
as (1) there is no change in the economic terms of the
merger agreement and (2)(A) such alternative structure does not
impose any material delay on, or condition to, the consummation
of the merger, (B) adversely affect any of the parties to
the merger agreement or either Biovail’s or Valeant’s
stockholders or (C) result in additional liability to
Biovail’s or Valeant’s directors or officers.
Amendments,
Extensions and Waivers
The merger agreement may be amended by the parties at any time
before or after the receipt of the approvals of the Biovail
shareholders or the Valeant stockholders required to consummate
the merger. However, after any such shareholder or stockholder
approval, there may not be, without further approval of Biovail
shareholders or Valeant stockholders, any amendment of the
merger agreement for which applicable law requires further
shareholder or stockholder approval, respectively.
At any time prior to the effective time of the merger, with
certain exceptions, any party may (a) extend the time for
performance of any obligations or other acts of the other party,
(b) waive any inaccuracies in the representations and
warranties of the other party contained in the merger agreement
or in any document delivered pursuant to the merger agreement,
(c) waive compliance by another party with any of the
agreements contained in the merger agreement or (d) waive
the satisfaction of any of the conditions contained in the
merger agreement. No extension or waiver will require the
approval of the Biovail shareholders or the Valeant stockholders
unless such approval is required by applicable law.
Specific
Enforcement
Valeant and Biovail acknowledged and agreed in the merger
agreement that irreparable damage would occur in the event that
any of the provisions of the merger agreement were not performed
in accordance with their specific terms or were otherwise
breached, and that monetary damages, even if available, would
not be an adequate remedy therefor. The parties further agreed
that they shall be entitled to an injunction or injunctions to
prevent breaches of the merger agreement and to enforce
specifically the performance of terms and provisions of the
merger agreement without proof of actual damages, this being in
addition to any other remedy to which they are entitled at law
or in equity. The parties further agreed not to assert that a
remedy of specific enforcement is unenforceable, invalid,
contrary to law or inequitable for any reason, nor to assert
that a remedy of monetary damages would provide an adequate
remedy for any such breach.
Governing
Law
The merger agreement is governed by and will be construed in
accordance with the laws of the State of Delaware.
Voting
Agreement
As a condition to Biovail’s willingness to enter into the
merger agreement, Valeant and Biovail entered into the voting
agreement, pursuant to which ValueAct Capital agreed to vote all
of its shares of Valeant common stock outstanding on the date of
the voting agreement together with any other shares of Valeant
common stock it acquires during the term of the voting
agreement, in favor of the merger and the merger agreement at
any meeting of the stockholders of Valeant called for such
stockholder approval or other circumstance upon which such a
vote, consent or other approval is sought (including by written
consent). In addition, ValueAct Capital agreed that at any
meeting of stockholders of Valeant or at any adjournment thereof
or in any other circumstances upon which ValueAct Capital’s
vote, consent or other approval is sought, ValueAct Capital will
vote its shares of Valeant common stock against (1) any
competing merger agreement or merger, consolidation,
combination, sale of substantial assets, reorganization,
recapitalization, dissolution, liquidation or winding up of or
by Valeant, (2) certain acquisition
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proposals from third parties with respect to Valeant and
(3) any amendment of the certificate of incorporation or
bylaws of Valeant or other proposal or transaction involving
Valeant, which amendment or other proposal or transaction would
in any manner impede, frustrate, prevent or nullify any
provision of the merger agreement or the merger or change in any
manner the voting rights of any class of stock of Valeant.
ValueAct Capital also agreed, among other things, not to
(1) sell, transfer, pledge, assign or otherwise dispose
(including by gift) its shares of Valeant common stock to any
person other than pursuant to the merger (referred to below as,
the “ValueAct’s Transfer Restriction
Obligations”) or (2) enter into any voting
arrangement, whether by proxy, voting agreement or otherwise,
with respect to its shares of Valeant common stock.
The voting agreement terminates upon the earliest of
(1) the effective time of the merger, (2) the
termination of the merger agreement, (3) the withdrawal (or
modification in any manner adverse to Biovail), or the public
announcement of a proposal to withdraw (or modify in any manner
adverse to Biovail), the approval, recommendation or declaration
of advisability by Valeant’s board of directors with
respect to the merger agreement, (4) the approval by
Valeant’s board of directors of a takeover proposal and
(5) February 28, 2011, except that ValueAct’s
Transfer Restriction Obligations will terminate on
December 30, 2010 if the voting agreement is not otherwise
terminated in accordance with its terms before such date.
As of the date of the voting agreement, ValueAct Capital owned
15,138,358 shares of Valeant common stock, representing
approximately 20.0% of the Valeant shares outstanding.
Commitment
Letter
On June 20, 2010, Valeant and Biovail entered into the
commitment letter with the commitment parties, pursuant to which
senior secured credit facilities of up to $3.022 billion
(the “senior facilities”) are to be provided, subject
to the conditions set forth in such commitment letter, by the
commitment parties to Valeant as borrower. GSLP, Morgan Stanley
Senior Funding and Jefferies Group will act as joint lead
arrangers, joint bookrunners and syndication agents for the
senior facilities. GSLP will act as the administrative agent for
the senior facilities.
Valeant, Biovail and the commitment parties are currently
finalizing the structure of the financing to be incurred in
connection with the transaction, including the form of the debt
to be incurred as well as the parties that will incur such
indebtedness. The definitive loan documentation for the senior
facilities will not be finalized until a short time prior to the
effectiveness of the merger but some principal terms thereof are
expected to be as described below.
Description
of the Senior Facilities
General
The senior facilities are currently expected to consist of
(1) $500 million in a senior secured term loan A
facility (the “Term A Facility”), (2) up to
$2.272 billion in a senior secured term loan B facility
($300 million of which will be in the form of a delayed
draw term loan, which may only be used to fund the post-merger
special dividend on or prior to the later of
(x) December 31, 2010 or (y) 60 days after
the date of the closing of the senior facilities (the
“senior facilities closing date”)) (the “Term B
Facility,” and together with the Term A Facility, the
“term facilities”) and (3) $250 million in a
senior secured revolving credit facility (the “revolving
facility”). The revolving facility may contain sublimits
for the issuance of letters of credit and swingline loans. The
senior facilities permit Valeant to increase the amount of the
Term B Facility by incurring an incremental term loan facility
(the “incremental facility”) in an aggregate principal
amount not to exceed $250 million on or before the final
maturity date of the senior facilities, subject to certain
conditions as set forth in the commitment letter.
After giving effect to all borrowings under the senior
facilities on the senior facilities closing date, Valeant is
required to have at least $100 million of undrawn
availability under the revolving facility. The amount of the
initial draw under the Term B Facility is subject to reduction
on a
dollar-for-dollar
basis by (1) the net proceeds of any issuance of debt
securities (the “Securities”) consummated by Valeant
after June 20, 2010 and prior to the senior facilities
closing date, (2) the aggregate principal amount of
Valeant’s existing notes that remain outstanding on the
senior facilities closing date, after giving effect to the
making of the loans under the senior facilities and the
refinancing of Valeant’s existing notes with the proceeds
therefrom and (3) 50% of the net proceeds from the sale of
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properties or assets or any interests therein that,
individually or in a series of related transactions, generate
net proceeds in excess of $25 million, until the aggregate
net proceeds of such sales after June 20, 2010 equal
$400 million and then 100% of any additional asset sale
proceeds (except for sales of pharmaceutical products in the
ordinary course of business, which shall not be subject to this
clause (3)).
The proceeds of the senior facilities are expected to be used
for the purposes of (x) refinancing Valeant’s existing
credit facilities, 8.375% Senior Notes due 2016 and
7.625% Senior Notes due 2020, (y) funding the
pre-merger special dividend, the post-merger special dividend
and certain expenses incurred in connection with the merger and
(z) providing post-closing liquidity, including for ongoing
working capital requirements and general corporate purposes.
The Term A Facility will mature on the five-year anniversary of
the senior facilities closing date and will amortize at 10% of
the original principal amount per year for each of the first two
years after the senior facilities closing date and at 20% of the
original principal amount per year for the third and fourth
years after the senior facilities closing date, with the
remaining balance due at the maturity of the Term A Facility.
The Term B Facility will mature on the six-year anniversary of
the senior facilities closing date and will amortize in equal
quarterly installments of 1% of the original principal amount
per year, with the remaining balance due at the maturity of the
Term B Facility. The revolving facility will mature on the
four-and-one-half
year anniversary of the senior facilities closing date.
Guarantees
and Security
Subject to exclusions to be mutually agreed between Valeant and
GSLP, it is anticipated that Biovail and its existing and
subsequently acquired or organized subsidiaries, including the
subsidiaries of Valeant (other than Valeant and the foreign
subsidiaries of Valeant), will be guarantors (the
“guarantors”) and guarantee (the
“guarantee”) the obligations of Valeant under the
senior facilities; provided that Biovail and its existing
subsidiaries immediately prior to the merger shall only be
guarantors upon and after the consummation of the merger.
The obligations of Valeant and the guarantors under the senior
facilities, each guarantee and any interest rate or currency
hedging arrangement owed to the commitment parties, any lender
under the senior facilities or any of their affiliates will be
secured by first priority security interests in substantially
all assets of Valeant and the guarantors. The senior facilities
will also be secured by a first priority security interest in
100% of the capital stock of Valeant and each domestic
subsidiary of Valeant, 65% of the capital stock of each foreign
subsidiary of Valeant, and 100% of the capital stock of each
subsidiary of Biovail that is not also a subsidiary of Valeant,
and all intercompany debt owed to Valeant or any guarantor.
Guarantees and collateral documentation regarding the Biovail
entities will be released and become effective concurrently with
the effectiveness of the merger.
Interest
Rate
Loans under the Term A Facility and the revolving facility are
expected to bear interest, at Valeant’s option, at a rate
equal to the base rate plus 3.50% per annum or reserve-adjusted
LIBOR plus 4.50% per annum and the loans under the Term B
Facility are expected to bear interest, at Valeant’s
option, at a rate equal to the base rate plus 3.75% per annum or
reserve-adjusted LIBOR plus 4.75% per annum, in each case,
subject to (x) a decrease of 0.25% if the credit ratings
for the senior facilities are at least Ba3 from Moody’s and
BB- from S&P prior to the senior facilities closing date
and (y) an increase of 0.75% if the credit rating for the
senior facilities is B2 or lower from Moody’s or B or lower
from S&P prior to the senior facilities closing date. With
respect to loans under the Term B Facility, reserve-adjusted
LIBOR and the base rate shall not be less than 1.75% and 2.75%,
respectively.
Voluntary
and Mandatory Prepayments
Valeant will be permitted to make prepayments of the borrowings
under the senior facilities at any time without penalty or
premium, except for the payment of customary breakage costs if
reserve-adjusted LIBOR loans are prepaid prior to the last day
of the applicable interest period. Subject to certain exceptions
and customary basket amounts to be negotiated in the definitive
loan documents, it is expected that the senior facilities will
require mandatory prepayments under certain circumstances,
including from 100% of net cash proceeds from asset sales other
than sales of inventory in the ordinary course of business and
subject to reinvestment exceptions, from 50% of
130
net cash proceeds received from equity issuance (with step downs
to be agreed), from 100% of net cash proceeds of insurance
proceeds for property or asset losses, from 100% of the net cash
proceeds received from the incurrence of indebtedness not
otherwise permitted under the definitive loan documents and from
50% of excess cash flow (with step downs to be agreed).
Interest
Rate Protection
The commitment letter requires Valeant, within 90 days
after the senior facilities closing date, to obtain interest
rate protection through interest rate swaps, caps or other
agreements against increases in the interest rates with respect
to a notional amount of indebtedness such that not less than 35%
of the total funded indebtedness of Biovail, Valeant and their
subsidiaries outstanding as of the senior facilities closing
date will be either (1) subject to such interest rate
protection agreements or (2) fixed rate indebtedness, in
each case for a period of not less than three years.
Representations
and Warranties, Covenants, Events of Default
The definitive loan documents for the senior facilities will
have representations and warranties, financial, affirmative and
negative covenants (including, without limitation, limitations
on the ability to incur indebtedness, create liens, and merge
and consolidate with other companies), and events of default, in
each case, as are usual and customary for financings of this
kind and subject to exceptions and baskets to be mutually agreed
upon by Valeant and the commitment parties, the exact terms of
which are to be negotiated before the closing of the senior
facilities. Financial covenants will consist of a maximum total
leverage ratio, a minimum total interest coverage ratio and
maximum capital expenditures, with financial definitions and
covenant levels to be mutually agreed between Valeant and the
commitment parties.
Conditions
to Commitments and to Closing the Senior Facilities
Each commitment party’s commitment and agreements under the
commitment letter are subject to the condition that, since
January 1, 2010, there has not occurred any fact,
circumstance, effect, change, event or development that,
individually or in the aggregate, has had or would reasonably be
expected to have a Material Adverse Effect (as defined in the
merger agreement) on either Valeant and its subsidiaries or
Biovail and its subsidiaries.
The initial draw under the senior facilities is subject to the
following conditions:
|
|
|
|
•
|
terms of merger agreement being reasonably satisfactory and
conditions precedent thereto satisfied or waived;
|
|
|
|
|
•
|
no default or event of default under the definitive loan
documents relating to the senior facilities or under
Valeant’s 3.0% Convertible Notes or
4.0% Convertible Notes;
|
|
|
|
|
•
|
concurrently with the consummation of the merger and after
giving effect to the financing thereof, Valeant shall not have
any material indebtedness outstanding other than (1) under
the senior facilities, (2) the Securities, if issued and
(3) Valeant’s 3.0% Convertible Notes and
4.0% Convertible Notes;
|
|
|
|
|
•
|
delivery of certain audited and unaudited financial statements
of Valeant, Biovail and their respective subsidiaries, and
customary pro forma financial statements, giving effect to the
merger, the refinancing of existing indebtedness of Valeant, the
pre-merger special dividend, the senior facilities
and/or
Securities and any borrowings thereunder;
|
|
|
•
|
payment of costs, fees and expenses and compliance in all
material respects with obligations under the commitment letter
and the fee letter;
|
|
|
•
|
maximum leverage ratio of Biovail and its subsidiaries, giving
pro forma effect to the merger, at the time of funding not
greater than 3.65:1.00; and
|
|
|
•
|
compliance with certain other customary closing conditions and
delivery of customary closing documentation.
|
131
The subsequent draw under the Term B Facility has these
additional conditions (in addition to the conditions set forth
above for the initial draw):
|
|
|
|
•
|
filing of the certificate relating to the merger (the
“merger certificate”) with the Delaware Secretary of
State substantially concurrent with the funding of the
subsequent draw. The merger certificate shall provide that the
merger shall become automatically effective at 12:01 a.m.,
Eastern time, on the date following the filing of the merger
certificate; and
|
|
|
•
|
no default or event of default under any other material
indebtedness of Biovail, Valeant or their subsidiaries (pro
forma for the merger and the financing thereof). Pro forma for
the consummation of the merger, all material pre-existing
indebtedness of the Biovail entities shall have been repaid or
repurchased in full, all commitments relating thereto shall have
been terminated, and all liens or security interests related
thereto shall have been terminated or released, in each case on
terms satisfactory to the commitment parties, and subject to
exceptions to be mutually agreed upon.
|
Termination
The commitments of the commitment parties to provide the senior
facilities will terminate upon the first to occur of
(1) the consummation of the merger, (2) the
abandonment or termination of the definitive documentation for
the merger, (3) a material breach by Valeant under the
commitment letter or the fee letter and
(4) February 28, 2011, unless the closing of the
senior facilities has been consummated on or before such date.
132
INDEBTEDNESS
OF THE COMBINED COMPANY FOLLOWING THE MERGER
Credit
Facilities
It is currently anticipated that, upon completion of the merger,
the respective credit facilities of Valeant and Biovail
established under the following credit agreements will be
terminated and any indebtedness thereunder repaid:
|
|
|
|
•
|
Credit and Guaranty Agreement, dated as of May 26, 2010, by
and among Valeant, as borrower, certain subsidiaries of Valeant,
as guarantors, the lenders party thereto from time to time,
Goldman Sachs Credit Partners L.P., as sole lead arranger, and
Goldman Sachs Bank USA, as administrative agent and collateral
agent (the “Existing Valeant Credit
Facility”); and
|
|
|
•
|
Credit Agreement, dated as of June 9, 2009, among Biovail,
as borrower, the lenders party thereto, JPMorgan Chase Bank,
N.A., Toronto Branch, as administrative agent, J.P. Morgan
Securities Inc. and Scotia Capital Inc., as joint bookrunners
and joint lead arrangers, and The Bank of Nova Scotia and
National Bank of Canada, as syndication agents (the
“Existing Biovail Credit Facility”).
|
As of June 30, 2010, Valeant had outstanding approximately
$30 million of indebtedness under the Existing Valeant
Credit Facility. Valeant currently plans to fund the repayment
of the indebtedness under its Existing Valeant Credit Facility
with the proceeds that Valeant obtains from the new credit
facilities described below.
As of June 30, 2010, Biovail had no outstanding
indebtedness under the Existing Biovail Credit Facility.
In connection with the closing of the merger, it is anticipated
that Valeant will enter into the senior facilities with the
commitment parties, as set forth in the commitment letter.
Subject to certain conditions, GS Bank, Morgan Stanley Senior
Funding and Jefferies Group have committed to provide 45%, 45%
and 10%, respectively, to such credit facilities, which are
currently expected to consist of (1) $500 million in a
senior secured Term Loan A facility, (2) up to
$2.272 billion in a senior secured Term Loan B facility
($300 million of which in the form of a delayed draw term
loan) and (3) $250 million in a senior secured
revolving credit facility, subject to any dollar-for-dollar
reduction of the Term Loan B facility in connection with any
permitted Valeant offering of debt securities described in
“—Notes” below. Certain of the terms of such
credit facilities are described in the commitment letter while
other terms (including with respect to restrictive covenants and
events of default) will be negotiated between Valeant, Biovail
and their lenders and are not currently known. The proceeds of
the loans from the senior facilities are expected to be used for
the purposes of (x) refinancing Valeant’s existing
credit facilities, 8.375% Senior Notes due 2016 and
7.625% Senior Notes due 2020, (y) funding the
pre-merger special dividend, the post-merger special dividend
and certain expenses incurred in connection with the merger and
(z) providing post-closing liquidity, including for ongoing
working capital requirements and general corporate purposes.
Although Valeant and Biovail believe, based on information
available to them, that the commitment parties would be able to
fulfill their commitments to Valeant, given the current economic
environment and the recent severe contraction in the global
financial markets, this could change in the future.
Notes
Valeant currently anticipates that, prior to the completion of
the merger, it will repay in full its 8.375% Senior Notes
due 2016 and 7.625% Senior Notes due 2020. After completion
of the merger, Valeant and Biovail currently anticipate that
Valeant’s 4% Convertible Notes will be convertible
into Biovail common shares and remain outstanding and
Biovail’s 5.375% Senior Convertible Notes due 2014
will remain outstanding.
The commitment letter provides that the amount of the Term
Loan B facility may be reduced on a
dollar-for-dollar
basis by the net proceeds of any issuance of debt securities
consummated by Valeant after June 20, 2010 and prior to the
senior facilities closing date. In connection with the closing
of the merger and subject to market conditions, Valeant is
considering issuing debt securities in a public offering or in a
Rule 144A or other private placement. If Valeant completes
such an issuance, the combined company may guarantee any such
debt securities so issued. This joint proxy statement/prospectus
is not an offer to sell any debt securities and is not
soliciting an offer to buy any debt securities.
133
BIOVAIL
CORPORATION AND VALEANT PHARMACEUTICALS INTERNATIONAL UNAUDITED
PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The unaudited pro forma condensed combined statements of income
for the fiscal year ended December 31, 2009 and for the six
months ended June 30, 2010 combine the historical
consolidated statements of income of Biovail Corporation
(“Biovail”) and Valeant Pharmaceuticals International
(“Valeant”), giving effect to the merger of Biovail
and Valeant, as if it had occurred on January 1, 2009. The
unaudited pro forma condensed combined balance sheet as of
June 30, 2010 combines the historical consolidated balance
sheets of Biovail and Valeant, giving effect to the merger as if
it had occurred on June 30, 2010. The historical
consolidated financial information has been adjusted to give
effect to pro forma events that are (1) directly
attributable to the merger, (2) factually supportable, and
(3) with respect to the statements of income, expected to
have a continuing impact on the combined results. The unaudited
pro forma condensed combined financial information should be
read in conjunction with the accompanying notes to the unaudited
pro forma condensed combined financial statements. In addition,
the unaudited pro forma condensed combined financial information
was based on and should be read in conjunction with the:
|
|
|
|
•
|
separate audited financial statements of Biovail as of and for
the year ended December 31, 2009 and the related notes
included in Biovail’s Annual Report on
Form 10-K
for the year ended December 31, 2009;
|
|
|
|
|
•
|
separate audited financial statements of Valeant as of and for
the year ended December 31, 2009 and the related notes
included in Valeant’s Annual Report on
Form 10-K
for the year ended December 31, 2009;
|
|
|
|
|
•
|
separate unaudited financial statements of Biovail as of and for
the six months ended June 30, 2010 and the related notes
included in Biovail’s Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2010; and
|
|
|
|
|
•
|
separate unaudited financial statements of Valeant as of and for
the six months ended June 30, 2010 and the related notes
included in Valeant’s Quarterly Report on
Form 10-Q
for the quarter ended June 30, 2010.
|
The unaudited pro forma condensed combined financial information
has been presented for informational purposes only. The pro
forma information is not necessarily indicative of what the
combined company’s financial position or results of
operations actually would have been had the merger been
completed as of the dates indicated. In addition, the unaudited
pro forma condensed combined financial information does not
purport to project the future financial position or operating
results of the combined company. There were no material
transactions between Biovail and Valeant during the periods
presented in the unaudited pro forma condensed combined
financial statements that would need to be eliminated.
The unaudited pro forma condensed combined financial information
has been prepared using the acquisition method of accounting
under U.S. GAAP, which is subject to change and
interpretation. Biovail is both the legal and accounting
acquirer in the merger. The acquisition accounting is dependent
upon certain valuations and other studies or events that have
yet to progress to a stage where there is sufficient information
for a definitive measurement. Accordingly, the pro forma
adjustments are preliminary and have been made solely for the
purpose of providing unaudited pro forma condensed combined
financial information. Differences between these preliminary
estimates and the final acquisition accounting will occur and
these differences could have a material impact on the
accompanying unaudited pro forma condensed combined financial
statements and the combined company’s future results of
operations and financial position.
The unaudited pro forma condensed combined financial information
does not reflect any cost savings, operating synergies or
revenue enhancements that the combined company may achieve as a
result of the merger, the costs to integrate the operations of
Biovail and Valeant or the costs necessary to achieve these cost
savings, operating synergies and revenue enhancements.
In addition, this unaudited pro forma condensed combined
financial information does not reflect the post-merger special
dividend of $1.00 per share of common stock (“post-merger
special dividend”), which is anticipated to be paid by the
combined company after the merger, subject to the discretion of
the Board of Directors of the combined company and to compliance
with applicable law. The contemplated post-merger special
dividend will be largely funded by the new debt secured in
connection with the merger (see notes 6(m) and 6(t) to the
unaudited pro forma condensed combined financial statements).
The debt commitment contains a specific delayed draw of
$300 million which is directly linked to payment of the
contemplated post-merger special dividend; accordingly, this
portion of the facility is considered undrawn for purposes of
the unaudited pro forma condensed combined balance sheet as at
June 30, 2010 and no related interest expense is reflected
in the unaudited pro forma condensed combined statements of
income for the year ended December 31, 2009 and for the six
months ended June 30, 2010.
134
UNAUDITED
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
|
|
Biovail
|
|
|
Valeant
|
|
|
(Note 6)
|
|
|
Combined
|
|
|
|
(All dollar amounts expressed in thousands of U.S. dollars
except per share data)
|
|
|
REVENUE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales
|
|
$
|
789,026
|
|
|
$
|
710,761
|
|
|
$
|
—
|
|
|
$
|
1,499,787
|
|
Alliance and royalty
|
|
|
17,256
|
|
|
|
97,311
|
|
|
|
—
|
|
|
|
114,567
|
|
Service and other
|
|
|
14,148
|
|
|
|
22,389
|
|
|
|
—
|
|
|
|
36,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
820,430
|
|
|
|
830,461
|
|
|
|
—
|
|
|
|
1,650,891
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold (exclusive of amortization of intangible
assets shown below)
|
|
|
204,309
|
|
|
|
192,974
|
|
|
|
683
|
(b),(k)
|
|
|
397,966
|
|
Cost of services
|
|
|
13,849
|
|
|
|
17,836
|
|
|
|
—
|
|
|
|
31,685
|
|
Research and development
|
|
|
47,581
|
|
|
|
43,977
|
|
|
|
1,367
|
(b),(k)
|
|
|
92,925
|
|
Selling, general and administrative
|
|
|
147,984
|
|
|
|
255,782
|
|
|
|
40,889
|
(b),(k)
|
|
|
444,655
|
|
Amortization of intangible assets
|
|
|
104,730
|
|
|
|
70,640
|
|
|
|
168,389
|
(a)
|
|
|
343,759
|
|
Acquired in-process research and development
|
|
|
59,354
|
|
|
|
1,951
|
|
|
|
—
|
|
|
|
61,305
|
|
Restructuring and other related costs
|
|
|
30,033
|
|
|
|
6,055
|
|
|
|
—
|
|
|
|
36,088
|
|
Legal settlements and indemnity obligations
|
|
|
25,840
|
|
|
|
4,400
|
|
|
|
—
|
|
|
|
30,240
|
|
Acquisition-related costs
|
|
|
5,596
|
|
|
|
4,013
|
|
|
|
—
|
|
|
|
9,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
639,276
|
|
|
|
597,628
|
|
|
|
211,328
|
|
|
|
1,448,232
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
181,154
|
|
|
|
232,833
|
|
|
|
(211,328
|
)
|
|
|
202,659
|
|
Interest income
|
|
|
1,118
|
|
|
|
4,321
|
|
|
|
—
|
|
|
|
5,439
|
|
Interest expense
|
|
|
(25,418
|
)
|
|
|
(43,571
|
)
|
|
|
(159,808
|
)(c)
|
|
|
(228,797
|
)
|
Foreign exchange and other
|
|
|
507
|
|
|
|
(1,455
|
)
|
|
|
—
|
|
|
|
(948
|
)
|
Gain on investments, net
|
|
|
17,594
|
|
|
|
—
|
|
|
|
—
|
|
|
|
17,594
|
|
Gain on early extinguishment of debt
|
|
|
—
|
|
|
|
7,221
|
|
|
|
—
|
|
|
|
7,221
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before recovery of income taxes
|
|
|
174,955
|
|
|
|
199,349
|
|
|
|
(371,136
|
)
|
|
|
3,168
|
|
Recovery of income taxes
|
|
|
(1,500
|
)
|
|
|
(58,270
|
)
|
|
|
(10,029
|
)(d)
|
|
|
(69,799
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
176,455
|
|
|
|
257,619
|
|
|
|
(361,107
|
)
|
|
|
72,967
|
|
Less: income from continuing operations attributable to
non-controlling interest
|
|
|
—
|
|
|
|
3
|
|
|
|
—
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to controlling
interest
|
|
$
|
176,455
|
|
|
$
|
257,616
|
|
|
$
|
(361,107
|
)
|
|
$
|
72,964
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to controlling
interest per share — basic
|
|
$
|
1.11
|
|
|
$
|
3.15
|
|
|
|
|
|
|
$
|
0.24
|
(u)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to controlling
interest per share — diluted
|
|
$
|
1.11
|
|
|
$
|
3.07
|
|
|
|
|
|
|
$
|
0.24
|
(u)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
135
UNAUDITED
PRO FORMA CONDENSED COMBINED
STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
|
|
Biovail
|
|
|
Valeant
|
|
|
(Note 6)
|
|
|
Combined
|
|
|
|
(All dollar amounts expressed in thousands of U.S. dollars
except per share data)
|
|
|
REVENUE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales
|
|
$
|
443,278
|
|
|
$
|
423,965
|
|
|
$
|
—
|
|
|
$
|
867,243
|
|
Alliance and royalty
|
|
|
9,487
|
|
|
|
54,244
|
|
|
|
|
|
|
|
63,731
|
|
Service and other
|
|
|
5,641
|
|
|
|
9,356
|
|
|
|
|
|
|
|
14,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
458,406
|
|
|
|
487,565
|
|
|
|
|
|
|
|
945,971
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold (exclusive of amortization of intangible
assets shown below)
|
|
|
122,805
|
|
|
|
114,841
|
|
|
|
595
|
(b),(k)
|
|
|
238,241
|
|
Cost of services
|
|
|
6,679
|
|
|
|
6,445
|
|
|
|
|
|
|
|
13,124
|
|
Research and development
|
|
|
36,221
|
|
|
|
22,353
|
|
|
|
489
|
(b),(k)
|
|
|
59,063
|
|
Selling, general and administrative
|
|
|
87,318
|
|
|
|
144,026
|
|
|
|
11,605
|
(b),(k)
|
|
|
242,949
|
|
Amortization of intangible assets
|
|
|
66,599
|
|
|
|
41,665
|
|
|
|
80,871
|
(a)
|
|
|
189,135
|
|
Acquired in-process research and development
|
|
|
61,245
|
|
|
|
—
|
|
|
|
|
|
|
|
61,245
|
|
Restructuring and other related costs
|
|
|
3,494
|
|
|
|
2,522
|
|
|
|
|
|
|
|
6,016
|
|
Legal settlements and indemnity obligations
|
|
|
1,289
|
|
|
|
1,550
|
|
|
|
|
|
|
|
2,839
|
|
Acquisition-related costs
|
|
|
7,577
|
|
|
|
9,208
|
|
|
|
(12,377
|
)(e)
|
|
|
4,408
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
393,227
|
|
|
|
342,610
|
|
|
|
81,183
|
|
|
|
817,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
65,179
|
|
|
|
144,955
|
|
|
|
(81,183
|
)
|
|
|
128,951
|
|
Interest income
|
|
|
422
|
|
|
|
846
|
|
|
|
—
|
|
|
|
1,268
|
|
Interest expense
|
|
|
(19,779
|
)
|
|
|
(33,648
|
)
|
|
|
(65,797
|
)(c)
|
|
|
(119,224
|
)
|
Foreign exchange and other
|
|
|
44
|
|
|
|
(1,936
|
)
|
|
|
—
|
|
|
|
(1,892
|
)
|
Loss on investments, net
|
|
|
(547
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(547
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before recovery of income taxes
|
|
|
45,319
|
|
|
|
110,217
|
|
|
|
(146,980
|
)
|
|
|
8,556
|
|
Provision for income taxes
|
|
|
14,500
|
|
|
|
42,378
|
|
|
|
(54,980
|
)(d)
|
|
|
1,898
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
30,819
|
|
|
|
67,839
|
|
|
|
(92,000
|
)
|
|
|
6,658
|
|
Less: income from continuing operations attributable to
non-controlling interest
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to controlling
interest
|
|
$
|
30,819
|
|
|
$
|
67,837
|
|
|
$
|
(92,000
|
)
|
|
$
|
6,656
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations attributable to
controlling interest per share — basic
|
|
$
|
0.19
|
|
|
$
|
0.87
|
|
|
|
|
|
|
$
|
0.02
|
(u)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations attributable to
controlling interest per share — diluted
|
|
$
|
0.19
|
|
|
$
|
0.82
|
|
|
|
|
|
|
$
|
0.02
|
(u)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
136
UNAUDITED
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF JUNE 30, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
|
|
|
Pro Forma
|
|
|
|
Biovail
|
|
|
Valeant
|
|
|
(Note 6)
|
|
|
Combined
|
|
|
|
(All dollar amounts expressed in thousands of U.S.
dollars)
|
|
|
ASSETS
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
176,566
|
|
|
$
|
75,383
|
|
|
$
|
(61,625
|
)(t)
|
|
$
|
190,324
|
|
Marketable securities
|
|
|
6,238
|
|
|
|
—
|
|
|
|
—
|
|
|
|
6,238
|
|
Accounts receivable, net
|
|
|
114,409
|
|
|
|
183,793
|
|
|
|
—
|
|
|
|
298,202
|
|
Inventories
|
|
|
88,134
|
|
|
|
134,036
|
|
|
|
56,000
|
(f)
|
|
|
278,170
|
|
Prepaid expenses and other current assets
|
|
|
9,576
|
|
|
|
20,678
|
|
|
|
(184
|
)(h)
|
|
|
30,070
|
|
Deferred tax assets, net of valuation allowance
|
|
|
12,400
|
|
|
|
87,741
|
|
|
|
(67,456
|
)(d)
|
|
|
32,685
|
|
Income taxes receivable
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Assets held for sale
|
|
|
7,117
|
|
|
|
1,559
|
|
|
|
—
|
|
|
|
8,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
414,440
|
|
|
|
503,190
|
|
|
|
(73,265
|
)
|
|
|
844,365
|
|
Marketable securities
|
|
|
9,660
|
|
|
|
—
|
|
|
|
—
|
|
|
|
9,660
|
|
Property, plant and equipment, net
|
|
|
96,480
|
|
|
|
155,208
|
|
|
|
31,100
|
(l)
|
|
|
282,788
|
|
Intangible assets, net
|
|
|
1,263,993
|
|
|
|
840,832
|
|
|
|
3,139,477
|
(j)
|
|
|
5,244,302
|
|
Goodwill
|
|
|
100,294
|
|
|
|
361,133
|
|
|
|
2,548,044
|
(i)
|
|
|
3,009,471
|
|
Deferred tax assets, net of valuation allowance
|
|
|
115,400
|
|
|
|
4,917
|
|
|
|
(120,317
|
)(d)
|
|
|
—
|
|
Other long-term assets, net
|
|
|
29,456
|
|
|
|
22,826
|
|
|
|
64,318
|
(g)
|
|
|
116,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,029,723
|
|
|
$
|
1,888,106
|
|
|
$
|
5,589,357
|
|
|
$
|
9,507,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
Current
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
41,880
|
|
|
$
|
49,733
|
|
|
$
|
—
|
|
|
$
|
91,613
|
|
Dividends payable
|
|
|
15,064
|
|
|
|
—
|
|
|
|
—
|
|
|
|
15,064
|
|
Accrued liabilities
|
|
|
127,471
|
|
|
|
228,213
|
|
|
|
—
|
|
|
|
355,684
|
|
Income taxes payable
|
|
|
11,323
|
|
|
|
10,730
|
|
|
|
—
|
|
|
|
22,053
|
|
Deferred revenue
|
|
|
21,131
|
|
|
|
17,773
|
|
|
|
—
|
|
|
|
38,904
|
|
Current deferred tax liabilities, net
|
|
|
—
|
|
|
|
759
|
|
|
|
—
|
|
|
|
759
|
|
Current portion of long-term debt
|
|
|
16,284
|
|
|
|
82,282
|
|
|
|
(30,000
|
)(n)
|
|
|
68,566
|
|
Liabilities held for sale
|
|
|
1,083
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
234,236
|
|
|
|
389,490
|
|
|
|
(30,000
|
)
|
|
|
593,726
|
|
Deferred revenue
|
|
|
59,446
|
|
|
|
621
|
|
|
|
—
|
|
|
|
60,067
|
|
Income taxes payable
|
|
|
66,900
|
|
|
|
16,739
|
|
|
|
—
|
|
|
|
83,639
|
|
Deferred tax liabilities, net
|
|
|
—
|
|
|
|
106,930
|
|
|
|
947,646
|
(d)
|
|
|
1,054,576
|
|
Long-term debt
|
|
|
302,939
|
|
|
|
955,576
|
|
|
|
1,656,749
|
(m)
|
|
|
2,915,264
|
|
Other long-term liabilities
|
|
|
5,519
|
|
|
|
65,741
|
|
|
|
(7,400
|
)(o)
|
|
|
63,860
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
669,040
|
|
|
|
1,535,097
|
|
|
|
2,566,995
|
|
|
|
4,771,132
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares
|
|
|
1,468,245
|
|
|
|
759
|
|
|
|
3,136,028
|
(p)
|
|
|
4,605,032
|
|
Additional paid-in capital
|
|
|
95,070
|
|
|
|
922,936
|
|
|
|
(532,166
|
)(q)
|
|
|
485,840
|
|
Accumulated deficit
|
|
|
(244,669
|
)
|
|
|
(573,774
|
)
|
|
|
421,566
|
(r)
|
|
|
(396,877
|
)
|
Accumulated other comprehensive income
|
|
|
42,037
|
|
|
|
3,066
|
|
|
|
(3,066
|
)(s)
|
|
|
42,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,360,683
|
|
|
|
352,987
|
|
|
|
3,022,362
|
|
|
|
4,736,032
|
|
Non-controlling interest
|
|
|
—
|
|
|
|
22
|
|
|
|
—
|
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,360,683
|
|
|
|
353,009
|
|
|
|
3,022,362
|
|
|
|
4,736,054
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,029,723
|
|
|
$
|
1,888,106
|
|
|
$
|
5,589,357
|
|
|
$
|
9,507,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
137
NOTES TO
THE UNAUDITED PRO FORMA
CONDENSED
COMBINED FINANCIAL STATEMENTS
|
|
1.
|
Description
of Transaction
|
On June 20, 2010, the Biovail board of directors and the
Valeant board of directors unanimously approved the merger
agreement under which the companies would merge to create a
combined company. In order to effect the combination of Valeant
and Biovail, Valeant will merge with a wholly owned subsidiary
of Biovail. As a result of this merger, the separate corporate
existence of the newly formed subsidiary will cease and Valeant
will continue as the surviving corporation. On the date of the
closing of the merger, Biovail will change its name to
“Valeant Pharmaceuticals International, Inc.”
Under the terms of the merger agreement, Valeant stockholders of
record as of the close of business on the business day
immediately preceding the effective time of the merger will have
the right to receive a special dividend of $16.77 per share of
Valeant common stock, which Valeant intends to pay on the
business day immediately preceding the effective time of the
merger. If the merger is completed, holders of shares of Valeant
common stock (except for shares of Valeant common stock owned by
Biovail, BAC or Beach Merger Corp. (all of which will be
cancelled), and other than those shares with respect to which
appraisal rights are properly exercised and not withdrawn), will
receive, for each share of Valeant common stock outstanding
immediately prior to the merger, 1.7809 Biovail common shares.
Upon the completion of the merger, which is expected to occur
before the end of the year, Biovail shareholders will own
approximately 50.5% and Valeant stockholders will own
approximately 49.5% of the shares of the combined company, each
on a fully diluted basis.
In connection with the transaction, the companies have secured a
commitment of $2.772 billion through a term loan facility
provided by the commitment parties. Existing Valeant 7.625% and
8.375% senior unsecured notes and senior secured term loan
will be refinanced as part of the transaction. In addition, a
$250 million senior secured revolving credit facility will
be made available to the combined company subsequent to the
transaction.
It is anticipated that $300 million of the
$2.772 billion facility will be utilized to partially fund
the post-merger special dividend of $1.00 per common share of
the combined company subsequent to the merger, subject to the
discretion of the board of directors of the combined company,
and to compliance with applicable law.
Except as otherwise agreed to by the holder of a Valeant
restricted stock unit award, each Valeant restricted stock unit
award (including performance share units and certain restricted
stock units granted to non-employee directors in
2010) that, in accordance with its existing term, provides
for vesting, in whole or in part, upon a change in control will
vest and settle at the level provided for under the terms of the
award on the day prior to the payment of the pre-merger special
dividend as if that day was the closing date of the merger (and
any performance metrics applicable to the accelerated restricted
stock units will be measured as of that day). Any portion of the
restricted stock units that vest will be settled in common
shares of the combined company at the time of the merger (with
the number of shares determined by multiplying the number of
shares of Valeant common stock subject to such vested restricted
stock unit immediately prior to the completion of the merger by
the exchange ratio of 1.7809) and the pre-merger special
dividend of $16.77 will be paid to the holder of the restricted
stock unit in cash. Any portion of the accelerated restricted
stock units that does not vest on the day prior to the payment
of the pre-merger special dividend will be forfeited on that day
for no consideration. Each stock option to acquire Valeant
common stock and each restricted stock unit award (including
each restricted stock unit held by non-employee directors not
described above) that is not vested or forfeited in the manner
described above (each, a “continuing award”) will be
adjusted to take into account the pre-merger special dividend by
multiplying the number of shares underlying the award by the
pre-merger special dividend adjustment ratio of 1.5710 (rounded
down to the nearest whole share) and, in the case of stock
options by dividing the per share exercise price by the
pre-merger special dividend adjustment ratio of 1.5710 (rounded
up to the nearest whole cent). At the closing of the merger,
each continuing award will be converted into an award to acquire
common shares of the combined company, on the same terms and
conditions as were applicable to the award prior to the merger.
The number of common shares of the combined company subject to
the award following the merger will be determined by multiplying
the number of shares of Valeant common stock underlying the
continuing award (as adjusted to take into account the
pre-merger special dividend) by the exchange ratio of 1.7809
(rounded down to the nearest whole share) and, for each share
underlying a stock option award by
138
NOTES TO
THE UNAUDITED PRO FORMA
CONDENSED
COMBINED FINANCIAL
STATEMENTS — (Continued)
dividing the per share exercise price (as adjusted to take into
account the pre-merger special dividend) by the exchange ratio
of 1.7809 (rounded up to the nearest whole cent).
Valeant’s outstanding convertible notes will be convertible
into Biovail common shares upon completion of the merger and the
conversion rate will be adjusted for the pre-merger special
dividend.
The merger is subject to approval by Biovail shareholders and
Valeant stockholders and the satisfaction or waiver (if
permissible under applicable law) of customary closing
conditions and regulatory approvals, including anti-trust and
competition law approvals in the U.S. and certain other
foreign jurisdictions.
The unaudited pro forma condensed combined financial information
was prepared using the acquisition method of accounting, with
Biovail being the legal and accounting acquirer, and was based
on the historical financial statements of Biovail and Valeant.
Certain reclassifications have been made to the historical
financial statements to conform the financial statement
presentation to be adopted by the combined company. These
adjustments are primarily related to the presentation of
alliance and royalty revenue, service and other revenue,
in-process research and development charges, restructuring
charges, acquisition-related costs, and accrued liabilities for
uncertain taxes.
The acquisition method of accounting is based on ASC 805,
Business Combinations,
and uses the fair value concepts
defined in ASC 820,
Fair Value Measurements
. The
unaudited pro forma condensed combined financial information was
prepared using the acquisition method of accounting, under these
existing U.S. GAAP standards, which are subject to change
and interpretation.
ASC 805 requires, among other things, that most assets acquired
and liabilities assumed be recognized at their fair values as of
the acquisition date and that the fair value of acquired
in-process research and development be recorded on the balance
sheet as of the acquisition date. In addition, ASC 805
establishes that the consideration transferred be measured at
the closing date of the merger at the then-current market price;
this particular requirement will likely result in a per share
equity component that is different from the amount assumed in
these unaudited pro forma condensed combined financial
statements.
ASC 820 defines the term “fair value” and sets forth
the valuation requirements for any asset or liability measured
at fair value, expands related disclosure requirements and
specifies a hierarchy of valuation techniques based on the
nature of the inputs used to develop the fair value measures.
Fair value is defined in ASC 820 as “the price that
would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants
at the measurement date.” This is an exit price concept for
the valuation of the asset or liability. In addition, market
participants are assumed to be buyers and sellers in the
principal (or the most advantageous) market for the asset or
liability. Fair value measurements for an asset assume the
highest and best use by these market participants. Many of these
fair value measurements can be highly subjective and it is also
possible that other professionals, applying reasonable judgment
to the same facts and circumstances, could develop and support a
range of alternative estimated amounts.
Under the acquisition method of accounting, the assets acquired
and liabilities assumed of Valeant will be recorded as of the
completion of the merger, primarily at their respective fair
values and added to those of Biovail. The results of operations
of Valeant will be included in the financial statements of the
combined company as of the date of the completion of the merger.
Under ASC 805, acquisition-related transaction costs (i.e.,
advisory, legal, valuation, other professional fees) and certain
acquisition-related restructuring charges affecting the target
company are not included as a component of consideration
transferred but are accounted for as expenses in the periods in
which the costs are incurred. Total acquisition-related
transaction costs expected to be incurred by Biovail and Valeant
are estimated to be approximately $88.6 million, of which
$12.4 million had been incurred in the six months ended
June 30, 2010. The
139
NOTES TO
THE UNAUDITED PRO FORMA
CONDENSED
COMBINED FINANCIAL
STATEMENTS — (Continued)
remaining estimated transaction costs are reflected in these
unaudited pro forma condensed combined financial statements as a
reduction to cash and cash equivalents and an increase to
accumulated deficit. The unaudited pro forma condensed combined
financial statements do not reflect any acquisition-related
restructuring charges and integration charges expected to be
incurred in connection with the merger; these charges are
expected to be in the range of approximately $130 million
to $150 million, on a pre-tax basis.
Upon consummation of the merger, Biovail will review, in detail,
Valeant’s accounting policies. As a result of that review,
Biovail may identify differences between the accounting policies
of the two companies that, when conformed, could have a material
impact on the combined financial statements. At this time,
Biovail is not aware of any differences that would have a
material impact on the combined financial statements.
|
|
4.
|
Estimate
of Consideration Expected to be Transferred
|
The following is a preliminary estimate of consideration
expected to be transferred to effect the acquisition of Valeant:
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
|
|
|
Estimated
|
|
|
Form of
|
|
|
Calculation
|
|
|
Fair Value
|
|
|
Consideration
|
|
|
(In thousands, except per share amounts)
|
|
Number of shares of Valeant common stock outstanding as of
June 30, 2010
|
|
|
75,902
|
|
|
|
|
|
|
|
Multiplied by Biovail’s stock price as of August 4,
2010 adjusted for the exchange ratio of 1.7809 ($22.37*1.7809)
|
|
$
|
39.84
|
|
|
$
|
3,023,840
|
(a)
|
|
Common stock
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares of Valeant common stock expected to be issued
pursuant to vested Valeant time-based RSUs and performance-based
RSUs as a result of the merger transaction
|
|
|
2,835
|
|
|
|
|
|
|
|
Multiplied by Biovail’s stock price as of August 4,
2010 adjusted for the exchange ratio of 1.7809
|
|
$
|
39.84
|
|
|
$
|
112,947
|
(a)
|
|
Common stock
|
|
|
|
|
|
|
|
|
|
|
|
Number and estimated fair value of vested and partially vested
Valeant stock options expected to be exchanged for stock options
in the combined company
|
|
|
7,530
|
|
|
$
|
117,875
|
(b)
|
|
Stock options
|
Number and estimated fair value of outstanding partially vested
Valeant RSUs expected to be exchanged for RSUs in the combined
company
|
|
|
1,865
|
|
|
$
|
45,382
|
(b)
|
|
Restricted stock units
|
|
|
|
|
|
|
|
|
|
|
|
Estimate of consideration expected to be transferred
|
|
|
|
|
|
$
|
3,300,044
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Certain
amounts may reflect rounding adjustments
|
|
|
(a)
|
|
The estimated consideration expected to be transferred reflected
in these unaudited pro forma condensed combined financial
statements does not purport to represent what the actual
consideration transferred will be when the merger is
consummated. In accordance with ASC 805, the fair value of
equity securities issued as part of the consideration
transferred will be measured on the closing date of the merger
at the then-current market price. This requirement will likely
result in a per share equity component different from the $39.84
assumed in these unaudited pro forma condensed combined
financial statements and that difference may be material.
Biovail believes that a price volatility of as much as 35% in
the Biovail common share price on the closing date of the merger
from the common stock price assumed in these unaudited pro forma
condensed combined
|
140
NOTES TO
THE UNAUDITED PRO FORMA
CONDENSED
COMBINED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
|
financial statements is reasonably possible based upon the
recent history of the price of Biovail common shares. A change
of this magnitude would increase or decrease the consideration
expected to be transferred by approximately $1.2 billion,
which would be reflected in these unaudited pro forma condensed
combined financial statements as an increase or decrease to
goodwill.
|
|
|
|
(b)
|
|
In accordance with ASC 805, the fair value of the vested
portion of Valeant stock options and Valeant RSUs that will be
converted into stock options and RSUs in the combined company
(hereinafter called the “converted options and RSUs”)
will be recognized as a component of the purchase price, based
on the fair value of the converted options and RSUs, as
described below:
|
|
|
|
|
|
The unaudited pro forma condensed combined financial statements
assume that 7.5 million Valeant stock options and
1.9 million Valeant RSUs will be converted into options and
RSUs to acquire or receive shares of the combined company’s
common stock based on the exchange ratio set forth in the merger
agreement. The additional purchase price of $112.9 million
relating to the vested portion of the stock options represents a
weighted-average fair value of $26.94 per stock option, which
was calculated using the Black-Scholes option pricing model.
This calculation considered the closing price of Biovail common
shares of $22.37 per share as of August 4, 2010, adjusted
by the exchange ratio of 1.7809, and the following assumptions:
|
|
|
|
|
|
Expected volatility
|
|
|
32
|
.73%
|
Expected life
|
|
|
4
|
.69 years
|
Expected dividend yield
|
|
|
0
|
.00%
|
Risk-free interest rate
|
|
|
1
|
.61%
|
|
|
|
|
|
The expected life of the options was determined by taking into
account the contractual life of the options and estimated
exercise pattern of the option holders. The expected volatility
and risk-free interest rate were determined based on current
market information, and the dividend yield was derived based on
historical experience as well as information that is available
to management.
|
|
|
|
|
|
The fair value of the vested portion of the Valeant time-based
and performance-based RSUs to be issued by the combined company
to exchange Valeant RSUs is $45.4 million. The fair value
of the time-based RSUs is determined based on the closing price
of Biovail common share of $22.37, adjusted by the exchange
ratio of 1.7809 and the fair value of the performance-based RSUs
are determined using a Monte Carlo simulation model. The Monte
Carlo simulation model utilizes multiple input variables to
estimate the probability that the performance condition will be
achieved.
|
|
|
|
|
|
The fair values of the combined company’s stock options
approximate the fair values of the Valeant stock options as of
August 4, 2010. Accordingly, the fair value of the
converted stock options was recognized as a component of the
purchase price and no additional amounts have been reflected as
compensation expense. The fair values of the combined
company’s time-based RSUs exceed the fair values of the
Valeant time-based RSUs and the excess of $1.1 million is
recognized as post-merger compensation cost in the unaudited pro
forma condensed combined statement of income. Biovail will
recalculate the fair values of the Valeant options and RSUs and
the converted options and RSUs as of the actual merger date, in
accordance with ASC 718,
Compensation — Stock
Compensation
, to determine the fair value amounts, if any,
to be recorded as post-merger compensation expense.
|
141
NOTES TO
THE UNAUDITED PRO FORMA
CONDENSED
COMBINED FINANCIAL
STATEMENTS — (Continued)
|
|
5.
|
Estimate
of Assets to be Acquired and Liabilities to be
Assumed
|
The following is a preliminary estimate of the assets to be
acquired and the liabilities to be assumed by Biovail in the
merger, reconciled to the estimate of consideration expected to
be transferred:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Book value of net assets acquired at June 30, 2010
|
|
$
|
352,987
|
|
Adjusted for:
|
|
|
|
|
Equity components of Valeant 3% and 4% convertible subordinated
notes
|
|
|
(103,670
|
)
|
Elimination of existing goodwill and intangible assets
|
|
|
(1,201,965
|
)
|
|
|
|
|
|
Adjusted book value of net liabilities assumed
|
|
$
|
(952,648
|
)
|
Adjustments to:
|
|
|
|
|
Inventory(a)
|
|
|
56,000
|
|
Property, plant and equipment(b)
|
|
|
31,100
|
|
Identifiable intangible assets(c)
|
|
|
3,980,309
|
|
Debt(d)
|
|
|
(321,546
|
)
|
Pre-merger special dividend payable(e)
|
|
|
(1,343,949
|
)
|
Other long-term liabilities(f)
|
|
|
7,400
|
|
Deferred income taxes(g)
|
|
|
(1,065,799
|
)
|
Goodwill(h)
|
|
|
2,909,177
|
|
|
|
|
|
|
Estimate of consideration expected to be transferred
|
|
$
|
3,300,044
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Reflects an adjustment of $56 million to record
Valeant’s inventory at its estimated fair value. In
connection with the merger, Biovail is required to record
Valeant’s inventory on the combined company’s balance
sheet at fair value. Biovail’s assumptions as to the fair
value of Valeant’s inventory may change as it conducts,
with the assistance of a third party appraiser, a valuation of
Valeant’s inventory following the completion of the merger.
Biovail’s pro forma fair value adjustment to inventory is
based on Valeant’s inventory at June 30, 2010,
adjusted as follows based on Valeant management’s estimates:
|
|
|
|
|
i.
|
Finished goods at estimated selling prices less the sum of costs
of disposal and a reasonable profit allowance for the selling
effort of a market participant;
|
|
|
|
|
ii.
|
Work in process at estimated selling prices of finished goods
less the sum of costs to complete, costs of disposal, and a
reasonable profit allowance for the completing and selling
effort of a market participant based on profit for similar
finished goods; and
|
iii. Raw materials at current replacement costs.
|
|
|
(b)
|
|
Reflects an adjustment of $31.1 million to record
Valeant’s property, plant and equipment at an estimated
fair value. The assumptions as to the fair value of
Valeant’s property, plant and equipment may change as the
combined company conducts, with the assistance of a third party
appraiser, a valuation of Valeant’s property, plant and
equipment following the completion of the merger. The fair value
adjustment to property, plant and equipment was derived based on
recent appraisals. In cases where no recent appraisals have been
completed,
|
142
NOTES TO
THE UNAUDITED PRO FORMA
CONDENSED
COMBINED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
|
the fair value adjustment assumptions were based on a review of
market evidence for real property and a review of full and
remaining useful lives, replacement cost, and disposal cost for
personal property.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
Estimated Fair
|
|
|
Estimated
|
|
|
|
Value
|
|
|
Useful Life
|
|
|
|
(In thousands)
|
|
|
Land
|
|
$
|
32,708
|
|
|
|
Indefinite
|
|
Buildings
|
|
|
71,400
|
|
|
|
30 years
|
|
Machinery and equipments
|
|
|
57,300
|
|
|
|
7 years
|
|
Automobiles
|
|
|
4,800
|
|
|
|
7 years
|
|
Furniture and fixtures
|
|
|
9,300
|
|
|
|
7 years
|
|
Leasehold improvements
|
|
|
3,900
|
|
|
|
7 years
|
|
Construction in progress
|
|
|
6,900
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
186,308
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Book value of property, plant and equipment
|
|
|
155,208
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment
|
|
$
|
31,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(c)
|
|
A preliminary fair value estimate of $4.0 billion has been
allocated to intangible assets acquired, primarily consisting of
customer relationships, patented products, brands and other
marketing intangibles, and in-process research and development
(“IPR&D”). Amortization related to the fair value
of amortizable intangible assets, taken over a weighted average
life of 10 years for customer relationships and brands and
other marketing intangibles, 11 years for patented
products, and 11 years for product rights, is reflected as
pro forma adjustments to the unaudited pro forma condensed
combined statements of income.
|
The determination of the estimated intangible asset fair values
was based upon various empirical studies, historical acquisition
experience, economic factors, and estimated future cash flows of
Valeant. A key variable in determining the fair value of
IPR&D included the application of probability factors
related to the likelihood of success of the respective products
reaching each remaining stage of clinical and regulatory
development, including market commercialization. The fair value
of IPR&D is supported by industry and academic research
papers that calculate probabilities of success by phase of
development, and by Valeant’s management view on regulatory
risks for its IPR&D. Changes in these probability factors
will have a significant impact on the asset values.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
|
Estimated Fair
|
|
|
Estimated
|
|
|
|
Value
|
|
|
Useful Life
|
|
|
|
(In thousands)
|
|
|
Product rights
|
|
$
|
685,650
|
|
|
|
11 years
|
|
Other formulations and technologies
|
|
|
149,500
|
|
|
|
10 years
|
|
Patented products
|
|
|
31,100
|
|
|
|
11 years
|
|
Brands and other marketing intangibles:
|
|
|
|
|
|
|
|
|
Definite lived
|
|
|
1,349,971
|
|
|
|
10 years
|
|
Indefinite lived
|
|
|
213,500
|
|
|
|
N/A
|
|
Customer relationships
|
|
|
531,888
|
|
|
|
10 years
|
|
IPR&D — indefinite-lived*
|
|
|
1,018,700
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
3,980,309
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
143
NOTES TO
THE UNAUDITED PRO FORMA
CONDENSED
COMBINED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
*
|
Acquired IPR&D assets are initially recognized at fair
value and are classified as indefinite-lived assets until the
successful completion or abandonment of the associated research
and development efforts. Accordingly, during the development
period after the acquisition date, these assets will not be
amortized into earnings; instead these assets will be subject to
periodic impairment testing. Upon successful completion of the
development process for an acquired IPR&D project, a
determination as to the useful life of the asset will be made;
at that point in time, the asset would then be considered a
finite-lived intangible asset and amortization of the asset into
earnings would commence.
|
|
|
|
(d)
|
|
As of the effective time of the merger, Valeant debt is required
to be measured at fair value. Biovail has calculated the
adjustment using publicly available information:
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Fair value adjustments related to debt:
|
|
|
|
|
Prepayment penalty on Valeant 8.375% senior unsecured notes
|
|
$
|
65,229
|
|
Prepayment penalty on Valeant 7.625% senior unsecured notes
|
|
|
105,720
|
|
Other adjustments to long-term debt
|
|
|
11,549
|
|
|
|
|
|
|
|
|
|
182,498
|
|
Elimination of Valeant debt issue costs
|
|
|
15,205
|
|
|
|
|
|
|
|
|
|
197,703
|
|
Fair value adjustment to equity component of convertible
notes
(a)
|
|
|
123,843
|
|
|
|
|
|
|
Total
|
|
$
|
321,546
|
|
|
|
|
|
|
|
|
|
(a)
|
|
In accordance with
ASC 470-20,
Debt with Conversion and Other Options
, Biovail is
required to separately account for the liability component and
equity component of the Valeant 3% and 4% convertible
subordinated notes as the notes have cash settlement features.
The fair value of the convertible notes has been allocated to
the liability component in a manner reflecting the combined
company’s interest rate at the effective date of the merger
for a similar debt instrument without the conversion feature;
the residual of the fair value is allocated to additional
paid-in capital.
|
|
|
|
(e)
|
|
Under the merger agreement, Valeant stockholders will receive a
special dividend of $16.77 per share of Valeant common stock
immediately prior to closing of the merger.
|
|
|
|
(f)
|
|
Represents an adjustment to liabilities relating to contingent
consideration payable in connection with Valeant’s
acquisition of Princeton Pharma Holdings LLC.
|
|
|
|
(g)
|
|
Represents the estimated deferred income tax liability, based on
an estimated income tax rate of 38%, multiplied by the value of
purchase price allocation adjustments made to assets and
liabilities, excluding goodwill. A combined U.S. Federal and
state estimated tax rate of 38% has been used in accordance with
Valeant’s intention to repatriate the earnings of
non-U.S.
subsidiaries which are owned directly or indirectly by Valeant.
The tax benefit associated with share-based compensation is
based on a preliminary estimate and may be different than the
actual amount recorded. This adjustment also includes the
reversal of the deferred income
|
144
NOTES TO
THE UNAUDITED PRO FORMA
CONDENSED
COMBINED FINANCIAL
STATEMENTS — (Continued)
|
|
|
|
|
tax liability associated with intangible assets previously
recorded by Valeant. The pro forma adjustment to record the
effect of deferred taxes was computed as follows:
|
|
|
|
|
|
|
|
(In thousands)
|
|
|
Estimated fair value adjustment of identifiable intangible
assets to be acquired
|
|
$
|
3,139,477
|
|
Estimated fair value adjustment of inventory to be acquired
|
|
|
56,000
|
|
Estimated fair value adjustment of property, plant and equipment
to be acquired
|
|
|
31,100
|
|
Estimated fair value adjustment related to debt
|
|
|
(197,703
|
)
|
|
|
|
|
|
Total estimated adjustments of assets to be acquired and
liabilities to be assumed
|
|
|
3,028,874
|
|
|
|
|
|
|
Deferred income taxes associated with the estimated adjustments
of assets to be acquired and liabilities to be assumed at 38%
tax rate
|
|
$
|
1,150,972
|
|
Deferred income taxes associated with exchange of stock-based
awards
|
|
|
(85,173
|
)
|
|
|
|
|
|
Estimated adjustment to deferred income taxes
|
|
$
|
1,065,799
|
|
|
|
|
|
|
|
|
|
|
|
For purposes of these unaudited pro forma condensed combined
financial statements, no adjustment has been made to the balance
of unrecognized tax benefits, which is based on a preliminary
assessment and may be subject to change.
|
|
|
|
(h)
|
|
Goodwill is calculated as the difference between the acquisition
date fair value of the consideration expected to be transferred
and the preliminary values assigned to the assets acquired and
liabilities assumed. Goodwill is not amortized.
|
This note should be read in conjunction with
Note 1.
Description of Transaction
;
Note 2. Basis of
Presentation
;
Note 4. Estimate of Consideration
Expected to be Transferred;
and
Note 5. Estimate of
Assets to be Acquired and Liabilities to be Assumed
.
Adjustments included in the column under the heading “Pro
Forma Adjustments” represent the following:
(a) To adjust amortization expense to an estimate of
intangible asset amortization, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Eliminate Valeant’s historical intangible asset
amortization expense
|
|
$
|
(70,640
|
)
|
|
$
|
(41,665
|
)
|
Estimated amortization expense of acquired finite-lived
intangibles:
|
|
|
|
|
|
|
|
|
Product rights (estimated to be $685,650 over average useful
life of 11 years)
|
|
|
35,322
|
|
|
|
20,190
|
|
Other formulations and technologies (estimated to be $149,500
over useful life of 10 years)
|
|
|
14,950
|
|
|
|
7,475
|
|
Patented products (estimated to be $31,100 million over
useful life of 11 years)
|
|
|
2,827
|
|
|
|
1,414
|
|
Brand and other marketing intangibles (estimated to be
$1,349,971 over useful life of 10 years)
|
|
|
133,320
|
|
|
|
66,926
|
|
Customer relationships (estimated to be $531,888 over useful
life of 10 years)
|
|
|
52,610
|
|
|
|
26,531
|
|
|
|
|
|
|
|
|
|
|
Adjustment(a)
|
|
$
|
168,389
|
|
|
$
|
80,871
|
|
|
|
|
|
|
|
|
|
|
145
NOTES TO
THE UNAUDITED PRO FORMA
CONDENSED
COMBINED FINANCIAL
STATEMENTS — (Continued)
|
|
|
(a)
|
|
Amortization expense related to intangible assets that arose
from the business combinations completed by Valeant in the
second quarter of 2010 had been included in the unaudited pro
forma combined statements of net income as if Biovail has
acquired those intangible assets as of the date on which each
respective business combination was consummated.
|
(b) To adjust depreciation expense relating to property,
plant and equipment fair value increments, as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Estimated depreciation expense for fair value increments:
|
|
|
|
|
|
|
|
|
Buildings (estimated to be $(1,000) over remaining useful life
of 30 years)
|
|
$
|
(33
|
)
|
|
$
|
(17
|
)
|
Machinery and equipment, automobiles (estimated to be $7,000
over remaining useful life of 7 years)
|
|
|
1,000
|
|
|
|
500
|
|
Furniture and fixtures (estimated to be $400 over remaining
useful life of 7 years)
|
|
|
57
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,024
|
|
|
$
|
512
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense relating to the property, plant and
equipment fair value increments has been allocated to cost of
goods sold, research and development, and selling, general and
administrative in the following percentages: 50%, 4% , 46%,
respectively, which is consistent with Valeant’s historical
allocation.
(c) To record the following debt related adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
|
Year Ended
|
|
|
Ended
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2009
|
|
|
2010
|
|
|
|
(In thousands)
|
|
|
Eliminate interest expense recorded by Valeant related to the
8.375% senior unsecured notes(a)
|
|
$
|
(18,149
|
)
|
|
$
|
(16,290
|
)
|
Eliminate interest expense recorded by Valeant related to the
7.625% senior unsecured notes(a)
|
|
|
—
|
|
|
|
(7,061
|
)
|
Eliminate interest expense recorded by Valeant related to the
senior secured term loan(a)
|
|
|
—
|
|
|
|
(135
|
)
|
Amortization of the fair value adjustment to the 4% convertible
subordinated notes(b)
|
|
|
(780
|
)
|
|
|
(186
|
)
|
Additional interest expense related to the new debt in
connection with the merger(c)
|
|
|
180,553
|
|
|
|
91,096
|
|
Eliminate amortization of deferred financing costs recorded by
Biovail related to the senior secured revolving credit
facility(d)
|
|
|
(1,816
|
)
|
|
|
(1,627
|
)
|
|
|
|
|
|
|
|
|
|
Total(e)
|
|
$
|
159,808
|
|
|
$
|
65,797
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Interest expense, including amortization of original issue
discount and underwriter fees, on the existing Valeant 8.375%
and 7.625% senior unsecured notes and senior secured term
loan will be eliminated as these notes and term loan will be
repaid as part of the merger transaction.
|
|
|
|
(b)
|
|
Fair value adjustment to existing Valeant debt will be amortized
to net earnings of the combined company using the effective
interest method. The effective interest rate is 7.46%.
|
146
NOTES TO
THE UNAUDITED PRO FORMA
CONDENSED
COMBINED FINANCIAL
STATEMENTS — (Continued)
|
|
|
(c)
|
|
The companies, in connection with the merger, have secured a
commitment of $2.772 billion through a term loan facility
provided by the commitment parties. The term loan facility
consists of two tranches: senior secured term loan A facility
(“Term A Facility”) with a principal amount of
$500 million and senior secured term loan B facility
(“Term B Facility”) with a principal amount of
$2,272 million ($300 million of which is a delayed
draw directly linked to the payment of the post-merger special
dividend) and is expected to have an original issue discount of
$69.3 million on a fully drawn basis. Term A Facility
matures on the fifth anniversary of the issuance of the loan and
is estimated to bear interest at a rate of 6.25%. Term B
Facility matures on the sixth anniversary of the issuance of the
loan and is estimated to bear interest at a rate of 6.50%.
Approximately $86 million of issue costs are expected to be
incurred and will be amortized using an effective interest
method. The effective interest rates for Term A Facility and
Term B Facility are 7.57% and 7.82%, respectively. Term A
Facility and Term B Facility are both committed as floating rate
loans. Additionally, the committed facility provides an element
of both rate and pricing market flex which could cause the rate
estimates applied in these unaudited pro forma condensed
combined financial statements to vary from those used above.
|
|
|
|
(d)
|
|
Amortization of deferred financing costs related to
Biovail’s senior secured revolving credit facility will be
eliminated as this facility will be terminated in connection
with the merger. There were no outstanding borrowings under this
facility as of June 30, 2010.
|
|
|
|
(e)
|
|
No interest income has been imputed on this cash balance in the
unaudited pro forma condensed combined statements of income.
|
(d) To record an estimate of the deferred income tax
impacts of the acquisition on the balance sheet and income
statement, primarily related to the additional expense on
incremental debt to finance the merger, estimated fair value
adjustments for inventory, property, plant and equipment and
intangibles, share-based compensation and reversal of
acquisition-related transaction costs (see note 6(a), (b),
(c), (e), (f), (k)). A combined U.S. Federal and state
estimated tax rate of 38% has been used in accordance with
Valeant’s intention to repatriate to the U.S. the
earnings of
non-U.S. subsidiaries
which are owned by the U.S. corporation. The effective tax
rate of the combined company could be significantly different
than the tax rates assumed for purposes of preparing the
unaudited pro forma condensed combined financial statements for
a variety of factors, including post-merger activities. The
income tax impact also includes the elimination of the
non-recurring tax benefits associated with the reduction of the
valuation allowance on U.S. net deferred tax assets that
was recorded by each of Biovail and Valeant in 2009. These
valuation allowance reductions would not have been expected to
be recorded if the merger had occurred on January 1, 2009.
The valuation allowance previously recorded by Valeant would
have been eliminated as at the closing date of the merger as a
result of the recording of deferred tax liabilities associated
with purchase price adjustments, rather than Valeant reducing
the valuation allowance as a tax benefit during 2009. In
addition, as a result of the limitation on Biovail’s
utilization of net operating loss carryovers immediately after
the merger, Biovail would have been expected to increase its
valuation allowance as of the merger date and maintain this
increased valuation allowance on U.S. net deferred tax
assets at the same amount in 2009 and the second quarter of
2010. Biovail and Valeant have assumed that their remaining net
deferred tax assets presented in the unaudited pro forma
condensed combined balance sheet as of June 30, 2010 will
be utilized based on reversing temporary differences, expected
future income and, if necessary, available tax-planning
strategies relating to the timing of the repatriation of foreign
earnings which are not permanently reinvested. In addition,
certain deferred tax balances have been reclassified from
noncurrent deferred tax assets to noncurrent deferred tax
liabilities in order to net deferred tax balances in each tax
jurisdiction.
(e) To eliminate acquisition-related transaction costs
incurred by Biovail and Valeant for the six months ended
June 30, 2010 as they do not have a continuing impact on
the combined company’s financial results.
(f) To adjust acquired inventory to an estimate of fair
value. The combined company’s cost of sales will reflect
the increased valuation of Valeant’s inventory as the
acquired inventory is sold which is expected to occur within the
first year post-acquisition. There is no continuing impact of
the acquired inventory adjustment on the combined
147
NOTES TO
THE UNAUDITED PRO FORMA
CONDENSED
COMBINED FINANCIAL
STATEMENTS — (Continued)
operating results, and as such, it is not included in the
unaudited pro forma condensed combined statement of income.
(g) To adjust other long-term assets, net, as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
Eliminate Valeant’s historical deferred charges associated
with the Valeant debt
|
|
$
|
(15,021
|
)
|
Eliminate Biovail’s historical deferred charges associated
with the Biovail senior secured revolving credit facility
|
|
|
(6,316
|
)
|
Estimated debt issuance costs associated with the new term loan
facility entered into in connection with the merger
|
|
|
85,655
|
|
|
|
|
|
|
Total
|
|
$
|
64,318
|
|
|
|
|
|
|
(h) To eliminate Valeant’s historical prepaid expenses
associated with the Valeant debt.
(i) To adjust goodwill to an estimate of acquisition-date
goodwill, as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
Eliminate Valeant’s historical goodwill
|
|
$
|
(361,133
|
)
|
Estimated transaction goodwill
|
|
|
2,909,177
|
|
|
|
|
|
|
Total
|
|
$
|
2,548,044
|
|
|
|
|
|
|
(j) To adjust intangible assets (including IPR&D
intangibles) to an estimate of fair value, as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Eliminate Valeant’s historical intangible assets
|
|
$
|
(840,832
|
)
|
Estimated fair value of intangible assets acquired
|
|
|
3,980,309
|
|
|
|
|
|
|
Total
|
|
$
|
3,139,477
|
|
|
|
|
|
|
(k) To adjust share-based compensation expense related to
unvested stock options and RSUs to be issued by the combined
company to replace Valeant stock options and Valeant RSUs.
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months
|
|
|
Year Ended
|
|
Ended
|
|
|
December 31,
|
|
June 30,
|
|
|
2009
|
|
2010
|
|
|
(In thousands)
|
|
Eliminate Valeant’s historical share-based compensation
expense
|
|
$
|
(16,121
|
)
|
|
$
|
(11,749
|
)
|
Estimated share-based compensation relating to the combined
company’s stock options and RSUs issued to replace the
unvested Valeant stock options and the unvested Valeant RSUs
|
|
|
58,036
|
|
|
|
23,926
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
41,915
|
|
|
$
|
12,177
|
|
|
|
|
|
|
|
|
|
|
The share-based compensation adjustment has been allocated to
cost of goods sold, research and development, and selling,
general and administrative in the following percentages: 2%, 2%,
96%, respectively, which is consistent with Valeant’s
historical allocation.
148
NOTES TO
THE UNAUDITED PRO FORMA
CONDENSED
COMBINED FINANCIAL
STATEMENTS — (Continued)
(l) To adjust property, plant and equipment to an estimate
of fair value, as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
Estimated fair value increments of property, plant and equipment
acquired:
|
|
|
|
|
Land
|
|
$
|
24,700
|
|
Buildings
|
|
|
(1,000
|
)
|
Machinery, equipment and automobiles
|
|
|
7,000
|
|
Furniture and fixtures
|
|
|
400
|
|
|
|
|
|
|
Total
|
|
$
|
31,100
|
|
|
|
|
|
|
(m) To record the new debt to be incurred in connection
with the merger; to adjust the remaining Valeant debt to its
estimated fair value; and to record the settlement of
Valeant’s 8.375% and 7.625% senior unsecured notes,
including related prepayment penalty, as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Establish new debt in connection with the merger(a)
|
|
$
|
2,410,200
|
|
Estimated net fair value increase to continuing debt
|
|
|
182,498
|
|
Settlement of Valeant 8.375% senior unsecured notes(b)
|
|
|
(430,229
|
)
|
Settlement of Valeant 7.625% senior unsecured notes(c)
|
|
|
(505,720
|
)
|
|
|
|
|
|
Total
|
|
$
|
1,656,749
|
|
|
|
|
|
|
|
|
|
(a)
|
|
The companies, in connection with the merger, have secured a
commitment of $2.772 billion through a term loan facility
provided by the commitment parties to fund the merger
transaction, including the repayment of certain existing Valeant
debt instruments, the special dividend, fees and transaction
costs and the proposed post-merger special dividend. The debt is
expected to be issued with an original issue discount of
$69.3 million on a fully drawn basis. In addition, the
committed facility includes a revolving facility of
$250 million which is considered as undrawn for the
purposes of the unaudited pro forma condensed combined financial
statements. The post-merger special dividend is not reflected in
these unaudited pro forma condensed financial statements and
accordingly the related $300 million portion of Term B
Facility is also considered undrawn for purposes of the
unaudited pro forma condensed combined financial statements.
|
|
|
|
(b)
|
|
Consists of repayment of the principal balance of
$365 million and an estimated prepayment penalty of
$65.2 million. Changes in the timing of this repayment will
impact the amount of the prepayment penalty; on a monthly basis,
the prepayment penalty will decrease by approximately
$2.1 million.
|
|
|
|
(c)
|
|
Consists of repayment of the principal balance of
$400 million and an estimated prepayment penalty of
$105.7 million. Changes in the timing of this repayment
will impact the amount of the prepayment penalty; on a monthly
basis, the prepayment penalty will decrease by approximately
$1.5 million.
|
(n) To record repayment of the Valeant senior secured term
loan which will be refinanced in connection with the merger.
(o) To record adjustment to fair value of contingent
consideration payable in connection with Valeant’s
acquisition of Princeton Pharma Holdings LLC.
149
NOTES TO
THE UNAUDITED PRO FORMA
CONDENSED
COMBINED FINANCIAL
STATEMENTS — (Continued)
(p) To record the common stock portion of the transaction
consideration and to eliminate Valeant common stock, at par, as
follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Eliminate Valeant common stock
|
|
$
|
(759
|
)
|
Issuance of Biovail common stock
|
|
|
3,136,787
|
|
|
|
|
|
|
Total
|
|
$
|
3,136,028
|
|
|
|
|
|
|
(q) To record the pre-merger special dividend and the
issuance of the combined company’s stock options and RSUs,
as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Pre-merger special dividend
|
|
$
|
(1,343,949
|
)
|
Less: amount charged to accumulated deficit(note 6(r))
|
|
|
(524,683
|
)
|
|
|
|
|
|
|
|
|
(819,266
|
)
|
Increase in equity component of Valeant 4% convertible
subordinated notes(a)
|
|
|
123,843
|
|
Issuance of the combined company’s replacement options and
RSUs
|
|
|
163,257
|
|
|
|
|
|
|
Total
|
|
$
|
(532,166
|
)
|
|
|
|
|
|
|
|
|
(a)
|
|
In accordance with
ASC 470-20,
Debt with Conversion and Other Options
, as the notes have
cash settlement features, the combined company is required to
separately account for the liability component and equity
component of the Valeant 4% convertible subordinated notes. The
fair value of the convertible notes has been allocated to the
liability component in a manner reflecting the combined
company’s estimated interest rate at the effective date of
the merger for a similar debt instrument without the conversion
feature; the residual of the fair value is allocated to
additional paid-in capital.
|
(r) To record the excess of the pre-merger special dividend
over available additional paid-in capital and to eliminate the
Valeant accumulated deficit, estimated acquisition-related
transaction costs and the increase in the valuation allowance
against deferred tax assets of Biovail, all of which are not
expected to be recurring, as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Pre-merger special dividend
|
|
$
|
(1,343,949
|
)
|
Less: amount charged to additional paid-in
capital(note 6(q))
|
|
|
(819,266
|
)
|
|
|
|
|
|
|
|
|
(524,683
|
)
|
Eliminate Valeant accumulated deficit, after pre-merger special
dividend
|
|
|
1,098,457
|
|
Estimated acquisition-related transaction costs assumed to be
non-recurring, net of tax of $7,980(a)
|
|
|
(68,292
|
)
|
Eliminate deferred charges associated with the Biovail senior
secured revolving credit facility, net of tax of $2,400
|
|
|
(3,916
|
)
|
Increase in valuation allowance against Biovail deferred tax
assets
|
|
|
(80,000
|
)
|
|
|
|
|
|
Total
|
|
$
|
421,566
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Total acquisition-related transaction costs to be incurred by
Biovail and Valeant are estimated to be approximately
$88.6 million, of which no amount was charged in the year
ended December 31, 2009 and $12.4 million was incurred
and expensed during the six months ended June 30, 2010.
Because the acquisition-related transaction costs are not
expected to have a continuing impact on the combined
company’s results, the amount was recorded as an increase
to accumulated deficit.
|
150
NOTES TO
THE UNAUDITED PRO FORMA
CONDENSED
COMBINED FINANCIAL
STATEMENTS — (Continued)
(s) To eliminate Valeant accumulated other comprehensive
income.
(t) To record the cash impact of financing, pre-merger
special dividend, and transaction costs as follows:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Proceeds from new term loan facility
|
|
$
|
2,410,200
|
|
Debt issue cost
|
|
|
(85,655
|
)
|
Repayment of 8.375% Valeant senior unsecured notes
|
|
|
(430,229
|
)
|
Repayment of 7.625% Valeant senior unsecured notes
|
|
|
(505,720
|
)
|
Repayment of Valeant senior secured term loan
|
|
|
(30,000
|
)
|
Acquisition-related transaction costs
|
|
|
(76,272
|
)
|
Payment of pre-merger special dividend
|
|
|
(1,343,949
|
)
|
|
|
|
|
|
Total
|
|
$
|
(61,625
|
)
|
|
|
|
|
|
In addition, the unaudited pro forma condensed combined
financial statements do not include the following amounts
related to the anticipated post-merger special dividend:
|
|
|
|
|
|
|
(In thousands)
|
|
|
Delayed draw down on term loan facility
|
|
$
|
300,000
|
|
Post-merger special dividend of $1.00 per common share
|
|
|
(322,300
|
)
|
|
|
|
|
|
Total
|
|
$
|
(22,300
|
)
|
|
|
|
|
|
(u) The unaudited pro forma combined basic and diluted
earnings per share for the period presented are based on the
combined basic and diluted weighted-average shares. The
historical basic and diluted weighted average shares of Valeant
were assumed to be replaced by the shares expected to be issued
by Biovail to effect the merger.
The unaudited pro forma condensed combined financial statements
do not reflect the expected realization of pre-tax annual cost
savings of approximately $175 million by the second year
after close of the merger. These savings are expected in
selling, information technology and administrative functions,
research and development and manufacturing. Although management
expects that cost savings will result from the merger, there can
be no assurance that these cost savings will be achieved. The
unaudited pro forma condensed combined financial statements also
do not reflect estimated acquisition-related restructuring
charges associated with the expected pre-tax cost savings, which
is estimated to be in the range of $130 to $150 million, on
a pre-tax basis, and which will be expensed as incurred.
151
COMPARATIVE
PER SHARE MARKET PRICE DATA AND DIVIDEND INFORMATION
Valeant’s common stock is listed and traded on the NYSE
under the symbol “VRX.” Biovail’s common shares
are listed and traded on the NYSE and TSX under the symbol
“BVF.” The following table sets forth, for the fiscal
quarters indicated, the high and low sales price per share of
Valeant common stock and the high and low sales price per share
of Biovail common shares, in each case as reported on the NYSE.
In addition, the table also sets forth the quarterly cash
dividends per share declared by Valeant with respect to its
common stock (excluding the pre-merger special dividend) and by
Biovail with respect to its common shares. On the Valeant record
date (August 18, 2010 ), there were approximately
76,696,012 shares of Valeant common stock outstanding. On
the Biovail record date (August 18, 2010), there were
approximately 158,646,462 Biovail common shares outstanding.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valeant
|
|
|
Biovail
|
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Dividends
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Dividends
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High
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Low
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Declared
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High
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Low
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Declared
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2008
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First Quarter
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$
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14.63
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$
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11.00
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—
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$
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14.90
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$
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10.00
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$
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0.375
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Second Quarter
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$
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17.71
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$
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11.99
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—
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$
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12.96
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$
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9.53
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$
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0.375
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Third Quarter
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$
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21.00
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$
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16.00
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—
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$
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11.27
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$
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9.27
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$
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0.375
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Fourth Quarter
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$
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23.28
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$
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14.58
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—
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$
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9.88
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$
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6.65
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$
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0.375
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2009
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First Quarter
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$
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24.65
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$
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15.64
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—
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$
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12.15
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$
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9.41
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$
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0.375
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Second Quarter
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$
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26.22
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$
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16.34
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—
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$
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13.75
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$
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9.26
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$
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0.09
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Third Quarter
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$
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28.13
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$
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22.17
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—
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$
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15.50
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$
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12.14
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$
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0.09
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Fourth Quarter
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$
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34.44
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$
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26.63
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—
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$
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15.49
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$
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12.91
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$
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0.09
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2010
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First Quarter
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$
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43.42
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$
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31.03
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—
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$
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16.97
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$
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13.64
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$
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0.09
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Second Quarter
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$
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53.50
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$
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40.50
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—
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$
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19.81
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$
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13.67
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$
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0.095
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Third Quarter (until August 17, 2010)
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$
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59.42
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$
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50.25
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—
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$
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23.40
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$
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18.07
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$
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0.095
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152
CERTAIN
HISTORICAL AND PRO FORMA PER SHARE DATA
The following tables set forth certain historical, pro forma and
pro forma equivalent per share financial information for Valeant
common stock and Biovail common shares. The pro forma and pro
forma equivalent per share information gives effect to the
merger as if the merger had occurred on June 30, 2010 in
the case of book value per share data and as of January 1,
2009 in the case of net income per share data.
The pro forma per share balance sheet information combines
Valeant’s June 30, 2010 unaudited consolidated balance
sheet with Biovail’s June 30, 2010 unaudited
consolidated balance sheet. The pro forma per share income
statement information for the fiscal year ended
December 31, 2009, combines Valeant’s audited
consolidated statement of income for the fiscal year ended
December 31, 2009, with Biovail’s audited consolidated
statement of income for the fiscal year ended December 31,
2009. The pro forma per share income statement information for
the six months ended June 30, 2010, combines Valeant’s
unaudited consolidated statement of income for the six months
ended June 30, 2010, with Biovail’s unaudited
consolidated statement of income for the six months ended
June 30, 2010. The Valeant pro forma equivalent per share
financial information is calculated by multiplying the unaudited
Biovail pro forma combined per share amounts by the 1.7809
exchange ratio.
The following information should be read in conjunction with the
audited consolidated financial statements of Valeant and Biovail
contained in Valeant’s and Biovail’s Annual Reports on
Form 10-K for the year ended December 31, 2009, and
the unaudited consolidated financial statements of Valeant and
Biovail contained in Valeant’s and Biovail’s quarterly
reports on Form 10-Q for the quarterly period ended
June 30, 2010, which are incorporated by reference in this
joint proxy statement/prospectus, and the financial information
contained in the section entitled “Biovail Corporation and
Valeant Pharmaceuticals International Unaudited Pro Forma
Condensed Combined Financial Statements” beginning on
page 134. The unaudited pro forma information below is not
necessarily indicative of the operating results or financial
position that would have occurred if the merger had been
completed as of the periods presented, nor is it necessarily
indicative of the future operating results or financial position
of the combined company. In addition, the unaudited pro forma
information does not purport to indicate balance sheet data or
results of operations data as of any future date or for any
future period.
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As of and for the
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As of and for the
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Six Months Ended
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Year Ended
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June 30, 2010
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December 31, 2009
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Valeant Historical Data per Share of Common Stock
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Income from continuing operations attributable to controlling
interest
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Basic
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$
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0
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.87
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$
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3
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.15
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Diluted
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$
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0
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.82
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$
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3
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.07
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Dividends declared per share of Common Stock
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—
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—
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Book value per share of Common Stock
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$
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4
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.65
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$
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4
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.80
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As of and for the
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As of and for the
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Six Months Ended
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Year Ended
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June 30, 2010
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December 31, 2009
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Biovail Historical Data per Common Share
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Income from continuing operations
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Basic
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$
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0
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.19
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$
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1
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.11
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Diluted
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$
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0
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.19
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$
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1
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.11
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Dividends declared per Common Share
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$
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0
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.185
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$
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0
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.65
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Book value per Common Share
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$
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8
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.58
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$
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8
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.56
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153
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As of and for the
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As of and for the
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Six Months Ended
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Year Ended
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June 30, 2010
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December 31, 2009
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Valeant Pro Forma Equivalent Combined Data per Share of
Common Stock
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Income from continuing operations attributable to controlling
interest
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Basic
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$0
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.04
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$0.43
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Diluted
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$0
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.04
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$0.43
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Dividends declared per share of Common Stock
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$0
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.33
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$1.15
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Book value per share of Common Stock
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$28
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.71
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N/A
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As of and for the
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As of and for the
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Six Months Ended
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Year Ended
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June 30, 2010
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December 31, 2009
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Biovail Pro Forma Combined Data per Common Share
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Income from continuing operations
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Basic
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$0
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.02
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$0.24
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Diluted
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$0
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.02
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$0.24
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Dividends declared per Common Share
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$0
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.185
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$0.65
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Book value per Common Share
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$16
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.12
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N/A
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154
COMPARISON
OF RIGHTS OF VALEANT STOCKHOLDERS
AND BIOVAIL SHAREHOLDERS
If the merger is completed, stockholders of Valeant will become
shareholders of Biovail. The rights of Valeant stockholders are
currently governed by the DGCL and the restated certificate of
incorporation and amended and restated bylaws of Valeant. The
rights of Biovail shareholders are currently governed by the
CBCA and the articles of continuance and bylaws of Biovail.
This section of the joint proxy statement/prospectus describes
the material differences between the rights of Valeant
stockholders and Biovail shareholders. This section does not
include a complete description of all differences among the
rights of Valeant stockholders and Biovail shareholders, nor
does it include a complete description of the specific rights of
these persons.
The following summary is qualified in its entirety by reference
to, and you are urged to read carefully, the relevant provisions
of the DGCL and the CBCA, as well as the certificate of
incorporation and bylaws of Valeant and the articles of
continuance and bylaws of Biovail. This summary does not reflect
any of the rules of the NYSE or TSX that may apply to Valeant or
Biovail in connection with the merger. Copies of the certificate
of incorporation and bylaws of Valeant and the articles of
continuance and bylaws of Biovail are filed as exhibits to the
reports of Valeant and Biovail incorporated by reference in this
joint proxy statement/prospectus. See “Where You Can Find
More Information” beginning on page 175.
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Valeant
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Biovail
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Outstanding Capital Stock
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Valeant has outstanding only one class of common stock. Holders
of Valeant common stock are entitled to all of the respective
rights and obligations provided to common stockholders under
Delaware law and Valeant’s restated certificate of
incorporation (referred to herein as its “certificate of
incorporation”) and amended and restated bylaws (referred
to herein as its “bylaws”).
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Biovail has outstanding only one class of common shares. Holders
of Biovail common shares are entitled to all of the respective
rights and obligations provided to shareholders under the CBCA
and Biovail’s articles of continuance and amended and
restated bylaws (referred to herein as its “bylaws”).
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Authorized Capital Stock
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The authorized capital stock of Valeant consists of (i)
200,000,000 shares of common stock, $0.01 par value,
and (ii) 10,000,000 shares of preferred stock,
$0.01 par value.
Under
Valeant’s certificate of incorporation, Valeant’s
board of directors has the authority to issue one or more series
of preferred stock with designations, voting powers, preferences
and rights, and any qualifications, restrictions or limitations
thereof, as the board of directors may determine.
As of
August 18, 2010, there were (i) approximately
76,696,012 shares of Valeant common stock outstanding and
(ii) no shares of Valeant preferred stock outstanding.
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The authorized share capital of Biovail consists of (i) an
unlimited number of Class A Special shares and (ii) an unlimited
number of common shares.
Under
Biovail’s articles of continuance, Biovail’s board of
directors has the authority to issue one or more series of Class
A Special shares with designations, rights, privileges,
restrictions and conditions, as the board of directors may
determine.
As of
August 18, 2010, there were (i) approximately
158,646,462 Biovail common shares outstanding and (ii) no
Class A Special shares outstanding.
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155
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Valeant
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Biovail
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Designations of Preferred Stock
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Valeant’s certificate of incorporation designates Series A
Participating Preferred Stock, which stock is entitled to
quarterly dividends, voting rights superior to the common stock
and a liquidation preference. No shares of Series A
Participating Preferred Stock are outstanding.
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Biovail’s articles of continuance provide that, subject to
the prior rights of the holders of the Class A Special shares
(and any other shares ranking senior to the common shares with
respect to priority in the payment of dividends), the holders of
common shares shall be entitled to receive any dividends
declared by the board of directors of Biovail, and Biovail shall
pay dividends thereon, as and when declared by the board of
directors of Biovail.
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Biovail’s articles of continuance provide that, in the
event of the dissolution, liquidation or winding- up of Biovail,
whether voluntary or involuntary, or any other distribution of
assets of Biovail among its shareholders for the purpose of
winding-up its affairs, subject to the prior rights of the
holders of the Class A Special shares (and any other shares
ranking senior to the common shares with respect to priority in
the distribution of assets upon dissolution, liquidation or
winding- up or distribution for the purpose of winding-up), the
holders of common shares shall be entitled to receive the
remaining property and assets of Biovail.
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Voting Rights
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Each holder of Valeant common stock is entitled to one vote per
share on all matters to be voted on by stockholders.
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Each holder of Biovail common shares is entitled to receive
notice of and attend all meetings of Biovail shareholders and
shall have one vote for each common share held at all meetings
of Biovail shareholders, except meetings at which, pursuant to
the CBCA, only holders of another specified class or series of
shares of Biovail are entitled to vote separately as a class or
series. Also see “— Mergers, Consolidations and
Other Transaction
s
” beginning on page 162.
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Dividend Rights
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The DGCL generally provides that, subject to certain
restrictions, the directors of every corporation may declare and
pay dividends upon the shares of its capital stock either out of
its surplus or, in case there is no such surplus, out of its net
profits for the fiscal year in which the dividend is declared
and the preceding fiscal year.
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Under the CBCA, dividends may be declared at the discretion of
the board of directors. Biovail may pay dividends unless there
are reasonable grounds for believing that (1) Biovail is, or
would after such payment be, unable to pay its liabilities as
they become due or (2) the realizable value of Biovail’s
assets would, as a result of the dividend, be less than the
aggregate of its liabilities and stated capital of all classes
of shares.
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156
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Valeant
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Biovail
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Size of the Board of Directors
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The DGCL provides that the board of directors of a Delaware
corporation must consist of one or more directors as fixed by
the corporation’s certificate of incorporation or bylaws.
Valeant’s board of directors currently has 10 members.
Valeant’s certificate of incorporation provides that the
Valeant board of directors must consist of not less than three
nor more than 20 members, as may be fixed from time to time by a
resolution adopted by the majority of the board of directors.
Valeant’s bylaws provide that so long as Valeant’s
certificate of incorporation provides that the number of
directors may be fixed by the board of directors, the Valeant
board of directors must consist of not less than seven nor more
than 11 members.
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The CBCA provides that a board of directors of a CBCA
corporation that is a distributing corporation whose issued
securities remain outstanding and are held by more than one
person must have no fewer than three directors, at least two of
whom are not officers or employees of the corporation or its
affiliates.
Biovail’s board of directors currently has 12 members.
Pursuant to the terms of the merger agreement, the combined
company’s board of directors will comprise
11 directors. See “The Merger — Board of
Directors and Management After the Merger” beginning on
page 90.
Biovail’s articles of incorporation state that the minimum
number of directors is three and the maximum is 20. The actual
number of directors, within that range, is determined by the
board of directors from time to time.
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The
CBCA provides that any amendment to increase or decrease this
minimum or maximum number of directors requires the approval of
shareholders of Biovail by special resolution.
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Classification of the Board of Directors
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Valeant’s certificate of incorporation provides for the
division of Valeant’s board of directors into three classes
of directors, as nearly equal in number as reasonably possible,
serving staggered three-year terms, with one-third of the board
of directors being elected each year.
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The CBCA provides that directors may be elected for a term of up
to three years, and that staggered terms are permissible;
however, Biovail’s bylaws and charter of the board of
directors provide that a director’s term of office shall be
from the date of the meeting at which such director is elected
or appointed until the close of the annual meeting of
shareholders next following such director’s election or
appointment or until such director’s successor is elected
or appointed. If qualified, a director whose term of office has
expired is eligible for re-election as a director.
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Election of Directors
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The DGCL provides that, unless the certificate of incorporation
or bylaws provide otherwise, directors will be elected by a
plurality of the votes of the shares present in person or
represented by proxy at the meeting and entitled to vote.
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The CBCA and Biovail’s bylaws provide that directors will
be elected by ordinary resolution of shareholders present in
person or represented by proxy at the meeting and entitled to
vote.
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The
Valeant bylaws provide that, in an uncontested election, each
director will be elected by the vote of the majority of votes
cast with respect to that director’s election, and that, in
a contested election (i.e., an election in which the number of
nominees exceeds the number of directors to be elected), each
director will be elected by a plurality of votes cast. For
purposes of the election of directors, a majority of the
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Pursuant to the CBCA, at least 25% of the directors of a CBCA
corporation must be resident Canadians.
Biovail’s corporate governance guidelines provide that, in
an uncontested election, each director who is elected by less
than a majority of votes cast with respect to that
director’s election (i.e. a director who receives a greater
number of votes “withheld” from his or her election
than votes “for” such election) shall promptly
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157
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Valeant
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Biovail
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votes cast means that the number of votes cast “for”
a director’s election exceeds 50% of the number of votes
cast with respect to that director’s election (excluding
abstentions).
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tender his or her written resignation to the board of directors
following the meeting at which the director is elected, which
will become effective upon acceptance by Biovail’s board of
directors.
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Removal of Directors
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Under the DGCL, where there is a classified board of directors,
any director may be removed only for cause, unless the
corporation’s certificate of incorporation provides
otherwise. Under the Valeant certificate of incorporation and
bylaws, Valeant stockholders may remove directors only for cause
and only by the affirmative vote of the holders of at least
66
2
/
3
%
of the voting power of all of the outstanding shares of capital
stock of Valeant entitled to vote generally in the election of
directors, voting together as a single class.
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Under the CBCA, unless the articles of a corporation provide for
cumulative voting (which is not the case for Biovail),
shareholders of the corporation may, by a majority of the votes
cast at a special meeting, remove any director or directors from
office. If holders of a class or series of shares have the
exclusive right to elect one or more directors, a director
elected by them may only be removed by a majority of the votes
cast at a meeting of the shareholders of that class or series.
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Filling of Vacancies on the Board of Directors
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Under the DGCL, a majority of the directors in office can fill
any vacancy or newly created directorship. Valeant’s
certificate of incorporation and bylaws provide that newly
created directorships resulting from any increase in the
authorized number of directors or any vacancies occurring on the
Valeant board of directors, however caused, may be filled by the
affirmative vote of a majority of the remaining directors even
though less than a quorum, or by a sole remaining director.
Each director so chosen will hold office for a term expiring at
the annual meeting of stockholders at which the term of office
of the class to which he or she has been elected expires, or in
the case of newly created directorships, will hold office until
such time as determined by the directors electing such new
director.
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In addition, the CBCA allows a vacancy on the board of directors
to be filled by a quorum of directors, except for the case in
which the vacancy results from an increase in the number or
minimum or maximum number of directors or from a failure to
elect the number or minimum number of directors required by
Biovail’s articles of continuance. Under the CBCA, a
vacancy among directors created by the removal of a director by
shareholders may be filled at a meeting of shareholders at which
the director is removed.
In
addition to the Board’s ability to fill a vacancy among
directors, the CBCA and Biovail’s articles of continuance
authorize the board of directors to appoint one or more
additional directors, who shall hold office for a term expiring
not later than the close of the next annual meeting of
shareholders, but the total number of directors so appointed may
not exceed one-third of the number of directors elected at the
previous annual meeting of shareholders, and those additional
directors may hold office for a term expiring not later than the
close of the next annual meeting of shareholders.
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158
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Valeant
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Biovail
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Ability to Call Special Meetings of Stockholders/
Shareholders
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Under the DGCL, a special meeting of stockholders may be called
by the board of directors or by any other person authorized to
do so in the corporation’s certificate of incorporation or
bylaws.
Valeant’s certificate of incorporation and bylaws provide
that special meetings of stockholders may be called at any time
only by the board of directors or the chairman of the board of
directors.
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Under the CBCA, the holders of not less than 5% of the shares
that carry a right to vote at a meeting may requisition the
directors to call a meeting of shareholders. If the directors do
not call the meeting within 21 days after receiving a
request in compliance with this provision, any shareholder who
signed the request may call the meeting.
Biovail’s bylaws provide that special meetings of
shareholders may be called at any time by the board of
directors.
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Notice of Annual and Special Meetings of Stockholders/
Shareholders
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Valeant’s bylaws provide that, except as otherwise
provided by law, written notice of every meeting of stockholders
must be given to each stockholder of record not less than 10 nor
more than 60 days before the date of the meeting.
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Under the CBCA, the board of directors must call an annual
meeting of shareholders not later than 15 months after
holding the last preceding annual meeting, but no later than six
months after the end of the corporation’s preceding
financial year. The corporation may apply to a Canadian court
for an order extending the time for calling an annual meeting.
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Pursuant to the CBCA and Biovail’s bylaws, meetings of
shareholders shall be held at such place within Canada as
determined by the directors, or at a place outside Canada if the
place is specified in Biovail’s articles of continuance or
if all the shareholders entitled to vote at the meeting agree
that the meeting is to be held at such place.
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Under the CBCA, notice of the date, time and place of a meeting
of Biovail shareholders must be given not less than 21 days
nor more than 60 days prior to the meeting to each
director, to the auditor and to each shareholder entitled to
vote at the meeting. In the case of a special notice, the notice
must also state the nature of the business to be transacted at
the meeting and the text of any special resolution to be
submitted to the meeting.
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Under the CBCA, the directors may fix in advance a date as the
record date for the determination of shareholders entitled to
receive notice of a meeting of shareholders, but the record date
must not precede by more than 60 days or by less than
21 days (less than 30 days under Canadian securities
regulations) the date on which the meeting is to be held. If no
record date is fixed, the record date will be at the close of
business on the day immediately preceding the day on which the
notice is given or, if no notice is given, the day on which the
meeting is held. If a record date is fixed, notice thereof shall
be given not less than seven days before the date so fixed by
newspaper advertisement
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159
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Valeant
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Biovail
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in the manner provided by the CBCA and by written notice to
each stock exchange in Canada on which the shares of Biovail are
listed for trading.
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Stockholder/
Shareholder Action by Written Consent
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The DGCL provides that, except as otherwise stated in the
certificate of incorporation, stockholders may act by written
consent without a meeting. The Valeant certificate of
incorporation and bylaws provide that no action required to be
taken or that may be taken at any annual or special meeting of
the stockholders of Valeant may be taken without a meeting, and
the power of the Valeant stockholders to consent in writing to
the taking of any action by written consent without a meeting is
specifically denied.
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Under the CBCA, generally, shareholder action without a meeting
may only be taken by written resolution signed by all
shareholders who would be entitled to vote on the relevant issue
at a meeting.
For a
public company such as Biovail, this effectively means that all
actions requiring shareholder approval must be taken at a duly
convened shareholders’ meeting.
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Advance Notice Requirements for Director Nominations and
Other Proposals by Stockholders/ Shareholders
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The Valeant bylaws generally permit stockholders to nominate
director candidates at annual and special meetings of
stockholders if the stockholder intending to make such
nomination gives timely notice thereof in writing in proper
form. To be timely, the Valeant bylaws require, subject to
certain limited exceptions, that written notice of an intention
to nominate a director candidate be received by the Valeant
board of directors, with a copy to the corporate secretary of
Valeant, not later than 60 days nor more than 90 days
in advance of the scheduled date of the meeting. However, if
less than 70 days’ notice or prior public disclosure
of the date of the meeting is given or made to stockholders,
notice by the stockholder to be timely must be delivered or
received not later than the close of business on the
10th day following the earlier of (i) the day on which the
notice of the date of the annual meeting was mailed or (ii) the
day on which the public disclosure was made. To be in proper
form, the Valeant bylaws require that the notice include, among
other things, certain disclosures about (i) the director
nominee, including all information that would be required to be
disclosed in a proxy filing, any agreements, arrangements and
understandings between the nominee and the proposing stockholder
relating to the proposed nomination or Valeant and (ii) the
stockholder making such nomination, including all ownership
interests (including derivatives) and rights to vote any
security of Valeant. Such notice must also contain the written
consent of the proposed nominee to be named in the proxy
statement as a nominee and to serve as a director if elected.
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Under the CBCA, shareholder proposals, including proposals with
respect to the nomination of candidates for election to the
board of directors, may be made by eligible registered or
beneficial holders of shares entitled to vote at an annual
meeting of shareholders. Proposals must be submitted at least
90 days before the anniversary date of the notice of
meeting that was sent to shareholders in connection with the
immediately preceding annual meeting.
To be
eligible to submit a proposal, a shareholder must be or have the
support of the registered or beneficial holder of (i) at least
1% of the total number of outstanding voting shares of the
corporation or (ii) shares whose fair market value is at least
C$2,000 on the close of business on the day before the
shareholder submits the proposal, and those registered or
beneficial holders must have held the shares for at least six
months immediately prior to the submission of the proposal.
Proposals for director nominations must be signed by one or more
holders of shares representing not less than 5% of the shares
(or shares of a class) entitled to vote at the meeting.
The
foregoing provisions do not preclude nominations made at
meetings of shareholders.
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160
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Valeant
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Biovail
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Valeant’s bylaws allow for business to be properly brought
before an annual meeting of stockholders, if the stockholder
intending to propose the business gives timely notice in writing
in proper form to the corporate secretary of Valeant. To be
timely, a stockholder’s notice must be received by the
corporate secretary, subject to certain limited exceptions, not
later than 60 days nor more than 90 days in advance of
the scheduled date of the annual meeting. However, if less than
70 days’ notice or prior public disclosure of the date
of the annual meeting is given or made to stockholders, notice
by the stockholder to be timely must be delivered or received
not later than the close of business on the 10th day
following the earlier of (i) the day on which the notice of the
date of the annual meeting was mailed or (ii) the day on which
the public disclosure was made. To be in proper form, the
Valeant bylaws require that the notice include, among other
things, certain disclosures about (i) the proposal, including
all information that would be required to be disclosed in a
proxy filing, any agreements, arrangements and understandings
between the proposing stockholder and any other persons relating
to the proposal or Valeant and (ii) the stockholder making such
proposal, including all ownership interests (including
derivatives), rights to vote any security of Valeant and any
material interest of the stockholder in the business being
proposed, as well as the text of any resolutions proposed for
consideration.
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Amendments to the Certificate of Incorporation
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The DGCL generally provides that amendments to the certificate
of incorporation must be approved by the board of directors and
then adopted by the vote of a majority of the outstanding voting
power entitled to vote thereon, unless the certificate of
incorporation requires a greater vote. Under Valeant’s
certificate of incorporation, amendments to Valeant’s
certificate of incorporation generally may be made in accordance
with the default positions of Delaware law. However, the Valeant
certificate of incorporation requires the vote of 75% of the
voting power of the shares entitled to vote in the election of
directors in order to amend, modify or repeal certain designated
provisions (including provisions relating to the ability of
stockholders to call a special meeting or act by written consent
in lieu of a meeting, notice of stockholder proposals and
nominations of director candidates by stockholders, the number,
election or term
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Under the CBCA, an amendment to the articles of incorporation
generally requires approval by special resolution of the voting
shares of the corporation. Specified amendments may also require
the separate approval of other classes or series of shares. If
the amendment is of a nature affecting a particular class or
series in a manner requiring a separate class or series vote,
that class or series is entitled to vote on the amendment
whether or not it otherwise carries the right to vote.
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161
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Valeant
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Biovail
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of Valeant directors, and filling vacancies on the Valeant
board of directors).
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Amendments to Bylaws
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Under the DGCL, stockholders of a corporation entitled to vote
and, if so provided in the certificate of incorporation, the
directors of the corporation, each have the power, separately,
to adopt, amend and repeal the bylaws of a corporation.
Valeant’s certificate of incorporation provides that the
board of directors is expressly authorized to make, alter or
repeal Valeant’s bylaws. Valeant’s bylaws may also be
adopted, amended and repealed by the stockholders. However, the
affirmative vote of the holders of 75% or more of the voting
power of all of the Valeant shares entitled to vote generally in
the election of directors is required for stockholders to amend,
repeal or adopt any bylaw, and to amend, repeal or adopt any
provision in a manner that would be inconsistent with any bylaw
adopted by Valeant’s board of directors.
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Biovail’s board of directors may, by resolution, make,
amend or repeal any bylaw that regulates the business or affairs
of the corporation. Where the directors make, amend or repeal a
bylaw, they are required under the CBCA to submit that action to
the shareholders at the next meeting of shareholders, and the
shareholders may confirm, reject or amend that action by simple
majority or ordinary resolution. If the action is rejected by
shareholders, or the directors of a corporation do not submit
the action to the shareholders at the next meeting of
shareholders, the action will cease to be effective, and no
subsequent resolution of the directors to make, amend or repeal
a bylaw having substantially the same purpose or effect will be
effective until it is confirmed by the shareholders.
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State Anti-Takeover Statutes
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Section 203 of the DGCL prohibits a Delaware corporation from
engaging in a business combination with a stockholder acquiring
more than 15% but less than 85% of the corporation’s
outstanding voting stock for three years following the time that
person becomes an “interested stockholder,” unless
prior to such date the board of directors approves either the
business combination or the transaction which resulted in the
stockholder becoming an interested stockholder or the business
combination is approved by the board of directors and by the
affirmative vote of at least
66
2
/
3
%
of the outstanding voting stock that is not owned by the
interested stockholder.
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The CBCA does not contain a provision comparable to Delaware law
with respect to business combinations. Under the CBCA, anyone
may make a take-over bid and offer to purchase all of the shares
of a class of a corporation, including Biovail. If, within
120 days after the date of a take-over bid, the holders of
not less than 90% of the shares of any class to which the take-
over bid relates accept the take-over bid, the offeror is
entitled to acquire the shares held by shareholders who did not
accept.
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Valeant is governed by Section 203 of the DGCL.
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Mergers, Consolidations and Other Transactions
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Under the DGCL, the board of directors and the holders of a
majority of the shares entitled to vote must approve a merger,
consolidation or sale of all or substantially all of a
corporation’s assets. However, unless the corporation
provides otherwise in its certificate of incorporation, no
stockholder vote of a constituent corporation surviving a merger
is required if:
• the merger agreement does not amend
the constituent corporation’s articles or certificate of
incorporation;
• each share of stock of the constituent
corporation outstanding before the
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Under the CBCA, certain extraordinary corporate actions, such
as:
• amalgamations (other than with certain
affiliated corporations);
• continuances;
• amending the articles of the corporation
to change its name;
• sales, leases or exchanges of all, or
substantially all, the property of a corporation other than in
the ordinary course of business;
• reductions of stated capital for any
purpose, e.g., in connection with the
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162
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Valeant
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Biovail
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merger is an identical outstanding or treasury share of the
surviving corporation after the merger; and
• either no shares of common stock of
the surviving corporation and no shares, securities or
obligations convertible into such stock are to be issued or
delivered under the plan of merger, or the authorized unissued
shares or the treasury shares of common stock of the surviving
corporation to be issued or delivered under the plan of merger
plus those initially issuable upon conversion of any other
shares, securities or obligations to be issued or delivered
under such plan do not exceed 20% of the shares of common stock
of such constituent corporation outstanding immediately prior to
the effective date of the merger.
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payment of special distributions (subject, in certain cases, to
the satisfaction of solvency tests); and
• other extraordinary corporate actions
such as liquidations, dissolutions and, if ordered by a court,
arrangements,
are
required to be approved by “special resolution.”
A
“special resolution” is a resolution passed by not
less than two- thirds of the votes cast by the shareholders who
voted in respect of the resolution or signed by all shareholders
entitled to vote on the resolution.
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In
specified cases, a special resolution to approve an
extraordinary corporate action is also required to be approved
separately by the holders of a class or series of shares,
including in certain cases a class or series of shares not
otherwise carrying voting rights.
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The Valeant certificate of incorporation requires the
affirmative vote of the holders of 85% of the voting stock of
Valeant (excluding the stock held by a “related
person” referred to below) to approve any business
combination, including mergers, sales and leases of assets,
issuances of securities and similar transactions, with a person
who, together with affiliates and associates, beneficially owns
10% or more of Valeant’s voting stock (a “related
person”), unless: (i) the business combination has been
approved by the vote of not less than
66
2
/
3
%
of directors who are not affiliates or associates of the related
person and were members of the board of directors before the
person became a related person, or their unaffiliated
successors, or (ii) certain fair price requirements are
satisfied.
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In specified extraordinary corporate actions, all shares have a
vote, whether or not they generally vote and, in certain cases,
have separate class votes.
Rules
or policies of certain Canadian securities regulatory
authorities, including Multilateral Instrument 61-
101 — Protection of Minority Security Holders in
Special Transactions (“MI
61-
101”) of the Canadian Securities Administrator contain
requirements in connection with “related party
transactions.” A related party transaction means,
generally, any transaction by which an issuer, directly or
indirectly: (i) acquires, sells, leases or transfers an asset;
(ii) acquires or issues securities; (iii) assumes or becomes
subject to a liability; or (iv) borrows money or lends money
from or to, as the case may be, a related party by any means in
any one or any combination of transactions. “Related
party” (as defined in MI 61-101) includes (i) directors and
senior officers of the issuer, (ii) holders of voting securities
of the issuer carrying more than 10% of the voting rights
attached to all the issuer’s outstanding voting securities,
and (iii) holders of a sufficient number of any securities of
the issuer to materially affect control of the issuer.
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MI 61-101 provides that, in connection with a “related
party transaction” (in addition to any other required
shareholder approval), Biovail is required, subject to the
availability of certain exceptions, to: (i) provide specific
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163
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Valeant
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Biovail
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disclosure in the proxy circular sent to security holders in
connection with a related party transaction where a meeting is
required; (ii) obtain a formal valuation of the subject matter
of the related party transaction and any non- cash consideration
offered in connection therewith and provide a summary thereof in
the proxy circular; and (iii) obtain the approval of a majority
of the votes cast by shareholders other than the related party
involved in the transaction.
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Preemptive Rights of Stockholders/ Shareholders
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Under Delaware law, stockholders of a corporation do not have
preemptive rights to subscribe to an additional issue of stock
or to any security convertible into such stock, unless such
right is expressly included in the certificate of incorporation.
Because the Valeant certificate of incorporation does not
include any provision in this regard, holders of shares of
Valeant common stock do not have preemptive rights.
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Under the CBCA, holders of Biovail common shares are not
entitled to pre- emptive or subscription rights.
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Directors’ and Officers’ Liability and
Indemnification
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Valeant’s certificate of incorporation provides that no
director of Valeant will be personally liable to Valeant or any
of its stockholders for monetary damages for breach of fiduciary
duty as a director of Valeant. However, personal liability of a
director will not be eliminated or limited (i) for any breach of
a director’s duty of loyalty to Valeant or its
stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of
law, (iii) for unlawful payments of dividends or unlawful stock
purchases or redemptions or (iv) for any transactions from which
such director derived an improper personal benefit.
The
Valeant certificate of incorporation and bylaws provide for
indemnification, to the full extent permitted by law, of any
person who was or is a party to, or is threatened to be made a
party to, any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative,
investigative or otherwise, by reason of the fact that such
person is or was a director, officer or employee of Valeant, or
is or was serving at the request of Valeant as a director,
officer or employee of another corporation, limited liability
company, partnership, joint venture, trust or other enterprise.
Valeant may purchase and maintain insurance on behalf of those
persons against any liability which may be asserted. The
indemnification includes expenses (including attorneys’
fees), judgments, fines and amounts paid in
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Under the CBCA, a corporation may indemnify a director or
officer, a former director or officer or a person who acts or
acted at the corporation’s request as a director or officer
or an individual acting in a similar capacity for another entity
(whom we refer to in this summary as an “indemnifiable
person”) against all costs, charges and expenses, including
an amount paid to settle an action or satisfy a judgment,
reasonably incurred by the indemnifiable person in any civil,
criminal, administrative, investigative or other proceeding in
which the person is involved because of that association, if:
• the person acted honestly and in good
faith with a view to the best interests of the corporation or
other entity; and
• in the case of a criminal or an
administrative action enforceable by a monetary penalty, the
person had reasonable grounds for believing the person’s
conduct was lawful.
A
corporation may advance moneys to an indemnifiable person for
the costs, charges and expenses of a proceeding provided that
the indemnifiable person repays the moneys if he or she does not
fulfill the above-mentioned requirements.
An
indemnifiable person is also entitled to indemnity for
reasonable defense costs and expenses if the person fulfills the
above mentioned requirements and was not judged to have
committed any fault or omitted to do anything the person ought
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164
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Valeant
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Biovail
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settlement, and those expenses may be paid by Valeant before
the final disposition of the action, suit or proceeding. The
indemnification does not limit Valeant’s right to indemnify
any other person for the expenses to the full extent permitted
by law, nor is it exclusive of any other rights to which any
person seeking indemnification from Valeant may be entitled.
Delaware law provides that, subject to certain limitations in
the case of derivative suits brought by a corporation’s
stockholders in its name, a corporation may indemnify any person
who is made a party to any third-party action, suit or
proceeding (other than an action by or in the right of the
corporation) on account of being a current or former director,
officer, employee or agent of the corporation (or serving or
having served at the request of the corporation in such capacity
for another corporation, partnership, joint venture, trust or
other enterprise) against expenses, including attorneys’
fees, judgments, fines and amounts paid in settlement actually
and reasonably incurred by him or her in connection with the
action, suit or proceeding if the person (i) acted in good faith
and in a manner reasonably believed to be in the best interests
of the corporation (or in some circumstances, at least not
opposed to its best interests), and (ii) in a criminal action or
proceeding, had no reasonable cause to believe his or her
conduct was unlawful.
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to have done.
In
the case of a derivative action, indemnity may be made only with
court approval, if the indemnifiable person fulfills the
above-mentioned requirements.
Under
the bylaws of Biovail, Biovail is required to indemnify each
director or officer, former director or officer or person who
acts or acted at the request of Biovail as a director or officer
of a body corporate of which Biovail is or was a shareholder or
creditor, and his or her heirs and legal representatives
(subject to the limitations under the CBCA).
In
addition, Biovail may purchase and maintain insurance against
liability asserted against or incurred by any of the persons
referred to above whether in his or her capacity as a director
or officer of Biovail or in his or her capacity as a director or
officer of another entity if he or she acts or acted in that
capacity at Biovail’s request, whether or not Biovail would
have the power to indemnify that person against this liability
under the CBCA.
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Delaware law also permits a corporation to indemnify any person
who is made a party to any third-party action, suit or
proceeding on account of being a current or former director,
officer, employee or agent of the corporation (or serving or
having served at the request of the corporation in such capacity
for another corporation, partnership, joint venture, trust or
other enterprise) against expenses (including attorneys’
fees) actually and reasonably incurred by such person in
connection with the defense or settlement of a derivative action
or suit, except that no indemnification may be made in respect
of any claim, issue or matter as to which the person is adjudged
to be liable to the corporation unless the Delaware Court of
Chancery or the court in which the action or suit was brought
determines upon application that the person is fairly and
reasonably entitled to indemnity for the
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165
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Valeant
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Biovail
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expenses which the court deems to be proper.
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To the extent that a current or former director or officer is
successful on the merits or otherwise in the defense of such an
action, suit or proceeding, the corporation is required by
Delaware law to indemnify such person for expenses actually and
reasonably incurred thereby.
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Stockholder/
Shareholder Rights Agreement
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Valeant currently has no stockholder rights plan.
Valeant’s previous stockholder rights plan expired by its
terms in November 2009. Notwithstanding the expiration of the
stockholder rights plan and subject to the restrictions
contained in the merger agreement, the Valeant board of
directors could, pursuant to its authority to issue preferred
stock, adopt a stockholder rights plan without stockholder
approval at any future time.
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Biovail currently has no shareholder rights plan in place.
Subject to the restrictions contained in the merger agreement,
the Biovail board of directors could adopt a shareholder rights
plan at any future time, which plan must be approved by
shareholders within six months of its adoption.
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Oppression Remedy
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The DGCL does not provide for a similar remedy.
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The CBCA provides an oppression remedy that enables a court to
make any order, whether interim or final, to rectify matters
that are oppressive or unfairly prejudicial to, or that unfairly
disregard the interests of, any securityholder, director or
officer of the corporation if an application is made to a court
by a “complainant,” which includes:
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• a present or former registered holder
or beneficial owner of securities of the corporation or any of
its affiliates;
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• a present or former officer or
director of the corporation or any of its affiliates;
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• the director appointed under the CBCA;
and
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• any other person who in the discretion
of the court is a proper person to make such application.
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The oppression remedy provides the court with very broad and
flexible powers to intervene in corporate affairs to protect
shareholders and other complainants. While conduct that is in
breach of fiduciary duties of directors or that is contrary to
the legal right of a complainant will normally trigger the
court’s jurisdiction under the oppression remedy, the
exercise of that jurisdiction does not depend on a finding of a
breach of those legal and equitable rights.
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Furthermore, the court may order a corporation to pay the
interim expenses of a complainant seeking an oppression remedy,
but the complainant may be held accountable for interim costs on
final disposition of the complaint (as in the case of a
derivative action).
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166
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Valeant
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Biovail
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Quorum of Shareholders
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Valeant’s bylaws provide that a majority of the voting
power of the issued and outstanding stock of Valeant entitled to
vote thereat, present in person, by remote communication, if
applicable, or represented by proxy, constitutes a quorum.
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Under Biovail’s bylaws, two persons present, each being a
shareholder entitled to vote thereat or a duly appointed
proxyholder or representative for a shareholder so entitled, and
together holding or representing shares of Biovail having not
less than 25% of the outstanding votes entitled to be cast at
the meeting, constitute a quorum.
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Inspection of Corporate Records
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Under the DGCL, any stockholder may inspect Valeant’s
stock ledger, a list of its stockholders, and its other books
and records for a proper purpose during usual business hours.
Moreover, under the DGCL and Valeant’s bylaws, Valeant must
make available, before every meeting of stockholders, a complete
list of stockholders entitled to vote at the meeting, showing
the address of each stockholder and the number of registered
shares in the name of each stockholder. The list must be open to
the examination of any stockholder for any purpose germane to
the meeting for a period of at least 10 days prior to the
meeting during normal business hours, at the principal place of
business of the corporation. The list must also be produced at
the time and place of the meeting during the whole time thereof.
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Under the CBCA, shareholders of Biovail have the right to
examine the corporate records, including Biovail’s charter
and Biovail’s by-laws, minutes of meetings and resolutions,
during the usual business hours of Biovail. Also, upon receipt
of an affidavit, Biovail is required to allow shareholders
access to the securities register of Biovail during normal
business hours and to provide a list of shareholders of Biovail
to the requesting shareholder setting out the names, number of
shares owned and addresses of Biovail’s registered
shareholders.
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Appraisal/Dissent Rights
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Under the DGCL, a stockholder of a Delaware corporation is
generally entitled to demand appraisal of the fair value of his
or her shares in the event the corporation is a party to a
merger or consolidation, subject to specified exceptions. The
DGCL does not confer appraisal rights, however, if the
corporation’s stock is either (a) listed on a national
securities exchange or (b) held of record by more than
2,000 holders.
Even
if a corporation’s stock meets the foregoing requirements,
the DGCL provides that appraisal rights generally will be
permitted if stockholders of the corporation are required to
accept for their stock in any merger, consolidation or similar
transaction anything other than (a) shares of the
corporation surviving or resulting from the transaction, or
those shares plus cash in lieu of fractional interests,
(b) shares of any other corporation, or those shares plus
cash in lieu of fractional interests, unless those shares are
listed on a national securities exchange or held of record by
more than 2,000 holders or (c) any combination of the
foregoing.
Pursuant to the merger agreement, the stockholders of Valeant
are entitled to
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The CBCA provides that shareholders of a corporation are
entitled to exercise dissent rights and to be paid the fair
value of their shares as determined by the board of directors of
the corporation or, failing which, by the appropriate Canadian
court upon an application timely brought by the corporation or a
dissenting shareholder, in connection with specified matters,
including:
• any amalgamation with another
corporation (other than with certain affiliated
corporations);
• an amendment to the corporation’s
articles to add, change or remove any provisions restricting or
constraining the issue, transfer or ownership of shares of the
class in respect of which a shareholder is dissenting;
• an amendment to the corporation’s
articles to add, change or remove any restriction upon the
business or businesses that the corporation may carry on;
• a continuance under the laws of another
jurisdiction;
• a sale, lease or exchange of all, or
substantially all, the property of the corporation other than in
the ordinary
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Valeant
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Biovail
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appraisal rights in connection with the merger, provided that
the applicable Valeant stockholder complies with all applicable
requirements and procedures under the DGCL. See
“Appraisal/Dissent Rights” beginning on page 169
and Annex F to this joint proxy statement/prospectus.
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course of business;
• a court order permitting a shareholder
to dissent in connection with an application to the court for an
order approving an arrangement proposed by the corporation;
• the carrying out of a going- private
transaction or a squeeze-out transaction; and
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• certain amendments to the articles of
a corporation which require a separate class or series vote by a
holder of shares of any class or series.
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However, a shareholder is not entitled to dissent if an
amendment to the articles is effected by a court order approving
a reorganization or by a court order made in connection with an
action for an oppression remedy.
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Biovail shareholders are not entitled to dissent/appraisal
rights under the CBCA in connection with the merger with
Valeant. See “Appraisal/Dissent Rights,” beginning on
page 169.
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168
APPRAISAL/DISSENT
RIGHTS
Appraisal or dissent rights are statutory rights that, if
applicable under law, enable shareholders to dissent from an
extraordinary transaction, such as a merger, and to demand that
the corporation pay the fair value for their shares as
determined by a court in a judicial proceeding instead of
receiving the consideration offered to shareholders in
connection with the extraordinary transaction. Appraisal or
dissent rights are not available in all circumstances.
Biovail
Under the CBCA, the holders of Biovail common shares are not
entitled to dissent rights in connection with the merger or any
of the Biovail proposals.
Valeant
Under the merger agreement, Valeant stockholders who dissent and
do not vote in favor of the proposal to adopt the merger
agreement may be entitled to certain appraisal rights in
connection with the merger, as described below and in
Annex F attached to this joint proxy statement/prospectus.
Such holders who perfect their appraisal rights and strictly
follow certain procedures in the manner prescribed by
Section 262 of the DGCL will be entitled to receive payment
of the fair value of their shares, valued as of the effective
time of the merger, in cash from the combined company.
Under Section 262 of the DGCL, where a merger agreement is
to be submitted for adoption at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
must notify each of its stockholders entitled to appraisal
rights that appraisal rights are available and include in the
notice a copy of Section 262 of the DGCL.
THIS JOINT PROXY STATEMENT/PROSPECTUS SHALL CONSTITUTE SUCH
NOTICE, AND THE FULL TEXT OF SECTION 262 OF THE DGCL IS
REPRINTED IN ITS ENTIRETY AS ANNEX F TO THIS JOINT PROXY
STATEMENT/PROSPECTUS. THE FOLLOWING DISCUSSION IS NOT A COMPLETE
STATEMENT OF THE LAW RELATING TO APPRAISAL RIGHTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO ANNEX F. ANY
VALEANT STOCKHOLDER WHO WISHES TO EXERCISE APPRAISAL RIGHTS OR
WHO WISHES TO PRESERVE HIS OR HER RIGHT TO DO SO SHOULD REVIEW
ANNEX F CAREFULLY AND SHOULD CONSULT HIS OR HER LEGAL
ADVISOR, SINCE FAILURE TO TIMELY COMPLY WITH THE PROCEDURES SET
FORTH THEREIN WILL RESULT IN THE LOSS OF SUCH RIGHTS.
Valeant stockholders of record that elect to exercise their
appraisal rights with respect to the merger are referred to
herein as “dissenting stockholders,” and the shares of
Valeant common stock with respect to which they exercise
appraisal rights are referred to herein as “dissenting
shares.” If a Valeant stockholder has a beneficial interest
in shares of Valeant common stock that are held of record in the
name of another person, such as a bank, broker or nominee, and
such Valeant stockholder desires to perfect whatever appraisal
rights such beneficial Valeant stockholder may have, such
beneficial Valeant stockholder must act promptly to cause the
holder of record to timely and properly file the required
demand.
Beneficial Valeant stockholders with shares held
through a bank, broker or other nominee that wish to exercise
appraisal rights should consult with their bank, broker or other
nominee to determine the appropriate procedures for the making
of a demand for appraisal by the nominee.
A VOTE IN FAVOR OF THE PROPOSAL TO ADOPT THE MERGER
AGREEMENT BY A VALEANT STOCKHOLDER WILL RESULT IN A WAIVER OF
SUCH HOLDER’S RIGHT TO APPRAISAL RIGHTS.
When the merger becomes effective, Valeant stockholders who
strictly comply with the procedures prescribed in
Section 262 of the DGCL will be entitled to a judicial
appraisal of the fair value of their shares as of the effective
time of the merger, exclusive of any element of value arising
from the accomplishment or expectation of the merger, in cash
from the combined company.
We advise any Valeant stockholder
considering demanding appraisal to consult legal counsel.
In order to exercise appraisal rights under Delaware law, a
stockholder must be the stockholder of record of the shares of
Valeant common stock as to which Valeant common stock appraisal
rights are to be exercised on the date
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that the written demand for appraisal described below is made,
and the stockholder must continuously hold such shares through
the effective time of the merger.
While Valeant stockholders electing to exercise their appraisal
rights under Section 262 of the DGCL are not required to
vote against the proposal to adopt the merger agreement, a vote
in favor of the proposal to adopt the merger agreement will
result in a waiver of the holder’s right to appraisal
rights. Valeant stockholders electing to demand the appraisal of
such stockholder’s shares shall deliver to Valeant,
before
the taking of the vote on the proposal to adopt
the merger agreement at the special meeting of Valeant
stockholders on September 27, 2010 a written demand for
appraisal of such stockholder’s shares. Such demand will be
sufficient if it reasonably informs Valeant of the identity of
the stockholder and that the stockholder intends thereby to
demand the appraisal of such stockholder’s shares.
A
proxy or vote against the proposal to adopt the merger agreement
shall not constitute such a demand.
Please see the
discussion below under the heading “Written Demands”
beginning on page 171 for additional information regarding
written demand requirements.
Within 10 days after the effective time of the merger, the
combined company must provide notice of the date of
effectiveness of the merger to all Valeant stockholders who have
not voted for the proposal to adopt the merger agreement and who
have otherwise complied with the requirements of
Section 262 of the DGCL.
A Valeant stockholder who elects to exercise appraisal rights
must mail or deliver the written demand for appraisal to:
Valeant Pharmaceuticals International
One Enterprise
Aliso Viejo, CA 92656
Phone:
(973) 549-5292
Facsimile:
(949) 315-3818
Attention: Corporate Secretary
Within 120 days after the effective time of the merger, any
dissenting stockholder that has strictly complied with the
procedures prescribed in Section 262 of the DGCL will be
entitled, upon written request, to receive from the combined
company a statement of the aggregate number of shares not voted
in favor of the proposal to adopt the merger agreement and with
respect to which demands for appraisal have been received by
Valeant, and the aggregate number of holders of those shares.
This statement must be mailed to the dissenting stockholder
within 10 days after the dissenting stockholder’s
written request has been received by the combined company or
within 10 days after the date of the effective time of the
merger, whichever is later. Notwithstanding the foregoing, a
person who is the beneficial owner of shares of common stock of
Valeant held either in a voting trust or by a nominee on behalf
of such person may, in such person’s own name, file a
petition or request from the combined company the statement
described in this paragraph.
Within 120 days after the effective time of the merger but
not thereafter, either the combined company or any dissenting
stockholder that has strictly complied with the procedures
prescribed in Section 262 of the DGCL may file a petition
in the Delaware Court of Chancery demanding a determination of
the fair value of each share of Valeant common stock of all
dissenting stockholders. If a petition for an appraisal is
timely filed, and a copy thereof is served upon the combined
company, the combined company will then be obligated within
20 days to file with the Delaware Register in Chancery a
duly verified list containing the names and addresses of all
Valeant stockholders who have demanded an appraisal of their
shares and with whom agreements as to the value of their shares
have not been reached. After notice to the stockholders as
required by the court, the Delaware Court of Chancery is
empowered to conduct a hearing on the petition to determine
those Valeant stockholders who have complied with
Section 262 and who have become entitled to appraisal
rights thereunder. The Delaware Court of Chancery may require
the Valeant stockholders who demanded payment for their shares
to submit their stock certificates to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceeding, and if any stockholder fails to comply with the
direction, the Delaware Court of Chancery may dismiss the
proceedings as to that stockholder.
After the Delaware Court of Chancery determines the holders of
Valeant common stock entitled to appraisal, the appraisal
proceeding shall be conducted in accordance with the rules of
the Delaware Court of Chancery, including any rules specifically
governing appraisal proceedings. Through such proceeding, the
Court shall
170
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 in its discretion determines otherwise for good cause
shown, interest from the effective date of the merger through
the date of payment of the judgment shall be compounded
quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time
to time during the period between the effective time of the
merger and the date of payment of the judgment. If no petition
for appraisal is filed with the Delaware Court of Chancery by
the combined company or any dissenting stockholder within
120 days after the effective time of the merger, then the
dissenting stockholders’ rights to appraisal will cease and
they will be entitled only to receive merger consideration paid
in the merger on the same basis as other Valeant stockholders.
The combined company is under no obligation to and Biovail has
no present intention to file a petition for appraisal.
dissenting stockholders should not assume the combined company
will file a petition for appraisal. Inasmuch as the combined
company has no obligation to file a petition, any Valeant
stockholder who desires a petition to be filed is advised to
file it on a timely basis. No petition timely filed in the
Delaware Court of Chancery demanding appraisal shall be
dismissed as to any Valeant stockholder, however, without the
approval of the Delaware Court of Chancery, which may be
conditioned on any terms the Delaware Court of Chancery deems
just.
The cost of the appraisal proceeding may be determined by the
Delaware Court of Chancery and imposed upon the parties as the
court deems equitable in the circumstances. Upon application of
a dissenting stockholder that has strictly complied with the
procedures prescribed in Section 262 of the DGCL, the court
may order that all or a portion of the expenses incurred by any
dissenting stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable
attorneys’ fees, and the fees and expenses of experts, be
charged pro rata against the value of all shares entitled to
appraisal. In the absence of this determination or assessment,
each party bears its own expenses. A dissenting stockholder who
has timely demanded appraisal in compliance with
Section 262 of the DGCL will not, after the effective time
of the merger, be entitled to vote the Valeant common stock
subject to such demand for any purpose or to receive payment of
dividends or other distributions on the Valeant common stock,
except for dividends or other distributions payable to
stockholders of record at a date prior to the effective time of
the merger.
At any time within 60 days after the effective time of the
merger, any dissenting stockholder will have the right to
withdraw the stockholder’s demand for appraisal and to
accept the right to receive merger consideration in the merger
on the same basis on which Valeant common stock is converted in
the merger by delivering to the combined company a written
withdrawal of the demand for approval. After this
60-day
period, a dissenting stockholder that has strictly complied with
the procedures prescribed in Section 262 of the DGCL may
withdraw his or her demand for appraisal only with the written
consent of the combined company and where an appraisal
proceeding has commenced, only with the approval of the Delaware
Court of Chancery.
Written
Demands
To be valid, written demands for appraisal must be made by
record holders of shares. Beneficial owners who do not hold
shares of record may not directly make appraisal demands. The
beneficial holder must, in such cases, have the registered
owner, such as a broker or other nominee, submit the required
demand in respect of those shares.
The written demand for appraisal must reasonably inform Valeant
of the identity of the stockholder of record making the demand
and indicate that the stockholder intends to demand appraisal of
the stockholder’s shares. A demand for appraisal should be
executed by or for the Valeant stockholder of record, fully and
correctly, as that stockholder’s name appears on the
stockholder’s stock certificate. If Valeant common stock is
owned of record in a fiduciary capacity, such as by a trustee,
guardian or custodian, the demand should be executed by the
fiduciary. If Valeant common stock is owned of record by more
than one person, as in a joint tenancy or tenancy in common, the
demand should be executed by or for all joint owners. An
authorized agent, including an agent for two or more joint
owners, should execute the demand for appraisal for a
stockholder of record; however, the agent must identify the
record owner and expressly disclose the fact that, in exercising
the demand, he, she or it is acting as agent for the record
owner.
171
A record owner who holds Valeant common stock as a nominee for
other beneficial owners of the shares may exercise appraisal
rights with respect to the Valeant common stock held for all or
less than all beneficial owners of the Valeant common stock for
which the holder is the record owner. In that case, the written
demand must state the number of shares of Valeant common stock
covered by the demand. Where the number of shares of Valeant
common stock is not expressly stated, the demand will be
presumed to cover all shares of Valeant common stock outstanding
in the name of that record owner. Beneficial owners who are not
record owners and who intend to exercise appraisal rights should
promptly consult the record owner to determine the appropriate
procedures for making a written demand for appraisal rights and
should instruct the record owner to comply strictly with the
statutory requirements with respect to the delivery of written
demand
prior to the taking of the vote on the proposal to
adopt the merger agreement.
Valeant stockholders considering whether to seek appraisal
should bear in mind that the fair value of their Valeant common
stock determined under Section 262 of the DGCL could be
more than, the same as or less than the value of the right to
receive merger consideration in the merger and that an
investment banking opinion as to fairness from a financial point
of view is not necessarily an opinion as to fair value under
Section 262 of the DGCL. Also, Valeant, Biovail and the
combined company reserve the right to assert in any appraisal
proceeding that, for purposes thereof, the “fair
value” of the Valeant common stock is less than the value
of the merger consideration to be issued in the merger.
Any stockholder who fails to strictly comply with the
requirements of Section 262 of the DGCL, attached as
Annex F to this joint proxy statement/prospectus, will
forfeit his, her or its rights to exercise appraisal rights and
will receive merger consideration on the same basis as all other
stockholders without interest.
THE PROCESS OF DISSENTING REQUIRES STRICT COMPLIANCE WITH
TECHNICAL PREREQUISITES. THOSE INDIVIDUALS OR ENTITIES WISHING
TO DISSENT AND TO EXERCISE THEIR APPRAISAL RIGHTS SHOULD CONSULT
WITH THEIR OWN LEGAL COUNSEL IN CONNECTION WITH COMPLIANCE UNDER
SECTION 262 OF THE DGCL. TO THE EXTENT THERE ARE ANY
INCONSISTENCIES BETWEEN THE FOREGOING SUMMARY AND
SECTION 262 OF THE DGCL, THE DGCL SHALL CONTROL.
172
LEGAL
MATTERS
The due authorization and due issuance of the Biovail common
shares to be issued in the merger will be passed upon by Blake,
Cassels & Graydon LLP. Certain U.S. Federal
income tax consequences relating to the merger will be passed
upon for Biovail by Cravath, Swaine & Moore LLP and
for Valeant by Skadden, Arps, Slate, Meagher & Flom
LLP.
EXPERTS
The consolidated financial statements of Biovail Corporation as
of December 31, 2009 and 2008 and for each of the three
years in the period ended December 31, 2009 appearing in
Biovail Corporation’s Annual Report on
Form 10-K
(including the schedule appearing therein) and the effectiveness
of Biovail Corporation’s internal control over financial
reporting as of December 31, 2009 have been audited by
Ernst & Young LLP, independent registered public
accounting firm, as set forth in their reports thereon appearing
therein. Both reports are incorporated herein by reference. Such
consolidated financial statements and schedule are incorporated
herein by reference in reliance upon such reports given on the
authority of such firm as experts in accounting and auditing.
The consolidated financial statements of Valeant and Valeant
management’s assessment of the effectiveness of internal
control over financial reporting (which is included in
Management’s Report on Internal Control over Financial
Reporting), incorporated in this joint proxy
statement/prospectus by reference to Valeant’s Annual
Report on
Form 10-K
for the year ended December 31, 2009, have been so
incorporated in reliance on the report of PricewaterhouseCoopers
LLP, an independent registered public accounting firm, given on
the authority of said firm as experts in auditing and
accounting. The report contains an explanatory paragraph on the
effectiveness of internal controls over financial reporting due
to the exclusion of certain elements of the internal control
over financial reporting of the Private Formula International
Holdings Pty Ltd., EMO-FARM Ltd, Tecnofarma S.A. de C.V., and
Laboratoire Dr Renaud businesses the registrant acquired during
2009.
With respect to the unaudited interim financial information of
Valeant Pharmaceuticals International for the three-month
periods ended March 31, 2010 and 2009 and for the
three-month and six-month periods ended June 30, 2010 and
2009, incorporated by reference in this joint proxy
statement/prospectus, PricewaterhouseCoopers LLP reported that
they have applied limited procedures in accordance with
professional standards for a review of such information.
However, their separate reports dated May 3, 2010 and
August 3, 2010 incorporated by reference herein state that
they did not audit and they do not express an opinion on that
unaudited interim financial information. Accordingly, the degree
of reliance on their reports on such information should be
restricted in light of the limited nature of the review
procedures applied. PricewaterhouseCoopers LLP is not subject to
the liability provisions of Section 11 of the Securities
Act of 1933 for their reports on the unaudited interim financial
information because neither of those reports is a
“report” or a “part” of the registration
statement prepared or certified by PricewaterhouseCoopers LLP
within the meaning of Sections 7 and 11 of the Act.
173
SHAREHOLDER
PROPOSALS
Biovail
Biovail will hold a regular annual general meeting of
shareholders in 2011 regardless of whether the merger is
completed.
A shareholder who is entitled to vote at the annual meeting of
shareholders of Biovail in respect of the fiscal year ended
December 31, 2010 (to be held in 2011), may raise a
proposal for consideration at such annual meeting. Biovail will
consider such proposal for inclusion in the proxy materials for
the annual meeting in 2011 only if the Biovail Secretary
receives such proposal (at 7150 Mississauga Road, Mississauga,
Ontario, Canada, L5N 8M5, or by facsimile
905-286-3050):
(i) submitted pursuant to
Rule 14a-8
(“Rule 14a-8”)
of the General Rules and Regulations promulgated under the
Exchange Act, on or before December 15, 2010, or
(ii) submitted pursuant to section 137 of the CBCA, on
or before January 14, 2011. The use of certified mail,
return receipt, is advised.
Valeant
In light of the expected timing of the completion of the merger,
Valeant expects to hold its 2011 annual meeting of stockholders
only if the merger is not completed. In the event that Valeant
holds a 2011 annual meeting of stockholders, stockholder
proposals intended to be presented pursuant to
Rule 14a-8
under the Exchange Act for inclusion in Valeant’s proxy
statement and accompanying proxy card for Valeant’s 2011
annual meeting of stockholders must have been received at
Valeant’s principal executive offices (One Enterprise,
Aliso Viejo, California 92656, Attention: Corporate Secretary),
on or before November 25, 2010, and must meet the
requirements of
Rule 14a-8.
To be included in the proxy statement, the proposal must comply
with the requirements as to form and substance established by
the SEC. If the date of the 2011 annual meeting of stockholders
is advanced or delayed more than 30 days from the date of
the 2010 annual meeting of stockholders, stockholder proposals
intended to be included in the proxy statement for the 2011
annual meeting of stockholders must be received by Valeant
within a reasonable time before Valeant begins to print and mail
the proxy statement, or provide a notice to stockholders with
respect to accessing such proxy statement over the Internet, for
the 2011 annual meeting of stockholders.
A stockholder may otherwise propose business for consideration
or nominate persons for election to the Valeant board of
directors without seeking to have the proposal included in
Valeant’s proxy statement. Such proposal must comply with
the requirements as to form and substance as set forth in
Valeant’s certificate of incorporation and bylaws. To be
timely, a stockholder’s notice generally must be delivered
to, or mailed and received at, Valeant’s principal
executive offices (One Enterprise, Aliso Viejo, California
92656, Attention: Corporate Secretary) not less than
60 days and no more than 90 days prior to the
scheduled date of the 2011 annual meeting of stockholders,
regardless of any postponement, deferral or adjournment of that
meeting. However, if less than 70 days notice or prior
public disclosure of the date of the meeting is given or made to
stockholders, then to be timely, notice by the stockholder must
be given not later than the close of business on the
10th day following the earlier of (i) the day on which
the notice of the date of the meeting was mailed, or
(ii) the day on which such public disclosure was made.
In the event a stockholder proposal is not submitted to Valeant
prior to March 1, 2011, the proxies solicited by the
Valeant board of directors for the 2011 annual meeting will
confer authority on the proxyholders to vote the shares in
accordance with their best judgment and discretion if the
proposal is presented at the 2011 annual meeting of stockholders
without any discussion of the proposal in the proxy statement
for such meeting.
Upon any determination that the date of Valeant’s 2011
annual meeting of stockholders will be advanced or delayed by
more than 30 days from the date of the 2010 annual meeting
of stockholders, Valeant will inform stockholders of such change
and the new deadlines for stockholder proposals in the earliest
possible Valeant Quarterly Report on
Form 10-Q.
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WHERE YOU
CAN FIND MORE INFORMATION
Valeant and Biovail file annual, quarterly and current reports,
proxy statements and other information with the SEC under the
Exchange Act, and Biovail also files these documents with the
CSA. You may read and copy any of this information at the
SEC’s Public Reference Room at 100 F Street,
N.E., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
for further information on the Public Reference Room. The SEC
also maintains an Internet website that contains reports, proxy
and information statements, and other information regarding
issuers, including Valeant and Biovail, who file electronically
with the SEC. The address of that site is
www.sec.gov
. Biovail also files its continuous
and timely disclosure reports and other information under the
CSA’s System for Electronic Document Analysis and Retrieval
(“SEDAR”) at
www.sedar.com
.
Investors may also consult Valeant’s or Biovail’s
website for more information about Valeant or Biovail,
respectively. Valeant’s website is
www.valeant.com
. Biovail’s website is
www.biovail.com
. Except as specifically
incorporated by reference in this joint proxy
statement/prospectus, the information included on these websites
is not incorporated by reference into this joint proxy
statement/prospectus.
Biovail has filed with the SEC a registration statement of which
this joint proxy statement/prospectus forms a part. The
registration statement registers the Biovail common shares to be
issued to Valeant stockholders in connection with the merger.
The registration statement, including the attached exhibits,
contains additional relevant information about Biovail and
Biovail common share. The rules and regulations of the SEC allow
Valeant and Biovail to omit certain information included in the
registration statement from this joint proxy
statement/prospectus.
In addition, the SEC and the CSA allow Valeant and Biovail to
disclose important information to you by referring you to other
documents filed separately with the SEC and the CSA. This
information is considered to be a part of this joint proxy
statement/prospectus, except for any information that is
superseded by information that is directly included in this
joint proxy statement/prospectus.
This joint proxy statement/prospectus incorporates by reference
the documents listed below that Biovail has previously filed or
will file with the SEC. These documents contain important
information about Biovail, its financial condition or other
matters.
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Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009.
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Proxy Statement on Schedule 14A, filed April 21, 2010.
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Quarterly Reports on
Form 10-Q
for the quarterly periods ended March 31, 2010 and
June 30, 2010.
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Current Reports on
Form 8-K,
filed February 10, 2010, February 25, 2010 (film
number 10631839), May 19, 2010, June 21, 2010,
June 23, 2010, July 16, 2010 and July 23, 2010
(other than documents or portions of these documents not deemed
to be filed).
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The description of the Biovail common shares contained in
Biovail’s registration statement on
Form 8-A
filed with the SEC under Section 12 of the Exchange Act on
December 10, 1996, including any subsequently filed
amendments and reports updating such description.
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In addition, Biovail incorporates by reference any future
filings it makes with the SEC under Section 13(a), 13(c),
14 or 15(d) of the Exchange Act and NI
51-102
of
the CSA after the date of this joint proxy statement/prospectus
and prior to the date of the Biovail special meeting. These
documents include periodic reports, such as Annual Reports on
Form 10-K,
Quarterly Reports on
Form 10-Q
and Current Reports on
Form 8-K,
as well as proxy statements. Such documents are considered to be
a part of this joint proxy statement/prospectus, effective as of
the date such documents are filed. To the extent that any
information contained in any such Current Report on
Form 8-K,
or any exhibit thereto, is furnished, rather than filed, with
the SEC, such information or exhibit is specifically not
incorporated by reference into this joint proxy
statement/prospectus.
175
You can obtain any of these documents from the SEC, through the
SEC’s website at
www.sec.gov
, from the CSA through
SEDAR at
www.sedar.com
or Biovail will provide you with
copies of these documents, without charge, upon written or oral
request to:
Biovail Corporation
7150 Mississauga Road
Mississauga, Ontario
Canada L5N 8M5
(905) 286-3000
Attn: Investor Relations
This joint proxy statement/prospectus also incorporates by
reference the documents listed below that Valeant has previously
filed or will file with the SEC. These documents contain
important information about Valeant, its financial condition or
other matters.
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Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009.
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Proxy Statement on Schedule 14A filed March 25, 2010.
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Quarterly Reports on
Form 10-Q
for the quarterly periods ended March 31, 2010 and
June 30, 2010.
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The Current Reports on
Form 8-K
filed on January 11, 2010, March 29, 2010,
April 5, 2010, April 7, 2010, April 12, 2010,
May 3, 2010, May 14, 2010, June 2, 2010,
June 21, 2010, June 23, 2010, July 23, 2010,
August 2, 2010 (film number 10982802) and
August 12, 2010 (other than documents or portions of these
documents not deemed to be filed).
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In addition, Valeant incorporates by reference any future
filings it makes with the SEC under Section 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this joint
proxy statement/prospectus and prior to the date of the Valeant
special meeting. These documents include periodic reports, such
as Annual Reports on
Form 10-K,
Quarterly Reports on
Form 10-Q
and Current Reports on
Form 8-K,
as well as proxy statements. Such documents are considered to be
a part of this joint proxy statement/prospectus, effective as of
the date such documents are filed. To the extent that any
information contained in any such Current Report on
Form 8-K,
or any exhibit thereto, is furnished, rather than filed, with
the SEC, such information or exhibit is specifically not
incorporated by reference into this joint proxy
statement/prospectus.
You can obtain any of these documents from the SEC, through the
SEC’s website at the address described above, or Valeant
will provide you with copies of these documents, without charge,
upon written or oral request to:
Valeant Pharmaceuticals International
One Enterprise
Aliso Viejo, California 92656
Attention: Investor Relations
Telephone: (949)
461-6178
In the event of conflicting information in this joint proxy
statement/prospectus in comparison to any document incorporated
by reference into this joint proxy statement/prospectus, or
among documents incorporated by reference, the information in
the latest filed document controls.
You should rely only on the information contained or
incorporated by reference into this joint proxy
statement/prospectus. No one has been authorized to provide you
with information that is different from that contained in, or
incorporated by reference into, this joint proxy
statement/prospectus. This joint proxy statement/prospectus is
dated August 18, 2010. You should not assume that the
information contained in this joint proxy statement/prospectus
is accurate as of any date other than that date. You should not
assume that the information incorporated by reference into this
joint proxy statement/prospectus is accurate as of any date
other than the date of such incorporated document. Neither our
mailing of this joint proxy statement/prospectus to Biovail
shareholders or Valeant stockholders nor the issuance by Biovail
of shares of common shares in connection with the merger will
create any implication to the contrary.
176
Annex A
AGREEMENT
AND PLAN OF MERGER
Dated as of June 20, 2010,
Among
Valeant Pharmaceuticals International,
Biovail Corporation,
Biovail Americas Corp.
and
Beach Merger Corp.
TABLE OF
CONTENTS
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Page
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ARTICLE I
The Merger
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Section 1.01.
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The Merger
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A-1
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Section 1.02.
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Closing
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A-1
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Section 1.03.
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Effective Time
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A-2
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Section 1.04.
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Effects
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A-2
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Section 1.05.
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Certificate of Incorporation and By-Laws
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A-2
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Section 1.06.
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Directors and Officers of Surviving Company
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A-2
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ARTICLE II
Effect on the Capital Stock of the Constituent Entities;
Exchange of Certificates
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Section 2.01.
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Effect on Capital Stock
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A-2
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Section 2.02.
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Exchange of Certificates
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A-3
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ARTICLE III
Representations and Warranties of Biovail, BAC and Merger Sub
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Section 3.01.
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Organization, Standing and Power
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A-6
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Section 3.02.
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Biovail Subsidiaries
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A-6
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Section 3.03.
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Capital Structure
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A-6
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Section 3.04.
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Authority; Execution and Delivery; Enforceability
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A-7
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Section 3.05.
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No Conflicts; Consents
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A-8
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Section 3.06.
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Reporting Documents; Undisclosed Liabilities
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A-9
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Section 3.07.
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Information Supplied
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A-11
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Section 3.08.
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Absence of Certain Changes or Events
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A-11
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Section 3.09.
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Taxes
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A-12
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Section 3.10.
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Employee Benefits
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A-13
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Section 3.11.
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Litigation
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A-14
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Section 3.12.
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Compliance with Applicable Laws
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A-14
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Section 3.13.
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Environmental Matters
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A-14
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Section 3.14.
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Contracts
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A-15
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Section 3.15.
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Properties
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A-16
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Section 3.16.
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Intellectual Property
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A-16
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Section 3.17.
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Regulatory Matters
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A-17
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Section 3.18.
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Insurance
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A-19
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Section 3.19.
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Labor and Employment Matters
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A-19
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Section 3.20.
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Brokers’ Fees and Expenses
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A-20
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Section 3.21.
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Opinion of Financial Advisor
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A-20
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Section 3.22.
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BAC; Merger Sub
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A-20
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Section 3.23.
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Affiliate Transactions
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A-20
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Section 3.24.
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No Other Representations or Warranties
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A-20
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A-i
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Page
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ARTICLE IV
Representations and Warranties of Valeant
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Section 4.01.
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Organization, Standing and Power
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A-20
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Section 4.02.
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Valeant Subsidiaries
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A-21
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Section 4.03.
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Capital Structure
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A-21
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Section 4.04.
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Authority; Execution and Delivery; Enforceability
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A-22
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Section 4.05.
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No Conflicts; Consents
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A-23
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Section 4.06.
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Reporting Documents; Undisclosed Liabilities
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A-24
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Section 4.07.
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Information Supplied
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A-25
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Section 4.08.
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Absence of Certain Changes or Events
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A-25
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Section 4.09.
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Taxes
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A-26
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Section 4.10.
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Employee Benefits
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A-27
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Section 4.11.
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Litigation
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A-28
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Section 4.12.
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Compliance with Applicable Laws
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A-28
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Section 4.13.
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Environmental Matters
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A-28
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Section 4.14.
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Contracts
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A-29
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Section 4.15.
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Properties
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A-29
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Section 4.16.
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Intellectual Property
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A-30
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Section 4.17.
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Regulatory Matters
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A-30
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Section 4.18.
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Insurance
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A-32
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Section 4.19.
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Labor and Employment Matters
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A-33
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Section 4.20.
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Brokers’ Fees and Expenses
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A-33
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Section 4.21.
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Opinion of Financial Advisor
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A-33
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Section 4.22.
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Affiliate Transactions
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A-33
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Section 4.23.
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No Other Representations or Warranties
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A-33
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ARTICLE V
Covenants Relating to Conduct of Business
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Section 5.01.
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Conduct of Business
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A-33
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Section 5.02.
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No Solicitation by Biovail; Biovail Board Recommendation
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A-38
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Section 5.03.
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No Solicitation by Valeant; Valeant Board Recommendation
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A-41
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A-ii
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Page
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ARTICLE VI
Additional Agreements
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Section 6.01.
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Preparation of the
Form S-4
and the Joint Proxy Statement; Stockholders Meetings
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A-43
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Section 6.02.
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Access to Information; Confidentiality
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A-45
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Section 6.03.
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Required Actions
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A-45
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Section 6.04.
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Equity Awards; Change in Control Provisions
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A-47
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Section 6.05.
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Indemnification, Exculpation and Insurance
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A-50
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Section 6.06.
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Fees and Expenses
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A-51
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Section 6.07.
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Certain Tax Matters
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A-52
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Section 6.08.
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Transaction Litigation
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A-52
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Section 6.09.
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Section 16 Matters
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A-52
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Section 6.10.
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Governance Matters
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A-52
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Section 6.11.
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Financing
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A-53
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Section 6.12.
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Public Announcements
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A-53
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Section 6.13.
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Stock Exchange Listing
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A-53
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Section 6.14.
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Joinder Agreement
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A-54
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Section 6.15.
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Entity Name
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A-54
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Section 6.16.
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Valeant Warrants and Valeant Convertible Notes
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A-54
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Section 6.17.
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Pre-Merger Special Dividend
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A-54
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ARTICLE VII
Conditions Precedent
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Section 7.01.
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Conditions to Each Party’s Obligation to Effect the Merger
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A-55
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Section 7.02.
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Conditions to Obligations of Valeant
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A-56
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Section 7.03.
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Conditions to Obligation of Biovail, BAC and Merger Sub
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A-56
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ARTICLE VIII
Termination, Amendment and Waiver
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Section 8.01.
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Termination
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A-57
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Section 8.02.
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Effect of Termination
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A-58
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Section 8.03.
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Amendment
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A-58
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Section 8.04.
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Extension; Waiver
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A-58
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Section 8.05.
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Procedure for Termination, Amendment, Extension or Waiver
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A-59
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Section 8.06.
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Alternative Structure
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A-59
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A-iii
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Page
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ARTICLE IX
General Provisions
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Section 9.01.
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Nonsurvival of Representations and Warranties
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A-59
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Section 9.02.
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Notices
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A-59
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Section 9.03.
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Definitions
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A-60
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Section 9.04.
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Interpretation
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A-63
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Section 9.05.
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Severability
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A-63
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Section 9.06.
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Counterparts
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A-63
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Section 9.07.
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Entire Agreement; No Third-Party Beneficiaries
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A-63
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Section 9.08.
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Governing Law
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A-63
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Section 9.09.
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Assignment
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A-63
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Section 9.10.
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Specific Enforcement
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A-63
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Section 9.11.
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Waiver of Jury Trial
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A-64
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Exhibit A Governance Matters
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A-Exhibit A-1
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Exhibit B Form of Joinder Agreement
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A-Exhibit B-1
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Exhibit C Commitment Letter
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A-Exhibit C-1
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A-iv
AGREEMENT AND PLAN OF MERGER (this
“
Agreement
”), dated as of June 20, 2010,
among Valeant Pharmaceuticals International, a Delaware
corporation (“
Valeant
”), Biovail Corporation, a
Canadian corporation (“
Biovail
”), Biovail
Americas Corp., a Delaware corporation and a wholly owned
subsidiary of Biovail (“
BAC
”), and Beach Merger
Corp., a Delaware corporation and a newly formed, wholly owned
subsidiary of BAC (“
Merger Sub
”).
WHEREAS the Board of Directors of Valeant, the Board of
Directors of Biovail, the Board of Directors of BAC and the
Board of Directors of Merger Sub have approved this Agreement,
determined that the merger of Merger Sub with and into Valeant,
upon the terms and subject to the conditions set forth in this
Agreement, are in the best interests of Valeant, Biovail or
Merger Sub, as applicable, and their respective stockholders and
declared the advisability of this Agreement;
WHEREAS the Board of Directors of Valeant and the Board of
Directors of Merger Sub has recommended adoption or approval, as
applicable, of this Agreement by their respective stockholders,
as applicable;
WHEREAS the Board of Directors of Biovail has recommended the
approval by its stockholders of the issuance of common shares of
Biovail contemplated by this Agreement;
WHEREAS Valeant intends to declare and pay the Pre-Merger
Special Dividend one Business Day immediately prior to the
Closing Date, payable to holders of record of Valeant Common
Stock as of the close of business one Business Day immediately
prior to the Closing Date;
WHEREAS the Board of Directors of Valeant and the Board of
Directors of Biovail have determined that the declaration and
payment of the Post-Merger Special Dividend will be in the best
interests of the Combined Company and its stockholders;
WHEREAS for U.S. Federal income Tax purposes, the Merger is
intended (i) to qualify as a “reorganization”
within the meaning of Section 368(a) of the Code and
(ii) to not result in gain being recognized under
Section 367(a)(1) of the Code (other than for any
stockholder that would be a “five-percent transferee
shareholder” (within the meaning of United States Treasury
Regulations
Section 1.367(a)-3(c)(5)(ii))
of Biovail following the Merger that does not enter into a
five-year gain recognition agreement in the form provided in
United States Regulations
Section 1.367(a)-8(c))
(the “
Intended Tax Treatment
”), and this
Agreement is intended to be, and is adopted as, a “plan of
reorganization” for purposes of Sections 354 and 361
of the Code; and
WHEREAS Valeant, Biovail, BAC and Merger Sub desire to make
certain representations, warranties, covenants and agreements in
connection with the Merger and also to prescribe various
conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing, and the
respective representations, warranties, covenants and agreements
set forth herein, and intending to be legally bound, the parties
hereto agree as follows:
ARTICLE I
The
Merger
Section
1.01.
The
Merger
.
On the terms and subject to the
conditions set forth in this Agreement, and in accordance with
the General Corporation Law of the State of Delaware (the
‘‘
DGCL
”), on the Closing Date, Merger Sub
shall be merged with and into Valeant (the
‘‘
Merger
”). At the Effective Time, the
separate corporate existence of Merger Sub shall cease and
Valeant shall continue as the surviving company in the Merger
(the “
Surviving Company
”).
Section
1.02.
Closing
.
The
closing (the “
Closing
”) of the Merger shall
take place at the offices of Cravath, Swaine & Moore
LLP, Worldwide Plaza, 825 Eighth Avenue, New York, New York,
10019 at 10:00 a.m., New York City time, on a date to be
specified by Valeant and Biovail, which shall be no later than
the second Business Day following the satisfaction or (to the
extent permitted by Law) waiver by the party or parties entitled
to the benefits thereof of the conditions set forth in
Article VII (other than those conditions that by their
nature are to be satisfied at the Closing, but subject to the
satisfaction or (to the extent permitted by Law) waiver of those
conditions), or at such other place, time and date as shall be
agreed in writing between Valeant and Biovail;
provided
,
however
, that if all the conditions set forth in
Article VII shall not have been satisfied or (to the extent
permitted by Law) waived on such second Business Day, then the
Closing shall take place on the first Business Day on which all
such conditions
A-1
shall have been satisfied or (to the extent permitted by Law)
waived or at such other time and date as shall be agreed in
writing between Valeant and Biovail. The date on which the
Closing occurs is referred to in this Agreement as the
“
Closing Date
”.
Section
1.03.
Effective
Time
.
Subject to the provisions of this
Agreement, as soon as practicable on the Closing Date, the
parties shall file with the Secretary of State of the State of
Delaware the certificate of merger relating to the Merger (the
“
Certificate of Merger
”), executed and
acknowledged in accordance with the relevant provisions of the
DGCL, and, as soon as practicable on or after the Closing Date,
shall make all other filings required under the DGCL or by the
Secretary of State of the State of Delaware in connection with
the Merger. The Merger shall become effective at the time
specified in the Certificate of Merger, which shall be on the
Business Day following the date that the Certificate of Merger
has been duly filed with the Secretary of State of the State of
Delaware, or at such later time as Valeant and Biovail shall
agree and specify in the Certificate of Merger (the time the
Merger becomes effective being the ‘‘
Effective
Time
”).
Section
1.04.
Effects
.
The
Merger shall have the effects set forth in this Agreement and
Section 259 of the DGCL.
Section
1.05.
Certificate
of Incorporation and By-Laws
.
The certificate
of incorporation of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the certificate of incorporation
of the Surviving Company until thereafter changed or amended as
provided therein or by applicable Law, except that the name of
the Surviving Company shall be amended to be consistent with the
terms of Section 6.15. The by-laws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the
by-laws of the Surviving Company until thereafter changed or
amended as provided therein or by applicable Law, except that
references to the name of Merger Sub shall be replaced by the
name of the Surviving Company.
Section
1.06.
Directors
and Officers of Surviving Company
.
The
directors of the Surviving Company shall be composed of the
individuals identified on Annex 1.06 attached hereto (as it
may be amended or modified from time to time after the date
hereof and prior to the Effective Time by the mutual written
consent of Biovail and Valeant) and shall continue until the
earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the
case may be. The officers of Valeant immediately prior to the
Effective Time shall be the officers of the Surviving Company
until the earlier of their resignation or removal or until their
respective successors are duly elected or appointed and
qualified, as the case may be.
ARTICLE II
Effect on
the Capital Stock of the Constituent Entities; Exchange of
Certificates
Section
2.01.
Effect
on Capital Stock
.
At the Effective Time, by
virtue of the Merger and without any action on the part of
Valeant, Biovail, BAC, Merger Sub or the holder of any shares of
Valeant Common Stock or Merger Sub Common Stock:
(a)
Conversion of Merger Sub Common
Stock
.
Each share of common stock, par value
$0.01 per share, in Merger Sub (“
Merger Sub Common
Stock
”) issued and outstanding immediately prior to the
Effective Time shall be converted into one fully paid and
nonassessable share of common stock, par value $0.01 per share,
of the Surviving Company (“
Surviving Company Common
Stock
”) with the same rights, powers and privileges as
the shares so converted (the ‘‘
Converted
Shares
”). In addition to the foregoing conversion, the
Surviving Company shall issue 10,000,000 shares of
Surviving Company Common Stock (the “
Issued
Shares
”) to BAC contemporaneously with the Closing in
consideration for the deposit of the Merger Consideration by or
on behalf of BAC with the Exchange Agent. The Converted Shares
and the Issued Shares shall constitute the only outstanding
shares of capital stock of the Surviving Company. From and after
the Effective Time, all certificates representing shares of
Merger Sub Common Stock shall be deemed for all purposes to
represent the Converted Shares and the Issued Shares until the
Board of the Surviving Company issues new certificates in
respect of such shares.
(b)
Cancellation of Treasury Stock and Biovail-Owned
Stock
.
Each share of common stock, par value
$0.01, of Valeant (the “
Valeant Common Stock
”)
that is owned by Valeant as treasury stock and each share of
A-2
Valeant Common Stock, if any, that is owned by Biovail, BAC or
Merger Sub immediately prior to the Effective Time shall no
longer be outstanding and shall automatically be canceled and
shall cease to exist, and no consideration shall be delivered in
exchange therefor.
(c)
Conversion of Valeant Common
Stock
.
Each share of Valeant Common Stock
issued and outstanding immediately prior to the Effective Time
(other than shares to be canceled in accordance with
Section 2.01(b) and except as provided in
Section 2.01(d) with respect to the Appraisal Shares) shall
be converted into the right to receive that number of fully paid
and nonassessable common shares in the capital of Biovail (the
“
Biovail Common Stock
”) equal to the Exchange
Ratio (the “
Merger Consideration
”). All such
shares of Valeant Common Stock, when so converted, shall no
longer be outstanding and shall automatically be canceled and
shall cease to exist, and each holder of a certificate (or
evidence of shares in book-entry form) that immediately prior to
the Effective Time represented any such shares of Valeant Common
Stock (each, a “
Certificate
”) shall cease to
have any rights with respect thereto, except the right to
receive the Merger Consideration, the Pre-Merger Special
Dividend (to the extent not previously paid) and any cash in
lieu of fractional shares of Biovail Common Stock to be issued
or paid in consideration therefor and any dividends or other
distributions to which holders become entitled upon the
surrender of such Certificate in accordance with
Section 2.02, without interest. For purposes of this
Agreement, the “
Exchange Ratio
” means 1.7809.
The Exchange Ratio shall be calculated to the nearest
one-ten-thousandth of a share of Biovail Common Stock.
Notwithstanding the foregoing, if between the date of this
Agreement and the Effective Time the outstanding shares of
Biovail Common Stock or Valeant Common Stock shall have been
changed into a different number of shares or a different class,
by reason of any stock dividend, subdivision, reclassification,
recapitalization, split, combination, consolidation or exchange
of shares, or any similar event shall have occurred, then any
number or amount contained herein which is based upon the number
of shares of Biovail Common Stock or Valeant Common Stock, as
the case may be, will be appropriately adjusted to provide to
Biovail and the holders of Valeant Common Stock the same
economic effect as contemplated by this Agreement prior to such
event. As provided in Section 2.02(i), the right of any
holder of a Certificate to receive the Merger Consideration or
other consideration shall be subject to and reduced by the
amount of any withholding under applicable Tax Law.
(d)
Appraisal
Rights
.
Notwithstanding anything in this
Agreement to the contrary, shares (“
Appraisal
Shares
”) of Valeant Common Stock issued and outstanding
immediately prior to the Effective Time that are held by any
Person who is entitled to demand and properly demands appraisal
of such Appraisal Shares pursuant to, and who complies in all
respects with, Section 262 of the DGCL
(“
Section 262
”) shall not be converted
into Merger Consideration as provided in this Section 2.01,
but rather the holders of Appraisal Shares shall be entitled to
payment of the fair value of such Appraisal Shares in accordance
with Section 262. At the Effective Time, all Appraisal
Shares shall no longer be outstanding, shall automatically be
canceled and shall cease to exist, and each holder of Appraisal
Shares shall cease to have any rights with respect thereto,
except the right to receive the fair value of such Appraisal
Shares in accordance with the provisions of Section 262.
Notwithstanding the foregoing, if any such holder shall fail to
perfect or otherwise shall waive, withdraw or lose the right to
appraisal under Section 262, or a court of competent
jurisdiction shall determine that such holder is not entitled to
the relief provided by Section 262, then the right of such
holder to be paid the fair value of such holder’s Appraisal
Shares shall cease and such Appraisal Shares shall be deemed to
have been converted as of the Effective Time into, and to have
become, the right to receive the Merger Consideration as
provided in this Section 2.01. Valeant shall give prompt
notice to Biovail of any demands received by Valeant for
appraisal of any shares of Valeant Common Stock, withdrawals of
such demands and any other instruments served pursuant to
Section 262 received by Valeant. Biovail shall have the
right to participate in all negotiations and proceedings with
respect to such demands. Prior to the Effective Time, Valeant
shall not, without the prior written consent of Biovail (not to
be unreasonably withheld, delayed or conditioned), make any
payment with respect to, or settle or offer to settle, any such
demands, or agree to do any of the foregoing.
Section
2.02.
Exchange
of Certificates
.
(a)
Exchange
Agent
.
Prior to the Effective Time, Biovail
and Valeant shall agree upon and appoint a bank or trust company
to act as exchange agent (the “
Exchange Agent
”)
for the payment of the Merger Consideration. At or prior to the
Effective Time, Biovail shall deposit on behalf of BAC, or shall
cause BAC to deposit, with the Exchange Agent, for the benefit
of the holders of Certificates, for exchange in accordance with
this Article II through the Exchange Agent, certificates
representing the shares of Biovail
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Common Stock to be issued as Merger Consideration and cash
sufficient to make payments in lieu of fractional shares
pursuant to Section 2.02(e). All such Biovail Common Stock
and cash deposited with the Exchange Agent is hereinafter
referred to as the “
Exchange Fund
”. As promptly
as practicable after the Effective Time, and in any event not
later than the second Business Day thereafter, Biovail shall
cause the Exchange Agent to mail to each holder of record of
Valeant Common Stock a form of letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss
and title to any Certificates shall pass, only upon delivery of
such Certificates to the Exchange Agent and shall be in such
form and have such other provisions (including customary
provisions with respect to delivery of an “agent’s
message” with respect to shares held in book-entry form) as
Biovail may specify, subject to Valeant’s approval),
together with instructions thereto.
(b)
Merger Consideration Received in Connection with
Exchange
.
Upon (i) in the case of shares
of Valeant Common Stock represented by a Certificate, the
surrender of such Certificate for cancellation to the Exchange
Agent, or (ii) in the case of shares of Valeant Common
Stock held in book-entry form, the receipt of an
“agent’s message” by the Exchange Agent, in each
case together with the letter of transmittal, duly, completely
and validly executed in accordance with the instructions
thereto, and such other documents as may reasonably be required
by the Exchange Agent, the holder of such shares shall be
entitled to receive in exchange therefor (x) the Merger
Consideration into which the shares of Valeant Common Stock have
been converted pursuant to Section 2.01 and (y) any
cash in lieu of fractional shares which the holder has the right
to receive pursuant to Section 2.02(e) and in respect of
any dividends or other distributions which the holder has the
right to receive pursuant to Section 2.02(c). In the event
of a transfer of ownership of Valeant Common Stock that is not
registered in the transfer records of Valeant, a certificate
representing the proper number of shares of Biovail Common Stock
pursuant to Section 2.01 and cash in lieu of fractional
shares which the holder has the right to receive pursuant to
Section 2.02(e) and in respect of any dividends or other
distributions which the holder has the right to receive pursuant
to Section 2.02(c) may be issued to a transferee if the
Certificate representing such Valeant Common Stock (or, if such
Valeant Common Stock is held in book-entry form, proper evidence
of such transfer) is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer
Taxes have been paid. Until surrendered as contemplated by this
Section 2.02(b), each share of Valeant Common Stock and any
Certificate with respect thereto shall be deemed at any time
after the Effective Time to represent only the right to receive
upon such surrender the Merger Consideration which the holders
of such shares were entitled to receive in respect of such
shares pursuant to Section 2.01 (and cash in lieu of
fractional shares pursuant to Section 2.02(e) and in
respect of any dividends or other distributions pursuant to
Section 2.02(c)). No interest shall be paid or shall accrue
on the cash payable upon surrender of any Certificate (or shares
of Valeant Common Stock held in book-entry form).
(c)
Treatment of Unexchanged
Shares
.
No dividends or other distributions
declared or made with respect to Biovail Common Stock with a
record date after the Effective Time shall be paid to the holder
of any unsurrendered Certificate (or shares of Valeant Common
Stock held in book-entry form) with respect to the shares of
Biovail Common Stock issuable upon surrender thereof, and no
cash payment in lieu of fractional shares shall be paid to any
such holder pursuant to Section 2.02(e), until the
surrender of such Certificate (or shares of Valeant Common Stock
held in book-entry form) in accordance with this
Article II. Subject to escheat, Tax or other applicable
Law, following surrender of any such Certificate (or shares of
Valeant Common Stock held in book-entry form), there shall be
paid to the holder of the certificate representing whole shares
of Biovail Common Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of
any cash payable in lieu of a fractional share of Biovail Common
Stock to which such holder is entitled pursuant to
Section 2.02(e) and the amount of dividends or other
distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Biovail
Common Stock and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and a
payment date subsequent to such surrender payable with respect
to such whole shares of Biovail Common Stock.
(d)
No Further Ownership Rights in Valeant Common
Stock
.
The shares of Biovail Common Stock
issued and cash paid in accordance with the terms of this
Article II upon conversion of any shares of Valeant Common
Stock (including any cash paid pursuant to Section 2.02(e))
shall be deemed to have been issued and paid in full
satisfaction of all rights pertaining to such shares of Valeant
Common Stock. From and after the Effective Time, there shall be
no further registration of transfers on the stock transfer books
of the Surviving Company of shares of
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Valeant Common Stock that were outstanding immediately prior to
the Effective Time. If, after the Effective Time, any
Certificates formerly representing shares of Valeant Common
Stock (or shares of Valeant Common Stock held in book-entry
form) are presented to Biovail or the Exchange Agent for any
reason, they shall be canceled and exchanged as provided in this
Article II.
(e)
No Fractional Shares
.
No
certificates or scrip representing fractional shares of Biovail
Common Stock shall be issued upon the conversion of Valeant
Common Stock pursuant to Section 2.01, and such fractional
share interests shall not entitle the owner thereof to vote or
to any rights of a holder of Biovail Common Stock.
Notwithstanding any other provision of this Agreement, each
holder of shares of Valeant Common Stock converted pursuant to
the Merger who would otherwise have been entitled to receive a
fraction of a share of Biovail Common Stock (after taking into
account all shares of Valeant Common Stock exchanged by such
holder) shall receive, in lieu thereof, cash (without interest)
in an amount equal to such fractional amount multiplied by the
average of the volume weighted average price per share of
Biovail Common Stock on the New York Stock Exchange
(“
NYSE
”) (as reported by Bloomberg L.P. or, if
not reported therein, in another authoritative source mutually
selected by Biovail and Valeant) on each of the 10 consecutive
trading days ending with the second complete trading day prior
to the date of the Effective Time, weighted by the total volume
of trading in Biovail Common Stock on each such trading day. The
payment of cash in lieu of fractional share interests pursuant
to this Section 2.02(e) is not a separately bargained-for
consideration.
(f)
Termination of Exchange
Fund
.
Any portion of the Exchange Fund
(including any interest received with respect thereto) that
remains undistributed to the holders of Valeant Common Stock for
360 days after the Effective Time shall be delivered to the
Surviving Company, upon demand, and any holder of Valeant Common
Stock who has not theretofore complied with this Article II
shall thereafter look only to Biovail for payment of its claim
for Merger Consideration, any cash in lieu of fractional shares
and any dividends and distributions to which such holder is
entitled pursuant to this Article II.
(g)
No Liability
.
None of Valeant,
Biovail, Merger Sub or the Exchange Agent shall be liable to any
Person in respect of any portion of the Exchange Fund delivered
to a public official pursuant to any applicable abandoned
property, escheat or similar Law. Any portion of the Exchange
Fund which remains undistributed to the holders of Certificates
for two years after the Effective Time (or immediately prior to
such earlier date on which the Exchange Fund would otherwise
escheat to, or become the property of, any Governmental Entity),
shall, to the extent permitted by applicable Law, become the
property of the Surviving Company, free and clear of all claims
or interest of any Person previously entitled thereto.
(h)
Investment of Exchange
Fund
.
The Exchange Agent shall invest any
cash in the Exchange Fund as mutually directed by Biovail and
Valeant. Any interest and other income resulting from such
investments shall be paid to the Surviving Company.
(i)
Withholding Rights
.
The
Exchange Agent shall be entitled to deduct and withhold from the
consideration otherwise payable to any holder of Valeant Common
Stock pursuant to this Agreement such amounts as may be required
to be deducted and withheld with respect to the making of such
payment under applicable Tax Law. Amounts so withheld and paid
over to the appropriate taxing authority shall be treated for
all purposes of this Agreement as having been paid to the holder
of Valeant Common Stock in respect of which such deduction or
withholding was made.
(j)
Lost Certificates
.
If any
Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the Person claiming such
Certificate to be lost, stolen or destroyed and, if required by
Biovail, the posting by such Person of a bond, in such
reasonable and customary amount as Biovail may direct, as
indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent shall issue, in
exchange for such lost, stolen or destroyed Certificate, the
Merger Consideration, any cash in lieu of fractional shares and
any dividends and distributions on the Certificate deliverable
in respect thereof pursuant to this Agreement.
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ARTICLE III
Representations
and Warranties of Biovail, BAC and Merger Sub
Biovail, BAC and Merger Sub jointly and severally represent and
warrant to Valeant that the statements contained in this
Article III are true and correct, except (i) as set
forth in the Biovail Reporting Documents publicly available and
filed with the SEC following January 1, 2008 and at least
two Business Days prior to the date of this Agreement (the
“
Filed Biovail Reporting Documents
”) (excluding
any disclosures in the Filed Biovail Reporting Documents under
the heading “Risk Factors” and any other disclosures
that are predictive or forward-looking in nature) or
(ii) as set forth in the disclosure letter delivered by
Biovail, BAC and Merger Sub to Valeant at or before the
execution and delivery by Biovail, BAC and Merger Sub of this
Agreement (the “
Biovail Disclosure Letter
”).
The Biovail Disclosure Letter shall be arranged in numbered and
lettered sections corresponding to the numbered and lettered
sections contained in this Article III, and the disclosure
in any section shall be deemed to qualify other sections in this
Article III to the extent (and only to the extent) that it
is reasonably apparent from the face of such disclosure that
such disclosure also qualifies or applies to such other sections.
Section
3.01.
Organization,
Standing and Power
.
Each of Biovail and each
of Biovail’s Subsidiaries (the “
Biovail
Subsidiaries
”) is duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it
is organized (in the case of good standing, to the extent such
jurisdiction recognizes such concept), except, in the case of
the Biovail Subsidiaries, where the failure to be so organized,
existing or in good standing, individually or in the aggregate,
has not had and would not reasonably be expected to have a
Biovail Material Adverse Effect. Each of Biovail and the Biovail
Subsidiaries has all requisite power and authority and possesses
all governmental franchises, licenses, permits, authorizations,
variances, exemptions, orders, registrations, clearances and
approvals (collectively, ‘‘
Permits
”)
necessary to enable it to own, operate, lease or otherwise hold
its properties and assets and to conduct its businesses as
presently conducted (the “
Biovail Permits
”),
except where the failure to have such power or authority or to
possess Biovail Permits, individually or in the aggregate, has
not had and would not reasonably be expected to have a Biovail
Material Adverse Effect. Each of Biovail and the Biovail
Subsidiaries is duly qualified or licensed to do business in
each jurisdiction where the nature of its business or the
ownership, operation or leasing of its properties make such
qualification necessary, other than in such jurisdictions where
the failure to be so qualified or licensed, individually or in
the aggregate, has not had and would not reasonably be expected
to have a Biovail Material Adverse Effect. Biovail has delivered
or made available to Valeant, prior to execution of this
Agreement, true and complete copies of (a) the Articles of
Continuance of Biovail in effect as of the date of this
Agreement (the “
Biovail Charter
”) and the
By-laws of Biovail in effect as of the date of this Agreement
(the “
Biovail By-laws
”) and (b) the
constituent documents of each of BAC and Merger Sub.
Section
3.02.
Biovail
Subsidiaries
.
(a) All the outstanding
shares of capital stock or voting securities of, or other equity
interests in, each Biovail Subsidiary have been validly issued
and are fully paid and nonassessable and are owned by Biovail,
by another Biovail Subsidiary or by Biovail and another Biovail
Subsidiary, free and clear of all pledges, liens, claims,
charges, mortgages, encumbrances and security interests of any
kind or nature whatsoever (collectively,
“
Liens
”), and free of any other restriction
(including any restriction on the right to vote, sell or
otherwise dispose of such capital stock, voting securities or
other equity interests), except for restrictions imposed by
applicable securities laws. Section 3.02(a) of the Biovail
Disclosure Letter sets forth, as of the date of this Agreement,
a true and complete list of the Biovail Subsidiaries.
(b) Except for the capital stock and voting securities of,
and other equity interests in, the Biovail Subsidiaries, neither
Biovail nor any Biovail Subsidiary owns, directly or indirectly,
any capital stock or voting securities of, or other equity
interests in, or any interest convertible into or exchangeable
or exercisable for, any capital stock or voting securities of,
or other equity interests in, any firm, corporation,
partnership, company, limited liability company, trust, joint
venture, association or other entity.
Section
3.03.
Capital
Structure
.
(a) The authorized capital
stock of Biovail consists of an unlimited number of shares of
Biovail Common Stock and an unlimited number of Class A
Special Shares in the capital of Biovail (the “
Biovail
Class A Stock
” and, together with the Biovail
Common Stock, the “
Biovail Capital Stock
”). At
the close of business on June 14, 2010,
(i) 158,573,603 shares of Biovail Common Stock were
issued and outstanding, none of which were subject to vesting or
other forfeiture conditions or repurchase by Biovail,
(ii) no shares of Biovail Class A Stock were issued
and outstanding, (iii) no shares of Biovail Common Stock
were
A-6
reserved for issuance upon conversion of Biovail’s
5.375% Senior Convertible Notes (the ‘‘
Biovail
Convertible Notes
”), (iv) 11,588,915 shares
of Biovail Common Stock were reserved and available for issuance
pursuant to the Biovail Stock Plans, of which
(A) 3,196,577 shares were issuable upon exercise of
outstanding Biovail Stock Options and
(B) 2,049,548 shares were issuable upon vesting of
outstanding Biovail Restricted Stock Units, assuming maximum
performance with respect to performance-based Biovail Restricted
Stock Units, (v) Biovail Deferred Share Units with respect
to 418,737 shares of Biovail Common Stock were outstanding
and (vi) 2,282,366 shares of Biovail Common Stock were
reserved for issuance pursuant to the Biovail Employee Stock
Purchase Plan. Except as set forth in this Section 3.03(a),
at the close of business on June 14, 2010, no shares of
capital stock or voting securities of, or other equity interests
in, Biovail were issued, reserved for issuance or outstanding.
From the close of business on June 14, 2010 to the date of
this Agreement, there have been no issuances by Biovail of
shares of capital stock or voting securities of, or other equity
interests in, Biovail, other than (1) the issuance of
Biovail Common Stock upon the conversion of Biovail Convertible
Notes, upon the exercise of Biovail Stock Options or upon the
vesting of Biovail Restricted Stock Units, in each case
outstanding at the close of business on June 14, 2010 and
in accordance with their terms in effect at such time, and
(2) the issuance of Biovail Deferred Share Units.
(b) All outstanding shares of Biovail Capital Stock are,
and all shares of Biovail Capital Stock that may be issued upon
the conversion of Biovail Convertible Notes, upon the exercise
of Biovail Stock Options or upon the vesting of Biovail
Restricted Stock Units will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to,
or issued in violation of, any purchase option, call option,
right of first refusal, preemptive right, subscription right or
any similar right under any provision of the Canada Business
Corporations Act (the “
CBCA
”), the Biovail
Charter, the Biovail By-laws or any Contract to which Biovail is
a party or otherwise bound. The shares of Biovail Common Stock
constituting the Merger Consideration will be, when issued, duly
authorized, validly issued, fully paid and nonassessable and not
subject to, or issued in violation of, any purchase option, call
option, right of first refusal, preemptive right, subscription
right or any similar right under any provision of the CBCA, the
Biovail Charter, the Biovail By-laws or any Contract to which
Biovail is a party or otherwise bound. Except as set forth above
in this Section 3.03 or pursuant to the terms of this
Agreement, there are not issued, reserved for issuance or
outstanding, and there are not any outstanding obligations of
Biovail or any Biovail Subsidiary to issue, deliver or sell, or
cause to be issued, delivered or sold, (x) any capital
stock of Biovail or any Biovail Subsidiary or any securities of
Biovail or any Biovail Subsidiary convertible into or
exchangeable or exercisable for shares of capital stock or
voting securities of, or other equity interests in, Biovail or
any Biovail Subsidiary, (y) any warrants, calls, options or
other rights to acquire from Biovail or any Biovail Subsidiary,
or any other obligation of Biovail or any Biovail Subsidiary to
issue, deliver or sell, or cause to be issued, delivered or
sold, any capital stock or voting securities of, or other equity
interests in, Biovail or any Biovail Subsidiary or (z) any
rights issued by or other obligations of Biovail or any Biovail
Subsidiary that are linked in any way to the price of any class
of Biovail Capital Stock or any shares of capital stock of any
Biovail Subsidiary, the value of Biovail, any Biovail Subsidiary
or any part of Biovail or any Biovail Subsidiary or any
dividends or other distributions declared or paid on any shares
of capital stock of Biovail or any Biovail Subsidiary. Except
pursuant to the Biovail Stock Plans, there are not any
outstanding obligations of Biovail or any of the Biovail
Subsidiaries to repurchase, redeem or otherwise acquire any
shares of capital stock or voting securities or other equity
interests of Biovail or any Biovail Subsidiary or any
securities, interests, warrants, calls, options or other rights
referred to in clause (x), (y) or (z) of the
immediately preceding sentence. Except for the Biovail
Convertible Notes, there are no debentures, bonds, notes or
other Indebtedness of Biovail having the right to vote (or
convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of Biovail
may vote (“
Biovail Voting Debt
”). Neither
Biovail nor any of the Biovail Subsidiaries is a party to any
voting agreement with respect to the voting of any capital stock
or voting securities of, or other equity interests in, Biovail.
Except for this Agreement, neither Biovail nor any of the
Biovail Subsidiaries is a party to any agreement pursuant to
which any Person is entitled to elect, designate or nominate any
director of Biovail or any of the Biovail Subsidiaries.
Section
3.04.
Authority;
Execution and Delivery;
Enforceability
.
(a) Each of Biovail, BAC
and Merger Sub has all requisite corporate power and authority
to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the Merger and the other
transactions contemplated by this Agreement, subject, in the
case of the Share Issuance and the Valeant Stock Plan
Assumption, to the receipt of the Biovail Stockholder Approval.
The Board of Directors of Biovail (the ‘‘
Biovail
Board
”) has adopted resolutions, by unanimous vote at a
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meeting duly called at which a quorum of directors of Biovail
was present, (i) approving this Agreement,
(ii) determining that entering into this Agreement is in
the best interests of Biovail and its stockholders,
(iii) declaring this Agreement advisable,
(iv) recommending that Biovail’s stockholders vote in
favor of (A) approval of the issuance of Biovail Common
Stock constituting the Merger Consideration, (B) the change
of Biovail’s name to “Valeant Pharmaceuticals
International, Inc.” (the “
Name Change
”)
and (C) the issuance of Biovail Common Stock under Valeant
Stock Plans, outstanding Valeant Stock Options and Valeant
Restricted Stock Units assumed by Biovail pursuant to the
Valeant Stock Plan Assumption (the “
Share
Issuance
”) and the Valeant Stock Plan Assumption and
directing that the Share Issuance and the Valeant Stock Plan
Assumption be submitted to Biovail’s stockholders for
approval at a duly held meeting of such stockholders for such
purpose (the ‘‘
Biovail Stockholders
Meeting
”) and (v) subject to the discretion of the
Board of the Combined Company, determining that the Post-Merger
Special Dividend will be in the best interests of the Combined
Company and its stockholders and that it is the intention of
those directors of Biovail that will continue as directors of
the Combined Company to support the declaration and payment of
the Post-Merger Special Dividend at the applicable time. Such
resolutions have not been amended or withdrawn as of the date of
this Agreement. The Board of Directors of Merger Sub has adopted
resolutions (i) approving this Agreement,
(ii) determining that entering into this Agreement is in
the best interests of Merger Sub and BAC, as its sole
stockholder, (iii) declaring this Agreement advisable and
(iv) recommending that BAC, as sole stockholder of Merger
Sub, adopt this Agreement and directing that this Agreement be
submitted to BAC, as sole stockholder of Merger Sub, for
adoption. Such resolutions have not been amended or withdrawn as
of the date of this Agreement. BAC, as sole stockholder of
Merger Sub, will, immediately following the execution and
delivery of this Agreement by each of the parties hereto, adopt
this Agreement. The Board of Directors of BAC has adopted
resolutions (i) approving this Agreement,
(ii) determining that entering into this Agreement is in
the best interests of BAC and Biovail, as its sole stockholder,
(iii) declaring this Agreement advisable and
(iv) recommending that Biovail, as sole stockholder of BAC,
adopt this Agreement and directing that this Agreement be
submitted to Biovail, as sole stockholder of BAC, for adoption.
Such resolutions have not been amended or withdrawn as of the
date of this Agreement. Biovail, as sole stockholder of BAC,
will, immediately following the execution and delivery of this
Agreement by each of the parties hereto, adopt this Agreement.
Except (A) in the case of the Share Issuance and the
Valeant Stock Plan Assumption, for the approval of the Share
Issuance and Valeant Stock Plan Assumption, respectively, by the
affirmative vote of the holders of a majority of the shares of
Biovail Common Stock represented in person or by proxy at the
Biovail Stockholders Meeting, as required by
Section 312.03(c) of the NYSE Listed Company Manual and by
Section 611(c) and Section 613, respectively, of the
Toronto Stock Exchange (‘‘
TSX
”) Company
Manual and the approval of the Name Change by the affirmative
vote of the holders of a majority of not less than two-thirds of
the votes cast in respect of such resolution at the Biovail
Stockholders Meeting as required by Section 173 of the CBCA
(collectively, the “
Biovail Stockholder
Approval
”) and (B) solely in the case of the
Merger, for the adoption of this Agreement (1) by Biovail
as the sole stockholder of BAC, and (2) by BAC as the sole
stockholder of Merger Sub, no other corporate proceedings on the
part of Biovail, BAC or Merger Sub are necessary to authorize,
adopt or approve, as applicable, this Agreement or to consummate
the Merger and the other transactions contemplated by this
Agreement (except for the filing of the appropriate merger
documents as required by the DGCL). Each of Biovail and Merger
Sub has duly executed and delivered this Agreement and, assuming
the due authorization, execution and delivery by Valeant, this
Agreement constitutes its legal, valid and binding obligation,
enforceable against it in accordance with its terms.
(b) No “fair price”, “moratorium”,
“control share acquisition” or other similar
antitakeover statute or similar statute or regulation applies
with respect to this Agreement, the Merger or any of the other
transactions contemplated by this Agreement in respect of
Biovail or Merger Sub.
Section
3.05.
No
Conflicts; Consents
.
(a) The execution
and delivery by each of Biovail, BAC and Merger Sub of this
Agreement does not, and the performance by each of Biovail, BAC
and Merger Sub of its obligations hereunder and the consummation
of the Merger and the other transactions contemplated by this
Agreement will not, (i) conflict with, or result in any
violation of any provision of, the Biovail Charter, the Biovail
By-laws or the comparable charter or organizational documents of
any Biovail Subsidiary (assuming that the Biovail Stockholder
Approval is obtained), (ii) conflict with, or result in any
violation of or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation, any obligation
to make an offer to purchase or redeem any Indebtedness or
capital stock or any loss of a material benefit under, or result
in the creation of any Lien upon any of the properties or assets
of Biovail or any Biovail Subsidiary
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under, any provision of, any contract, lease, license,
indenture, note, bond, agreement, concession, franchise or other
instrument (a “
Contract
”) to which Biovail or
any Biovail Subsidiary is a party or by which any of their
respective properties or assets is bound or any Biovail Permit
or (iii) conflict with, or result in any violation of any
provision of, subject to the filings and other matters referred
to in Section 3.05(b), any judgment, order or decree
(“
Judgment
”) or statute, law (including common
law), ordinance, rule or regulation, including the rules and
regulations of the NYSE and TSX (“
Law
”), in
each case, applicable to Biovail or any Biovail Subsidiary or
their respective properties or assets (assuming that the Biovail
Stockholder Approval is obtained), other than, in the case of
clauses (ii) and (iii) above, any matters that,
individually or in the aggregate, have not had and would not
reasonably be expected to have a Biovail Material Adverse Effect
(it being agreed that for purposes of this Section 3.05(a),
effects resulting from or arising in connection with the matters
set forth in clause (iv) of the definition of the term
“Material Adverse Effect” shall not be excluded in
determining whether a Biovail Material Adverse Effect has
occurred or would reasonably be expected to occur) and would not
prevent or materially impede, interfere with, hinder or delay
the consummation of the Merger.
(b) No consent, waiver or Permit
(“
Consent
”) of or from, or registration,
declaration, notice or filing made to or with any Federal,
national, state, provincial or local, whether domestic or
foreign, government or any court of competent jurisdiction,
administrative agency or commission or other governmental
authority or instrumentality, whether domestic, foreign or
supranational (a “
Governmental Entity
”), is
required to be obtained or made by or with respect to Biovail or
any Biovail Subsidiary in connection with the execution and
delivery of this Agreement or its performance of its obligations
hereunder or the consummation of the Merger and the other
transactions contemplated by this Agreement, other than (i)
(A) the filing with the Securities and Exchange Commission
(the “
SEC
”) and the securities commissions or
similar securities regulatory authority in each of the provinces
of Canada (the “
Canadian Securities
Authorities
”) of the Joint Proxy Statement in
definitive form, (B) the filing with the SEC, and
declaration of effectiveness under the Securities Act of 1933,
as amended (the “
Securities Act
”), of the
registration statement on
Form S-4
in connection with the issuance by Biovail of the Merger
Consideration, in which the Joint Proxy Statement will be
included as a prospectus (the
‘‘
Form S-4
”),
and (C) the filing with the SEC and the Canadian Securities
Authorities of such reports under, and such other compliance
with, the Securities Exchange Act of 1934, as amended (the
“
Exchange Act
”), the Securities Act, the
Canadian provincial securities laws (“
Canadian
Securities Laws
”), and the rules and regulations
thereunder, as may be required in connection with this
Agreement, the Merger and the other transactions contemplated by
this Agreement, (ii) compliance with and filings under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the “
HSR
Act
”) and, if required, Part IX of the Competition
Act (Canada) (the “
Competition Act
”) and such
other Consents, registrations, declarations, approvals, notices
or filings as are required to be made or obtained under any
foreign antitrust, competition, foreign investment, trade
regulation or similar Laws, (iii) the filing of the
Certificate of Merger with the Secretary of State of the State
of Delaware and appropriate documents with the relevant
authorities of the other jurisdictions in which Biovail and
Valeant are qualified to do business, (iv) such Consents,
registrations, declarations, notices or filings as are required
to be made or obtained under the securities or “blue
sky” laws of various states in connection with the issuance
of the Merger Consideration, (v) such filings with and
approvals of the NYSE and TSX as are required to permit the
consummation of the Merger and the listing of the Merger
Consideration and (vi) such other matters that,
individually or in the aggregate, have not had and would not
reasonably be expected to have a Biovail Material Adverse Effect
(it being agreed that for purposes of this Section 3.05(b),
effects resulting from or arising in connection with the matters
set forth in clause (iv) of the definition of the term
“Material Adverse Effect” shall not be excluded in
determining whether a Biovail Material Adverse Effect has
occurred or would reasonably be expected to occur) and would not
prevent or materially impede, interfere with, hinder or delay
the consummation of the Merger.
Section
3.06.
Reporting
Documents; Undisclosed
Liabilities
.
(a) Biovail has furnished
or filed all reports, schedules, forms, statements and other
documents (including exhibits and other information incorporated
therein) required to be furnished or filed by Biovail with the
SEC and the Canadian Securities Authorities since
January 1, 2008 (such documents, together with any
documents filed with the SEC during such period by Biovail on a
voluntary basis on a Current Report on
Form 8-K,
but excluding the Joint Proxy Statement and the
Form S-4,
being collectively referred to as the “
Biovail Reporting
Documents
”). Biovail is a reporting issuer in each of
the provinces
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of Canada within the meaning of the Canadian Securities Laws.
Biovail is in compliance with all its material obligations under
the Canadian Securities Laws and the rules and policies of the
TSX to which it is subject.
(b) Each Biovail Reporting Document (i) at the time
filed, complied in all material respects with the requirements
of the Sarbanes-Oxley Act of 2002 (“
SOX
”), the
Exchange Act, the Securities Act or the Canadian Securities
Laws, as the case may be, and the rules and regulations of the
SEC or the Canadian Securities Authorities or promulgated
thereunder applicable to such Biovail Reporting Document and
(ii) did not at the time it was filed (or if amended or
superseded by a filing or amendment prior to the date of this
Agreement, then at the time of such filing or amendment) contain
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each
of the consolidated financial statements of Biovail included in
the Biovail Reporting Documents complied at the time it was
filed as to form in all material respects with applicable
accounting requirements and the published rules and regulations
of the SEC with respect thereto, was prepared in accordance with
United States generally accepted accounting principles
(“
GAAP
”) (except, in the case of unaudited
statements, as permitted by
Form 10-Q
of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and
fairly presented in all material respects the consolidated
financial position of Biovail and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their
operations and cash flows for the periods shown (subject, in the
case of unaudited statements, to normal year-end audit
adjustments).
(c) Neither Biovail nor any Biovail Subsidiary has any
liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) that, individually or in the
aggregate, have had or would reasonably be expected to have a
Biovail Material Adverse Effect.
(d) Each of the chief executive officer of Biovail and the
chief financial officer of Biovail (or each former chief
executive officer of Biovail and each former chief financial
officer of Biovail, as applicable) has made all applicable
certifications required by
Rule 13a-14
or
15d-14
under the Exchange Act and Sections 302 and 906 of SOX with
respect to the Biovail Reporting Documents, and the statements
contained in such certifications are true and accurate. For
purposes of this Agreement, “chief executive officer”
and “chief financial officer” shall have the meanings
given to such terms in SOX. None of Biovail or any of the
Biovail Subsidiaries has outstanding, or has arranged any
outstanding, “extensions of credit” to directors or
executive officers within the meaning of Section 402 of SOX.
(e) Biovail maintains a system of “internal control
over financial reporting” (as defined in
Rules 13a-15(f)
and
15d-15(f)
of
the Exchange Act) sufficient to provide reasonable assurance
(A) that transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP,
consistently applied, (B) that transactions are executed
only in accordance with the authorization of management and
(C) regarding prevention or timely detection of the
unauthorized acquisition, use or disposition of Biovail’s
properties or assets.
(f) The “disclosure controls and procedures” (as
defined in
Rules 13a-15(e)
and
15d-15(e)
of
the Exchange Act) utilized by Biovail are reasonably designed to
ensure that all information (both financial and non-financial)
required to be disclosed by Biovail in the reports that it files
or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
rules and forms of the SEC and that all such information
required to be disclosed is accumulated and communicated to the
management of Biovail, as appropriate, to allow timely decisions
regarding required disclosure and to enable the chief executive
officer and chief financial officer of Biovail to make the
certifications required under the Exchange Act with respect to
such reports.
(g) Neither Biovail nor any of the Biovail Subsidiaries is
a party to, or has any commitment to become a party to, any
joint venture, off-balance sheet partnership or any similar
Contract (including any Contract or arrangement relating to any
transaction or relationship between or among Biovail and any of
the Biovail Subsidiaries, on the one hand, and any
unconsolidated Affiliate, including any structured finance,
special purpose or limited purpose entity or Person, on the
other hand, or any “off-balance-sheet arrangements”
(as defined in Item 303(a) of
Regulation S-K
under the Exchange Act)), where the result, purpose or intended
effect of such Contract is to avoid disclosure of any material
transaction involving, or material liabilities of, Biovail or
any of the Biovail Subsidiaries in Biovail’s or such
Biovail Subsidiary’s published financial statements or
other Biovail Reporting Documents.
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(h) Since January 1, 2009, none of Biovail,
Biovail’s independent accountants, the Biovail Board or the
audit committee of the Biovail Board has received any oral or
written notification of any (x) “significant
deficiency” in the internal controls over financial
reporting of Biovail, (y) “material weakness” in
the internal controls over financial reporting of Biovail or
(z) fraud, whether or not material, that involves
management or other employees of Biovail who have a significant
role in the internal controls over financial reporting of
Biovail. For purposes of this Agreement, the terms
“significant deficiency” and “material
weakness” shall have the meanings assigned to them in
Auditing Standard No. 5 of the Public Company Accounting
Oversight Board, as in effect on the date of this Agreement.
(i) None of the Biovail Subsidiaries is, or has at any time
since January 1, 2009 been, subject to the reporting
requirements of Section 13(a) or 15(d) of the Exchange Act
or a reporting issuer in any of the provinces of Canada within
the meaning of the Canadian Securities Laws.
Section
3.07.
Information
Supplied
.
None of the information supplied or
to be supplied by Biovail or Merger Sub for inclusion or
incorporation by reference in (i) the
Form S-4
will, at the time the
Form S-4
is filed with the SEC, at any time it is amended or supplemented
or at the time it is declared effective under the Securities
Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading or
(ii) the Joint Proxy Statement will, at the date it is
first mailed to each of Biovail’s stockholders and
Valeant’s stockholders or at the time of each of the
Biovail Stockholders Meeting and the Valeant Stockholders
Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The
Form S-4
will comply as to form in all material respects with the
requirements of the Securities Act and the rules and regulations
thereunder, except that no representation is made by Biovail or
Merger Sub with respect to statements made or incorporated by
reference therein based on information supplied by Valeant for
inclusion or incorporation by reference therein. The Joint Proxy
Statement will comply as to form in all material respects with
the requirements of the Exchange Act and the rules and
regulations thereunder and the requirements of the CBCA and
applicable Canadian Securities Laws, except that no
representation is made by Biovail with respect to statements
made or incorporated by reference therein based on information
supplied by Valeant for inclusion or incorporation by reference
therein.
Section
3.08.
Absence
of Certain Changes or Events
.
From
January 1, 2010 to the date of this Agreement, each of
Biovail and the Biovail Subsidiaries has conducted its
respective business in the ordinary course in all material
respects, and during such period there has not occurred:
(a) any fact, circumstance, effect, change, event or
development that, individually or in the aggregate, has had or
would reasonably be expected to have a Biovail Material Adverse
Effect;
(b) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of any capital
stock or voting securities of, or other equity interests in,
Biovail or the capital stock or voting securities of, or other
equity interests in, any of the Biovail Subsidiaries (other than
(x) regular quarterly cash dividends in an amount not
exceeding $0.095 per share of Biovail Common Stock and
(y) dividends or other distributions by a direct or
indirect wholly owned Biovail Subsidiary to its parent) or any
repurchase for value by Biovail of any capital stock or voting
securities of, or other equity interests in, Biovail or the
capital stock or voting securities of, or other equity interests
in, any of the Biovail Subsidiaries;
(c) any split, reverse split, combination, subdivision or
reclassification of any capital stock or voting securities of,
or other equity interests in, Biovail, securities convertible
into or exercisable or exchangeable for capital stock or voting
securities of, or other equity interests in, Biovail or any
issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for
shares of capital stock or voting securities of, or other equity
interests in, Biovail;
(d) any incurrence of material Indebtedness for borrowed
money or any guarantee of such Indebtedness for another Person,
or any issue or sale of debt securities, warrants or other
rights to acquire any debt security of Biovail or any Biovail
Subsidiary other than draws on existing revolving credit
facilities in the ordinary course of business;
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(e) (i) any transfer, lease, license, sale, mortgage,
pledge or other disposal or encumbrance of any of Biovail’s
or Biovail’s Subsidiaries’ property or assets outside
of the ordinary course of business consistent with past practice
with a fair market value in excess of $5,000,000 or
(ii) any acquisitions of businesses, whether by merger,
consolidation, purchase of property or assets or otherwise;
(f) (i) any granting by Biovail to any director or
executive officer of Biovail of any material increase in
compensation, (ii) any granting by Biovail to any director
or executive officer of Biovail of any material increase in
change in control, severance or termination pay, (iii) any
establishment, adoption, entry into or amendment in any material
respect of any collective bargaining agreement or material
Biovail Benefit Plan or (iv) the taking of any action to
accelerate the time of vesting or payment of any material
compensation or benefits under any Biovail Benefit Plan;
(g) any change in accounting methods, principles or
practices by Biovail or any Biovail Subsidiary, except insofar
as may have been required by a change in GAAP; or
(h) any material elections or changes thereto with respect
to Taxes by Biovail or any Biovail Subsidiary or any settlement
or compromise by Biovail or any Biovail Subsidiary of any
material Tax liability or refund, other than in the ordinary
course of business.
Section
3.09.
Taxes
.
(a)
(i) Each of Biovail and each Biovail Subsidiary has timely
filed, taking into account any extensions, all material Tax
Returns required to have been filed and such Tax Returns are
accurate and complete in all material respects; (ii) each
of Biovail and each Biovail Subsidiary has paid all material
Taxes required to have been paid by it other than Taxes that are
not yet due or that are being contested in good faith in
appropriate proceedings; and (iii) no deficiency for any
Tax has been asserted or assessed by a taxing authority against
Biovail or any Biovail Subsidiary which deficiency has not been
paid or is not being contested in good faith in appropriate
proceedings.
(b) No Tax Return of Biovail or any Biovail Subsidiary is
under audit or examination by any taxing authority, and no
written (or, to the Knowledge of Biovail, oral) notice of such
an audit or examination has been received by Biovail or any
Biovail Subsidiary. No deficiencies for any Taxes have been
proposed, asserted or assessed against Biovail or any Biovail
Subsidiary, and no requests for waivers of the time to assess
any such Taxes are pending. There are no outstanding waivers of
any limitation periods or agreements providing for an extension
of time for the filing of any Tax Return, the assessment or
collection thereof by any relevant taxing authority or the
payment of any Tax by Biovail or any Biovail Subsidiary. No
other procedure, proceeding or contest of any refund or
deficiency in respect of Taxes is pending in or on appeal from
any Governmental Entity.
(c) Each of Biovail and each Biovail Subsidiary has
complied in all material respects with all applicable Laws
relating to the withholding, collection and remittance of Taxes
and other deductions required to be withheld
(d) Other than for Taxes not yet due and delinquent or that
are being contested in good faith in appropriate proceedings,
there are no Liens with respect to Taxes against any of the
assets of Biovail or any Biovail Subsidiary. No written or, to
the Knowledge of Biovail, other claim has been received by
Biovail or any Biovail Subsidiary from an authority in a
jurisdiction where such corporation does not file Tax Returns
that it is or may be subject to material taxation by such
jurisdiction. Neither Biovail nor any Biovail Subsidiary has a
permanent establishment or is resident for Tax purposes outside
of its jurisdiction or territory of incorporation or formation.
(e) Each of Biovail and the Biovail Subsidiaries has not
and has not been deemed to have for purposes of the Income Tax
Act (or any other applicable Law), acquired property from a
non-arm’s length Person, within the meaning of the Income
Tax Act (or such other applicable Law), for consideration, the
value of which is less than the fair market value of the
property in circumstances which could subject it to a liability
under section 160 of the Income Tax Act (or the analogous
provision of such other applicable Law).
(f) With respect to any transaction with any non-arm’s
length Person that is not a resident of Canada within the
meaning of the Income Tax Act, neither Biovail nor any Biovail
Subsidiary resident in Canada has (i) paid any
consideration for any property (including for the use of
property) or services that is in excess of the fair market value
thereof, nor (ii) received any consideration for any
property (including for the use of property) or services that is
less than the fair market value thereof. For all such
transactions, Biovail and any Biovail Subsidiary resident in
Canada,
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as the case may be, has made or obtained records or documents
that meet the requirements of paragraphs 247(4)(a) to
(c) of the Income Tax Act.
(g) None of sections 78, 80, 80.01, 80.02, 80.03 and
80.04 of the Income Tax Act, or any equivalent provision of the
Laws of any other jurisdiction, has applied in any material
manner or shall apply in any material manner to any of Biovail
or the Biovail Subsidiaries as of the Closing Date.
(h) Neither Biovail nor any Biovail Subsidiary has received
any material requirement pursuant to section 224 of the
Income Tax Act which remains unsatisfied in any respect.
(i) Neither Biovail nor any Biovail Subsidiary is a party
to or is otherwise bound by any material Tax sharing, allocation
or indemnification agreement or arrangement (other than such an
agreement or arrangement exclusively between or among Biovail
and wholly owned Biovail Subsidiaries).
(j) Within the past three years, neither Biovail nor any
Biovail Subsidiary has been a “distributing
corporation” or a “controlled corporation” in a
distribution intended to qualify for tax-free treatment under
Section 355 of the Code.
(k) Neither Biovail nor any Biovail Subsidiary has
participated in or been a party to a transaction that, as of the
date of this Agreement, constitutes a “listed
transaction” within the meaning of Section 6011 of the
Code and applicable Treasury Regulations thereunder (or a
similar provision of state or foreign Law).
(l) This Agreement (including any exhibits hereto) sets
forth the complete terms of the Merger. Neither Biovail nor any
Biovail Subsidiary has taken any other action or knows of any
other fact relating to the Merger that would reasonably be
expected to prevent the Merger from qualifying for the Intended
Tax Treatment.
(m) No amounts paid or payable by Biovail or any Biovail
Subsidiary as employee compensation, whether under any contract,
plan, program or arrangement, understanding or otherwise
(including any Biovail Benefit Plan or Biovail Benefit
Arrangement), individually or in the aggregate, is or would
reasonably be expected to be non-deductible for federal income
tax purposes by virtue of Section 162(m) or 280G of the
Code.
Section
3.10.
Employee
Benefits
.
(a) Section 3.10(a) of
the Biovail Disclosure Letter sets forth a complete and accurate
list of each material Biovail Benefit Plan and each material
Biovail Benefit Agreement.
(b) With respect to each material Biovail Benefit Plan and
material Biovail Benefit Agreement, Biovail has made available
to Valeant complete and accurate copies of (A) such Biovail
Benefit Plan or Biovail Benefit Agreement, including any
material amendment thereto, and, to the extent applicable,
summary plan description thereof, (B) each trust,
insurance, annuity or other funding Contract related thereto,
(C) the most recent audited financial statements and
actuarial or other valuation reports prepared with respect
thereto, (D) the two most recent annual reports on
Form 5500 required to be filed with the Internal Revenue
Service with respect thereto and the two most recent annual
information returns required to be filed with any Governmental
Entity and (E) the most recently received IRS determination
letter.
(c) Each Biovail Benefit Plan and Biovail Benefit Agreement
(and any related trust or other funding vehicle) has been
administered in accordance with its terms and is in compliance
with ERISA, the Code and all other applicable Laws, other than
instances of non-compliance that, individually or in the
aggregate, have not had and would not reasonably be expected to
have a Biovail Material Adverse Effect.
(d) Except for matters that, individually or in the
aggregate, have not had and would not reasonably be expected to
have a Biovail Material Adverse Effect, neither Biovail nor any
Biovail Subsidiary nor any Biovail Commonly Controlled Entity
currently sponsors, maintains or contributes to, or has
sponsored, maintained, contributed to or been required to
maintain or contribute to, or has any actual or contingent
liability under, any Benefit Plan that is subject to
Section 302 or Title IV of ERISA or Section 412
of the Code or is otherwise a defined benefit plan (including
any such plan maintained outside the United States).
(e) None of the Biovail Benefit Plans is a “registered
pension plan” within the meaning of Section 248(1) of
the Income Tax Act (Canada) R.S.C. 1985, as amended (the
“
Income Tax Act
”).
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(f) Neither Biovail nor any Biovail Subsidiary has any
liability for providing health, medical or other welfare
benefits after retirement or other termination of employment
(other than for continuation coverage required under
Section 4980(B)(f) of the Code or applicable Law), except
for any liabilities that, individually and in the aggregate,
have not had and would not reasonably be expected to have a
Biovail Material Adverse Effect.
(g) None of the execution and delivery of this Agreement,
the performance by either party of its obligations hereunder or
the consummation of the Merger and the other transactions
contemplated by this Agreement (alone or in conjunction with any
other event, including any termination of employment on or
following the Effective Time) will (i) entitle any Biovail
Personnel to any material compensation or benefit,
(ii) accelerate the time of payment or vesting, or trigger
any payment or funding, of any material compensation or benefit
or trigger any other material obligation under any Biovail
Benefit Plan or Biovail Benefit Agreement or (iii) result
in any breach or violation of, or default under, or limit
Biovail’s right to amend, modify or terminate, any Biovail
Benefit Plan or Biovail Benefit Agreement.
Section
3.11.
Litigation
.
There
is no, and since January 1, 2008, there has been no, suit,
action or other proceeding pending or, to the Knowledge of
Biovail, threatened against or affecting Biovail or any Biovail
Subsidiary (i) that, individually or in the aggregate, has
had or would reasonably be expected to have a Biovail Material
Adverse Effect or (ii) that, as of the date of this
Agreement, challenges or seeks to prevent, enjoin, alter in any
material respect or materially delay the Merger or any of the
other transactions contemplated hereby. There is no, and since
January 1, 2008, there has been no, Judgment outstanding
against or, to the Knowledge of Biovail, investigation by any
Governmental Entity involving, Biovail or any Biovail Subsidiary
or any of their respective properties or assets that,
individually or in the aggregate, has had or would reasonably be
expected to have a Biovail Material Adverse Effect.
Section
3.12.
Compliance
with Applicable Laws
.
Except for matters
that, individually or in the aggregate, have not had and would
not reasonably be expected to have a Biovail Material Adverse
Effect, Biovail and the Biovail Subsidiaries are, and since
January 1, 2008, have been, in compliance with all
applicable Laws and Biovail Permits. Except for matters that,
individually or in the aggregate, have not had and would not
reasonably be expected to have a Biovail Material Adverse
Effect, there is no, and since January 1, 2008, there has
been no, material action, demand or investigation by or before
any Governmental Entity pending or, to the Knowledge of Biovail,
threatened alleging that Biovail or a Biovail Subsidiary is not
in compliance with any applicable Law or Biovail Permit or which
challenges or questions the validity of any rights of the holder
of any Biovail Permit. To the Knowledge of Biovail, Biovail is,
and since January 1, 2008, has been, in material compliance
with the Foreign Corrupt Practices Act of 1977, as amended (the
‘‘
FCPA
”) and any rules and regulations
thereunder. This Section 3.12 does not relate to Tax
matters, employee benefits matters, environmental matters or
Intellectual Property matters, which are the subjects of
Sections 3.09, 3.10, 3.13 and 3.16, respectively.
Section
3.13.
Environmental
Matters
.
(a) Except for matters that,
individually or in the aggregate, have not had and would not
reasonably be expected to have a Biovail Material Adverse Effect:
(i) Biovail and the Biovail Subsidiaries are in compliance
with all Environmental Laws (which compliance includes the
possession by Biovail and the Biovail Subsidiaries of all
Permits required under applicable Environmental Laws necessary
for their operations as currently conducted, and compliance with
the terms and conditions thereof), and neither Biovail nor any
Biovail Subsidiary has received any written communication,
whether from a Governmental Entity, citizens group, employee or
otherwise, alleging that Biovail or any Biovail Subsidiary is
not in such compliance, and, to the Knowledge of Biovail, there
are no past or present circumstances, conditions, events or
incidents that would reasonably be expected to prevent or
interfere with such compliance in the future;
(ii) there are no Environmental Claims pending or, to the
Knowledge of Biovail, threatened against Biovail or any of the
Biovail Subsidiaries or, to the Knowledge of Biovail, against
any Person whose liability for any Environmental Claim Biovail
or any of the Biovail Subsidiaries has or may have retained or
assumed, either contractually or by operation of law;
(iii) there have been no Releases of any Hazardous Material
that would reasonably be expected to form the basis of any
Environmental Claim against Biovail or any of the Biovail
Subsidiaries or, to the Knowledge of
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Biovail, against any Person whose liabilities for such
Environmental Claims Biovail or any of the Biovail Subsidiaries
has, or may have, retained or assumed, either contractually or
by operation of Law; and
(iv) neither Biovail nor any of the Biovail Subsidiaries
has retained or assumed, either contractually or by operation of
law, any liabilities or obligations that would reasonably be
expected to form the basis of any Environmental Claim against
Biovail or any of the Biovail Subsidiaries.
(b) As used herein:
(i)
“
Environmental Claim
”
means any
administrative, regulatory or judicial actions, suits, orders,
demands, directives, claims, liens, cause of action,
investigations, proceedings or written or oral notices of
noncompliance or violation by or from any Person alleging
liability of whatever kind or nature (including potential
liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages,
personal injuries, or penalties) arising out of, based on or
resulting from (y) the presence or Release of, or exposure
to, any Hazardous Materials at any location; or
(z) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law.
(ii)
“
Environmental Laws
”
means all
applicable Federal, national, state, provincial or local,
foreign and common Laws, Judgments, or Contracts issued,
promulgated or entered into by or with any Governmental Entity,
relating to pollution, natural resources or protection of
endangered or threatened species, human health (as it relates to
environmental conditions or exposure to Hazardous Materials) or
the environment (including ambient air, surface water,
groundwater, land surface or subsurface strata), including those
relating to the exposure to, or Releases or threatened Releases
of, Hazardous Materials.
(iii)
“
Hazardous Materials
”
means
(y) any petroleum or petroleum products, explosive or
radioactive materials or wastes, asbestos in any form, toxic
mold, and polychlorinated biphenyls; and (z) any other
chemical, material, substance or waste that in relevant form or
concentration is prohibited, limited or regulated under any
Environmental Law.
(iv)
“
Release
”
means any actual or
threatened release, spill, emission, leaking, dumping,
injection, pouring, deposit, disposal, discharge, dispersal,
leaching or migration into or through the indoor or outdoor
environment (including ambient air, surface water, groundwater,
land surface or subsurface strata) or within any building,
structure, facility or fixture, including the movement of
Hazardous Materials through or in the air, soil, surface water,
groundwater or property.
Section
3.14.
Contracts
.
(a) As
of the date of this Agreement, neither Biovail nor any Biovail
Subsidiary is a party to any Contract required to be filed by
Biovail as a “material contract” pursuant to
Item 601(b)(10) of
Regulation S-K
under the Securities Act (a “
Filed Biovail
Contract
”) that has not been so filed.
(b) Section 3.14(b) of the Biovail Disclosure Letter
sets forth, as of the date of this Agreement, a true and
complete list of (i) non-competition Contracts or any other
Contract containing terms that expressly (A) limit or
otherwise restrict Biovail or the Biovail Subsidiaries or
(B) to the Knowledge of Biovail, would, after the Effective
Time, by its terms expressly limit or otherwise restrict the
Combined Company from, in the case of either (A) or (B),
engaging or competing in any line of business or in any
geographic area or from developing or commercializing any
compounds, any therapeutic area, class of drugs or mechanism of
action, in a manner that would be reasonably likely to be
material, in the case of (A), to Biovail and the Biovail
Subsidiaries, taken as a whole, or in the case of (B), to the
Combined Company, taken as a whole, (ii) each loan and
credit agreement, note, debenture, bond, indenture or other
similar agreement pursuant to which any Indebtedness of Biovail
or any of the Biovail Subsidiaries is outstanding or may be
incurred, other than any such agreement between or among Biovail
and the wholly owned Biovail Subsidiaries, and (iii) each
partnership, joint venture or similar agreement or understanding
to which Biovail or any of the Biovail Subsidiaries is a party
relating to the formation, creation, operation, management or
control of any partnership or joint venture material to Biovail
and the Biovail Subsidiaries, taken as a whole. Each agreement,
understanding or undertaking of the type described in this
Section 3.14(b) and each Filed Biovail Contract is referred
to herein as a “
Biovail Material Contract
”.
(c) Except for matters which, individually or in the
aggregate, have not had and would not reasonably be expected to
have a Biovail Material Adverse Effect, (i) each Biovail
Material Contract (including, for purposes of
A-15
this Section 3.14(c), any Contract entered into after the
date of this Agreement that would have been a Biovail Material
Contract if such Contract existed on the date of this Agreement)
is a valid, binding and legally enforceable obligation of
Biovail or one of the Biovail Subsidiaries, as the case may be,
and, to the Knowledge of Biovail, of the other parties thereto,
except, in each case, as enforcement may be limited by
bankruptcy, insolvency, reorganization or similar Laws affecting
creditors’ rights generally and by general principles of
equity, (ii) each such Biovail Material Contract is in full
force and effect and (iii) none of Biovail or any of the
Biovail Subsidiaries is (with or without notice or lapse of
time, or both) in breach or default under any such Biovail
Material Contract and, to the Knowledge of Biovail, no other
party to any such Biovail Material Contract is (with or without
notice or lapse of time, or both) in breach or default
thereunder.
Section
3.15.
Properties
.
(a) Biovail
and each Biovail Subsidiary has good and valid title to, and
with respect to real property owned by Biovail or any Biovail
Subsidiary, marketable and insurable fee simple interest in, or
valid license or leasehold interests in, all their respective
properties and assets, except in respects that, individually or
in the aggregate, have not had and would not reasonably be
expected to have a Biovail Material Adverse Effect. All such
properties and assets, other than properties and assets in which
Biovail or any of the Biovail Subsidiaries has a license or
leasehold interest, are free and clear of all conditions,
encroachments, easements, rights of way, restrictions and Liens,
except for such conditions, encroachments, easements, rights of
way, restrictions and Liens that, individually or in the
aggregate, have not had and would not reasonably be expected to
have a Biovail Material Adverse Effect. This Section 3.15
does not relate to Intellectual Property matters, which are the
subject of Section 3.16.
(b) Biovail and each of the Biovail Subsidiaries has
complied with the terms of all leases to which it is a party,
and all leases to which Biovail or any Biovail Subsidiary is a
party are in full force and effect, except for such
noncompliance or failure to be in full force and effect that,
individually or in the aggregate, has not had and would not
reasonably be expected to have a Biovail Material Adverse
Effect. Biovail and each Biovail Subsidiary is in possession of
the properties or assets purported to be leased under all its
leases, except for such failures to have such possession as,
individually or in the aggregate, have not had and would not
reasonably be expected to have a Biovail Material Adverse Effect.
Section
3.16.
Intellectual
Property
.
(a) Except for matters that,
individually or in the aggregate, have not had and would not
reasonably be expected to have a Biovail Material Adverse
Effect, (i) to the Knowledge of Biovail, Biovail and each
of the Biovail Subsidiaries owns, or is licensed to use (in each
case, free and clear of any Liens), all Intellectual Property
used in or necessary for the conduct of its business as
currently conducted, and to its Knowledge, all such Intellectual
Property, is valid, enforceable and subsisting; (ii) to the
Knowledge of Biovail, the use of any Intellectual Property by
Biovail and the Biovail Subsidiaries does not infringe on or
otherwise violate the rights of any Person and is in accordance
with any applicable license pursuant to which Biovail or any
Biovail Subsidiary acquired the right to use any Intellectual
Property; (iii) to the Knowledge of Biovail, no Person is
challenging, infringing on or otherwise violating any right of
Biovail or any of the Biovail Subsidiaries with respect to any
Intellectual Property owned by or licensed to Biovail or any of
the Biovail Subsidiaries; and (iv) to the Knowledge of
Biovail, neither Biovail nor any of the Biovail Subsidiaries has
received any written notice or otherwise has Knowledge of any
pending claim, order or proceeding with respect to any
Intellectual Property used by Biovail and the Biovail
Subsidiaries and to its Knowledge no Intellectual Property owned
or licensed by Biovail or the Biovail Subsidiaries is being used
or enforced in a manner that would reasonably be expected to
result in the abandonment, cancellation or unenforceability of
such Intellectual Property. This Section 3.16(a)
constitutes the only representation and warranty of Biovail with
respect to any actual or alleged infringement or other violation
of any Intellectual Property of any other Person. For purposes
of this Agreement, “
Intellectual Property
”
shall mean (A) trademarks, service marks, certification
marks, names, corporate names, trade names, domain names, logos,
slogans, trade dress, design rights, and other similar
designations of sources of origin, the goodwill associated with
the foregoing and registrations of, and applications to
register, the foregoing, including any extension, modification
or renewal of any such registration or application,
(B) inventions, discoveries and ideas, whether patentable
or not, (C) patents, applications for patents (including
any division, continuation, continuation in part or renewal
application) and any renewals, extensions, substitutions, or
reissues thereof, (D) trade secrets and confidential
information and rights to limit the use or disclosure thereof by
any person, (E) writings and other works, whether
copyrightable or not, (F) registrations and applications
for registration of copyrights and any renewals or extensions
A-16
thereof, (G) moral rights and rights of attribution and
integrity, (H) all rights in the foregoing, in any similar
intangible assets, and in any similar intellectual property or
proprietary rights, in each case in any domestic or foreign
jurisdiction.
(b) Biovail and the Biovail Subsidiaries have taken
reasonable steps to protect the confidentiality and value of all
trade secrets and any other confidential information that are
owned, used or held by Biovail and the Biovail Subsidiaries in
confidence, including entering into licenses and Contracts that
require employees, licensees, contractors and other Persons with
access to trade secrets or other confidential information to
safeguard and maintain the secrecy and confidentiality of such
trade secrets and confidential information. To the Knowledge of
Biovail, such trade secrets and confidential information have
not been used, disclosed to or discovered by any Person except
pursuant to a valid non-disclosure, license or other appropriate
Contract which has not been breached.
(c) To the Knowledge of Biovail, Biovail and the Biovail
Subsidiaries are in compliance with all applicable Law, as well
as their own policies, relating to privacy, data protection, and
the collection and use of personal information collected, used,
or held for use by Biovail or the Biovail Subsidiaries, and as
of the date hereof no claims are pending or threatened in
writing against Biovail or the Biovail Subsidiaries alleging a
violation of any Person’s privacy or personal information.
(d) Except for matters that, individually or in the
aggregate, have not had and would not reasonably be expected to
have a Biovail Material Adverse Effect (it being agreed that for
purposes of this Section 3.16(d), effects resulting from or
arising in connection with the matters set forth in
clause (iv) of the definition of the term “Material
Adverse Effect” shall not be excluded in determining
whether a Biovail Material Adverse Effect has occurred or would
reasonably be expected to occur) and except as set forth in
Section 3.16(d) of the Biovail Disclosure Letter, to the
Knowledge of Biovail, the consummation of the transactions
contemplated by this Agreement will not (i) result in the
loss of, or otherwise adversely affect, any rights of Biovail or
the Biovail Subsidiaries in any Intellectual Property,
(ii) grant or require Biovail or the Biovail Subsidiaries
to grant to any Person any rights with respect to any
Intellectual Property of Biovail or the Biovail Subsidiaries,
(iii) subject Biovail or any of the Biovail Subsidiaries to
any increase in royalties or other payments in respect of any
Intellectual Property, (iv) by the terms of any Contract to
which Biovail or a Subsidiary of Biovail is a party, diminish
any royalties or other payments Biovail or a Subsidiary of
Biovail would otherwise be entitled to in respect of any
Intellectual Property or (v) result in the breach or, by
the terms of such Contract, termination of any agreement
relating to the Intellectual Property of Biovail.
Section
3.17.
Regulatory
Matters
.
(a) Except as has not had and
would not reasonably be expected to have, individually or in the
aggregate, a Biovail Material Adverse Effect, (i) each of
Biovail and the Biovail Subsidiaries holds all Biovail Permits,
including all authorizations under the Federal Food, Drug and
Cosmetic Act of 1938, as amended (the
‘‘
FDCA
”), the Public Health Service Act of
1944, as amended (the “
PHSA
”), and the
regulations of the United States Food and Drug Administration
(the “
FDA
”) promulgated thereunder, the Food
and Drugs Act, as amended (the “
Food and Drugs
Act
”), the Controlled Drugs and Substances Act, as
amended (the “
CDSA
”), and the regulations of
Health Canada promulgated thereunder, and any other Governmental
Entity that is concerned with the quality, identity, strength,
purity, safety, efficacy, manufacturing, distribution, sale,
import or export of the Biovail Products (any such Governmental
Entity, a “
Biovail Regulatory Agency
”)
necessary for the lawful operating of the businesses of Biovail
or any of the Biovail Subsidiaries and the testing,
manufacturing, sale or distribution, as applicable, of each of
the Biovail Products (the “
Biovail Regulatory
Permits
”) and (ii) all such Biovail Regulatory
Permits are valid and in full force and effect. Since
January 1, 2009, there has not occurred any violation of,
default (with or without notice or lapse of time or both) under,
or event giving to others any right of termination, amendment or
cancellation of, with or without notice or lapse of time or
both, any Biovail Regulatory Permit, except as has not had and
would not reasonably be expected to have, individually or in the
aggregate, a Biovail Material Adverse Effect. Biovail and each
of the Biovail Subsidiaries are in compliance in all material
respects with the terms of all Biovail Regulatory Permits, and
no event has occurred that, to the Knowledge of Biovail, would
reasonably be expected to result in a penalty under or the
revocation, cancellation, non-renewal or adverse modification of
any Biovail Regulatory Permit, except as has not had and would
not reasonably be expected to have, individually or in the
aggregate, a Biovail Material Adverse Effect.
(b) Except as would not, individually or in the aggregate,
reasonably be expected to have a Biovail Material Adverse
Effect, the businesses of each of Biovail and the Biovail
Subsidiaries are being conducted in compliance
A-17
with all applicable Laws, including (i) the FDCA, including
the rules and regulations promulgated thereunder;
(ii) federal Medicare and Medicaid statutes and related
state or local statutes or regulations; (iii) the Food and
Drugs Act and the CDSA, including the rules and regulations
promulgated thereunder; (iv) provincial formulary and drug
pricing statutes, including the rules and regulations
promulgated thereunder, (v) any comparable foreign Laws for
any of the foregoing; (vi) federal, state or provincial
criminal or civil Laws (including the federal Anti-Kickback
Statute (42 U.S.C.
§1320a-7(b)),
Stark Law (42 U.S.C. §1395nn), False Claims Act
(42 U.S.C.
§1320a-7b(a)),
Health Insurance Portability and Accountability Act of 1996
(42 U.S.C. §1320d et. seq., and any comparable state,
provincial or local Laws) and (vii) state or provincial
licensing, disclosure and reporting requirements.
(c) Each of Biovail and the Biovail Subsidiaries are in
compliance in all material respects with the terms of the
Corporate Integrity Agreement, dated September 11, 2009,
between the Office of Inspector General of the Department of
Health and Human Services and Biovail.
(d) All pre-clinical and clinical investigations conducted
or sponsored by each of Biovail and the Biovail Subsidiaries are
being conducted in compliance in all material respects with all
applicable Laws administered or issued by the applicable
Regulatory Authorities, including (i) FDA standards for
conducting non-clinical laboratory studies contained in
Title 21 part 58 of the Code of Federal Regulations,
(ii) FDA standards for the design, conduct, performance,
monitoring, auditing, recording, analysis and reporting of
clinical trials contained in Title 21 parts 50, 54, 56,
312, 314 and 320 of the Code of Federal Regulations,
(iii) Division 5 of the Food and Drug Regulations
regarding Drugs for Clinical Trials Involving Human Subjects,
and (iv) federal, state and provincial Laws restricting the
collection, use and disclosure of individually identifiable
health information and personal information.
(e) Neither Biovail nor any of the Biovail Subsidiaries has
received any written information from the FDA, the European
Medicines Agency (“
EMEA
”) or Health Canada or
any foreign agency with jurisdiction over the marketing, sale,
use handling and control, safety, efficacy, reliability, or
manufacturing of drugs which would reasonably be expected to
lead to the denial of any application for marketing approval
currently pending before the FDA, Health Canada or such other
Biovail Regulatory Agency.
(f) All material reports, documents, claims, permits and
notices required to be filed, maintained or furnished to the
FDA, Health Canada or any other Biovail Regulatory Agency by
Biovail and the Biovail Subsidiaries have been so filed,
maintained or furnished. All such reports, documents, claims,
permits and notices were complete and accurate in all material
respects on the date filed (or were corrected in or supplemented
by a subsequent filing) such that no liability exists with
respect to such filing. Neither Biovail nor any of the Biovail
Subsidiaries, nor, to the Knowledge of Biovail, any officer,
employee, agent or distributor of Biovail or any of the Biovail
Subsidiaries, has made an untrue statement of a material fact or
a fraudulent statement to the FDA, Health Canada or any other
Biovail Regulatory Agency, failed to disclose a material fact
required to be disclosed to the FDA, Health Canada or any other
Biovail Regulatory Agency, or committed an act, made a
statement, or failed to make a statement that, at the time such
disclosure was made, would reasonably be expected to provide a
basis for the FDA, Health Canada or any other Biovail Regulatory
Agency to invoke its policy respecting “Fraud, Untrue
Statements of Material Facts, Bribery, and Illegal
Gratuities”, set forth in 56 Fed. Reg. 46191
(September 10, 1991) or any similar policy. Neither
Biovail nor any of the Biovail Subsidiaries, nor, to the
Knowledge of Biovail, any officer, employee, agent or
distributor of Biovail or any of the Biovail Subsidiaries, has
been convicted of any crime or engaged in any conduct for which
debarment is mandated by 21 U.S.C. §335a(a) or any
similar Law or authorized by 21 U.S.C. §335a(b) or any
similar Law. Neither Biovail nor any of the Biovail
Subsidiaries, nor, to the Knowledge of Biovail, any officer,
employee, agent or distributor of Biovail or any of the Biovail
Subsidiaries, has been convicted of any crime or engaged in any
conduct for which such Person could be excluded from
participating in the federal health care programs under
Section 1128 of the Social Security Act of 1935, as
amended, or any similar Law or program.
(g) As to each Biovail Product or Biovail Product candidate
subject to the FDCA and the regulations of the FDA promulgated
thereunder, the Food and Drugs Act, the CDSA and the regulations
of Health Canada promulgated thereunder, or similar Law in any
foreign jurisdiction that is or has been developed,
manufactured, tested, distributed or marketed by or on behalf of
Biovail or any of the Biovail Subsidiaries, each such Biovail
Product or Biovail Product candidate is being or has been
developed, manufactured, tested, distributed or marketed in
compliance in all material respects with all applicable
requirements under the FDCA and the regulations of the FDA
promulgated thereunder, the Food and Drugs Act, the CDSA and the
regulations of Health Canada
A-18
promulgated thereunder, and similar Laws in any foreign
jurisdiction, including those relating to investigational use,
premarket clearance or marketing approval, good manufacturing
practices, good clinical practices, good laboratory practices,
labeling, advertising, record keeping, filing of reports, and
security. There is no action or proceeding pending or
threatened, including any prosecution, injunction, seizure,
civil fine, debarment, suspension or recall, in each case
alleging any violation applicable to any Biovail Product or
Biovail Product candidate by Biovail or any of the Biovail
Subsidiaries of any Law, except as would not, individually or in
the aggregate, reasonably be expected to have a Biovail Material
Adverse Effect.
(h) Since January 1, 2009, each of Biovail and the
Biovail Subsidiaries have neither voluntarily nor involuntarily
initiated, conducted or issued, or caused to be initiated,
conducted or issued, any recall, field notifications, field
corrections, market withdrawal or replacement, safety alert,
warning, “dear doctor” letter, investigator notice,
safety alert or other notice or action relating to an alleged
lack of safety, efficacy or regulatory compliance of any Biovail
Product. Each of Biovail and the Biovail Subsidiaries are not
aware of any facts which are reasonably likely to cause
(i) the recall, market withdrawal or replacement of any
Biovail Product sold or intended to be sold by Biovail or the
Biovail Subsidiaries, (ii) a change in the marketing
classification or a material change in the labeling of any such
Biovail Products, or (iii) a termination or suspension of
the marketing of such Biovail Products.
(i) To Biovail’s Knowledge, no data generated by
Biovail or any of the Biovail Subsidiaries with respect to the
Biovail Products that has been provided to its customers or
otherwise made public or filed with a Biovail Regulatory Agency
is the subject of any regulatory or other action, either pending
or threatened, by any Biovail Regulatory Agency relating to the
truthfulness or scientific adequacy of such data.
(j) Since January 1, 2009, neither Biovail nor any of
the Biovail Subsidiaries has received any written notice that
the FDA, Health Canada or any other Biovail Regulatory Agency
has (i) commenced, or threatened to initiate, any action to
request the recall of any product sold or intended to be sold by
Biovail or the Biovail Subsidiaries, or (ii) commenced, or
threatened to initiate, any action to enjoin manufacture or
distribution of any product sold or intended to be sold by
Biovail or the Biovail Subsidiaries.
(k) Since January 1, 2009, neither Biovail nor any of
the Biovail Subsidiaries has received any written notice from
the FDA, Health Canada or any other Biovail Regulatory Agency
regarding inappropriate advertising or marketing of a Biovail
Product or a negative change in reimbursement status of a
Biovail Product.
(l) Except as would not, individually or in the aggregate,
reasonably be expected to have a Biovail Material Adverse
Effect, no Biovail Product manufactured or distributed by
Biovail or any of the Biovail Subsidiaries is
(i) adulterated within the meaning of 21 U.S.C.
§351 (or any similar Law), (ii) misbranded within the
meaning of 21 U.S.C. §352 (or any similar Law).
(m) To the Knowledge of Biovail, all of its vendors are in
compliance in all material respects with good manufacturing
practice and similar regulations promulgated by regulatory
agencies with jurisdiction over Biovail’s vendors.
(n) This Section 3.17 does not apply to environmental
matters, which are the subject of Section 3.13.
Section
3.18.
Insurance
.
Since
January 1, 2009, Biovail and the Biovail Subsidiaries have
maintained continuous insurance coverage, in each case, in those
amounts and covering those risks as are in accordance, in all
material respects, with normal industry practice for companies
of the size and financial condition of Biovail engaged in
businesses similar to those of Biovail and the Biovail
Subsidiaries.
Section
3.19.
Labor
and Employment Matters
.
Neither Biovail nor
any Biovail Subsidiary is a party to any collective bargaining
agreement and, as of the date of this Agreement, there are not,
to the Knowledge of Biovail, any union organizing activities
concerning any employees of Biovail or any of the Biovail
Subsidiaries, other than any such activities that, individually
or in the aggregate, have not had and would not reasonably be
expected to have a Biovail Material Adverse Effect. As of the
date of this Agreement, there are no labor strikes, slowdowns,
work stoppages or lockouts pending or, to the Knowledge of
Biovail, threatened in writing against Biovail or any Biovail
Subsidiary, other than any such matters that, individually or in
the aggregate, have not had and would not reasonably be expected
to have a Biovail Material Adverse Effect.
A-19
Section
3.20.
Brokers’
Fees and Expenses
.
No broker, investment
banker, financial advisor or other Person, other than Morgan
Stanley & Co. Incorporated (the “
Biovail
Financial Advisor
”), the fees and expenses of which
will be paid by Biovail, is entitled to any broker’s,
finder’s, financial advisor’s or other similar fee or
commission in connection with the Merger or any of the other
transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Biovail or Merger Sub.
Biovail has furnished to Valeant true and complete copies of all
agreements between Biovail and the Biovail Financial Advisor
relating to the Merger or any of the other transactions
contemplated by this Agreement.
Section
3.21.
Opinion
of Financial Advisor
.
Biovail has received an
opinion from the Biovail Financial Advisor, dated the date of
this Agreement, to the effect that, as of such date, subject to
the assumptions and qualifications set forth therein, the
Exchange Ratio is fair to Biovail from a financial point of view.
Section
3.22.
BAC;
Merger Sub
.
Biovail is the sole stockholder
of BAC. BAC is the sole stockholder of Merger Sub. Since its
date of incorporation, Merger Sub has not carried on any
business nor conducted any operations other than the execution
of this Agreement, the performance of its obligations hereunder
and matters ancillary thereto.
Section
3.23.
Affiliate
Transactions
.
Except for (i) Contracts
filed or incorporated by reference as an exhibit to the Filed
Biovail Reporting Documents, (ii) Biovail Benefits Plans,
(iii) indemnification agreements between Biovail or any
Biovail Subsidiary, on the one hand, and, on the other hand, any
current or former executive officer or director of Biovail or
any Biovail Subsidiary, or (iv) Contracts or arrangements
entered into in the ordinary course of business with customers,
suppliers or service providers, Section 3.23 of the Biovail
Disclosure Letter sets forth a correct and complete list of the
contracts or arrangements that are in existence as of the date
of this Agreement between Biovail or any of its Subsidiaries, on
the one hand, and, on the other hand, any (x) present
executive officer or director of either Biovail or any of the
Biovail Subsidiaries or any person that has served as such an
executive officer or director within the last five years or any
of such officer’s or director’s immediate family
members, (y) record or beneficial owner of more than 5% of
the shares of Biovail Common Stock as of the date hereof or
(z) to the Knowledge of Biovail, any affiliate of any such
officer, director or owner (other than Biovail or any of the
Biovail Subsidiaries).
Section
3.24.
No
Other Representations or Warranties
.
Except
for the representations and warranties contained in this
Article III, Valeant acknowledges that none of Biovail, the
Biovail Subsidiaries or any other Person on behalf of Biovail
makes any other express or implied representation or warranty in
connection with the transactions contemplated by this Agreement.
ARTICLE IV
Representations
and Warranties of Valeant
Valeant represents and warrants to Biovail and Merger Sub that
the statements contained in this Article IV are true and
correct, except (i) as set forth in the Valeant Reporting
Documents publicly available and filed with the SEC following
January 1, 2008 and at least two Business Days prior to the
date of this Agreement (the “
Filed Valeant Reporting
Documents
”) (excluding any disclosures in the Filed
Valeant Reporting Documents under the heading “Risk
Factors” and any other disclosures that are predictive or
forward-looking in nature) or (ii) as set forth in the
disclosure letter delivered by Valeant to Biovail at or before
the execution and delivery by Valeant of this Agreement (the
“
Valeant Disclosure Letter
”). The Valeant
Disclosure Letter shall be arranged in numbered and lettered
sections corresponding to the numbered and lettered sections
contained in this Article IV, and the disclosure in any
section shall be deemed to qualify other sections in this
Article IV to the extent (and only to the extent) that it
is reasonably apparent from the face of such disclosure that
such disclosure also qualifies or applies to such other sections.
Section
4.01.
Organization,
Standing and Power
.
Each of Valeant and each
of Valeant’s Subsidiaries (the “
Valeant
Subsidiaries
”) is duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it
is organized (in the case of good standing, to the extent such
jurisdiction recognizes such concept), except, in the case of
the Valeant Subsidiaries, where the failure to be so organized,
existing or in good standing, individually or in the aggregate,
has not had and would not reasonably be expected to have a
Valeant Material Adverse Effect. Each of Valeant and the Valeant
Subsidiaries has all requisite power and authority and possesses
all
A-20
Permits necessary to enable it to own, operate, lease or
otherwise hold its properties and assets and to conduct its
businesses as presently conducted (the “
Valeant
Permits
”), except where the failure to have such power
or authority or to possess Valeant Permits, individually or in
the aggregate, has not had and would not reasonably be expected
to have a Valeant Material Adverse Effect. Each of Valeant and
the Valeant Subsidiaries is duly qualified or licensed to do
business in each jurisdiction where the nature of its business
or the ownership, operation or leasing of its properties make
such qualification necessary, other than in such jurisdictions
where the failure to be so qualified or licensed, individually
or in the aggregate, has not had and would not reasonably be
expected to have a Valeant Material Adverse Effect. Valeant has
delivered or made available to Biovail, prior to execution of
this Agreement, true and complete copies of the Certificate of
Incorporation of Valeant in effect as of the date of this
Agreement (the “
Valeant Charter
”) and the
By-laws of Valeant in effect as of the date of this Agreement
(the “
Valeant By-laws
”).
Section
4.02.
Valeant
Subsidiaries
.
(a) All the outstanding
shares of capital stock or voting securities of, or other equity
interests in, each Valeant Subsidiary have been validly issued
and are fully paid and nonassessable and are owned by Valeant,
by another Valeant Subsidiary or by Valeant and another Valeant
Subsidiary, free and clear of all Liens, and free of any other
restriction (including any restriction on the right to vote,
sell or otherwise dispose of such capital stock, voting
securities or other equity interests), except for restrictions
imposed by applicable securities laws. Section 4.02(a) of
the Valeant Disclosure Letter sets forth, as of the date of this
Agreement, a true and complete list of the Valeant Subsidiaries.
(b) Except for the capital stock and voting securities of,
and other equity interests in, the Valeant Subsidiaries, neither
Valeant nor any Valeant Subsidiary owns, directly or indirectly,
any capital stock or voting securities of, or other equity
interests in, or any interest convertible into or exchangeable
or exercisable for, any capital stock or voting securities of,
or other equity interests in, any firm, corporation,
partnership, company, limited liability company, trust, joint
venture, association or other entity.
Section
4.03.
Capital
Structure
.
(a) The authorized capital
stock of Valeant consists of 200,000,000 shares of Valeant
Common Stock and 10,000,000 shares of preferred stock, par
value $0.01 per share (the “
Valeant Preferred
Stock
” and, together with the Valeant Common Stock, the
“
Valeant Capital Stock
”). At the close of
business on June 14, 2010, (i) 75,786,925 shares
of Valeant Common Stock were issued and outstanding, none of
which were subject to vesting or other forfeiture conditions or
repurchase by Valeant, (ii) no shares of Valeant Preferred
Stock were issued and outstanding,
(iii) 28,086,863 shares of Valeant Common Stock were
held by Valeant in its treasury, (iv) 8,662,102 shares
of Valeant Common Stock were issuable upon conversion of
(A) Valeant’s 3.0% Convertible Subordinated Notes
due 2010 (the “
Valeant 3.0% Convertible
Notes
”) and (B) Valeant’s
4.0% Convertible Subordinated Notes due 2013 (together with
the Valeant 3.0% Convertible Notes, the “
Valeant
Convertible Notes
”), (v) 1,710,585 shares of
Valeant Common Stock were underlying warrants issued pursuant to
the Exchange Agreement, dated August 13, 2009, among
Valeant and certain holders of the Valeant 3.0% Convertible
Notes (the “
Valeant Warrants
”),
(vi) 14,808,875 shares of Valeant Common Stock were
reserved and available for issuance pursuant to the Valeant
Stock Plans, of which (A) 4,920,081 shares were
issuable upon exercise of outstanding Valeant Stock Options and
(B) 5,376,442 shares were issuable upon settlement of
outstanding Valeant Restricted Stock Units, assuming maximum
performance with respect to performance-based Valeant Restricted
Stock Units and (vii) 1,189,437 shares of Valeant
Common Stock were reserved for issuance pursuant to the Valeant
ESPP. Except as set forth in this Section 4.03(a), at the
close of business on June 14, 2010, no shares of capital
stock or voting securities of, or other equity interests in,
Valeant were issued, reserved for issuance or outstanding. From
the close of business on June 14, 2010 to the date of this
Agreement, there have been no issuances by Valeant of shares of
capital stock or voting securities of, or other equity interests
in, Valeant, other than the issuance of Valeant Common Stock
upon the conversion of Valeant Convertible Notes, upon the
exercise of Valeant Warrants, Valeant Stock Options or rights
under the Valeant ESPP or upon the vesting of Valeant Restricted
Stock Units, in each case outstanding at the close of business
on June 14, 2010 and in accordance with their terms in
effect at such time.
(b) At the close of business on June 14, 2010,
assuming the Pre-Merger Special Dividend was paid on
June 14, 2010, (i) 75,786,925 shares of Valeant
Common Stock would have been issued and outstanding, none of
which would have been subject to vesting or other forfeiture
conditions or repurchase by Valeant, (ii) no shares of
Valeant Preferred Stock would have been issued and outstanding,
(iii) 28,086,863 shares of Valeant Common Stock would
have been held by Valeant in its treasury, (iv) assuming
that the “Current Market Price” (as defined in the
Indenture,
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dated as of November 19, 2003, among Valeant, Ribapharm
Inc. and The Bank of New York, as trustee (the
‘‘
Valeant Convertible Notes Indenture
”))
was $46.14, 13,607,296 shares of Valeant Common Stock would
have been issuable upon conversion of the Valeant Convertible
Notes, (v) 1,710,585 shares of Valeant Common Stock
would be underlying the Valeant Warrants (of which a total of
785,569 shares of Valeant Common Stock would have been
issuable upon net share settlement of the Valeant Warrants on
June 14, 2010 based on a share price of $46.14),
(vi) 23,263,262 shares of Valeant Common Stock would
have been reserved and available for issuance pursuant to the
Valeant Stock Plans, of which (A) 7,728,955 shares
would have been issuable upon exercise of outstanding Valeant
Stock Options and (B) 5,642,372 shares would have been
issuable upon settlement of outstanding Valeant Restricted Stock
Units, assuming (1) a price of $46.14 per share of Valeant
Common Stock, and (2) the treatment of Valeant Restricted
Stock Units in accordance with Section 6.04, and
(vii) 1,868,487 shares of Valeant Common Stock would
have been reserved for issuance pursuant to the Valeant ESPP.
(c) All outstanding shares of Valeant Capital Stock are,
and all such shares that may be issued upon the conversion of
Valeant Convertible Notes, upon the exercise of Valeant
Warrants, Valeant Stock Options or rights under the Valeant ESPP
or upon the vesting of Valeant Restricted Stock Units will be,
when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to, or issued in violation of, any
purchase option, call option, right of first refusal, preemptive
right, subscription right or any similar right under any
provision of the DGCL, the Valeant Charter, the Valeant By-laws
or any Contract to which Valeant is a party or otherwise bound.
Except as set forth above in this Section 4.03, there are
not issued, reserved for issuance or outstanding, and there are
not any outstanding obligations of Valeant or any Valeant
Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, (x) any capital stock of Valeant or any
Valeant Subsidiary or any securities of Valeant or any Valeant
Subsidiary convertible into or exchangeable or exercisable for
shares of capital stock or voting securities of, or other equity
interests in, Valeant or any Valeant Subsidiary, (y) any
warrants, calls, options or other rights to acquire from Valeant
or any Valeant Subsidiary, or any other obligation of Valeant or
any Valeant Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, any capital stock or voting
securities of, or other equity interests in, Valeant or any
Valeant Subsidiary or (z) any rights issued by or other
obligations of Valeant or any Valeant Subsidiary that are linked
in any way to the price of any class of Valeant Capital Stock or
any shares of capital stock of any Valeant Subsidiary, the value
of Valeant, any Valeant Subsidiary or any part of Valeant or any
Valeant Subsidiary or any dividends or other distributions
declared or paid on any shares of capital stock of Valeant or
any Valeant Subsidiary. Except pursuant to the Valeant Stock
Plans, there are not any outstanding obligations of Valeant or
any of the Valeant Subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock or voting
securities or other equity interests of Valeant or any Valeant
Subsidiary or any securities, interests, warrants, calls,
options or other rights referred to in clause (x), (y) or
(z) of the immediately preceding sentence. Except for the
Valeant Convertible Notes, there are no debentures, bonds, notes
or other Indebtedness of Valeant having the right to vote (or
convertible into, or exchangeable for, securities having the
right to vote) on any matters on which stockholders of Valeant
may vote (“
Valeant Voting Debt
”). Neither
Valeant nor any of the Valeant Subsidiaries is a party to any
voting agreement with respect to the voting of any capital stock
or voting securities of, or other equity interests in, Valeant.
Except for this Agreement and the Standstill and Board
Nomination Agreement, dated as of December 17, 2009, among
Valeant, ValueAct Capital Master Fund, L.P., VA Partners I,
LLC, ValueAct Capital Management, L.P., ValueAct Capital
Management, LLC, ValueAct Holdings, L.P. and ValueAct Holdings
GP, LLC (the “
Valeant Board Nomination
Agreement
”), neither Valeant nor any of the Valeant
Subsidiaries is a party to any agreement pursuant to which any
Person is entitled to elect, designate or nominate any director
of Valeant or any of the Valeant Subsidiaries.
Section
4.04.
Authority;
Execution and Delivery;
Enforceability
.
(a) Valeant has all
requisite corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to
consummate the Merger and the other transactions contemplated by
this Agreement, subject, in the case of the Merger, to the
receipt of the Valeant Stockholder Approval. The Board of
Directors of Valeant (the “
Valeant Board
”) has
adopted resolutions, by unanimous vote at a meeting duly called
at which a quorum of directors of Valeant was present,
(i) approving this Agreement, (ii) determining that
entering into this Agreement is in the best interests of Valeant
and its stockholders, (iii) declaring this Agreement
advisable, (iv) recommending that Valeant’s
stockholders adopt this Agreement and directing that this
Agreement be submitted to Valeant’s stockholders for
adoption at a duly held meeting of such stockholders for such
purpose (the “
Valeant Stockholders Meeting
”)
and (v) subject to the discretion of the Board of the
Combined Company, determining that the Post-Merger Special
Dividend will be in
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the best interests of the Combined Company and its stockholders
and that it is the intention of those directors of Valeant that
will become directors of the Combined Company to support the
declaration and payment of the Post-Merger Special Dividend at
the applicable time. Such resolutions have not been amended or
withdrawn as of the date of this Agreement. Except for the
adoption of this Agreement by the affirmative vote of a majority
of the outstanding shares of Valeant Common Stock entitled to
vote at the Valeant Stockholders Meeting (the “
Valeant
Stockholder Approval
”), no other corporate proceedings
on the part of Valeant are necessary to authorize, adopt or
approve this Agreement or to consummate the Merger and the other
transactions contemplated by this Agreement (except for the
filing of the appropriate merger documents as required by the
DGCL). Valeant has duly executed and delivered this Agreement
and, assuming the due authorization, execution and delivery by
Biovail and Merger Sub, this Agreement constitutes its legal,
valid and binding obligation, enforceable against it in
accordance with its terms.
(b) The Valeant Board has adopted such resolutions as are
necessary to render inapplicable to this Agreement, the Merger
and the other transactions contemplated by this Agreement the
restrictions on (i) “business combinations” (as
defined in Section 203 of the DGCL) as set forth in
Section 203 of the DGCL and (ii) “Business
Combinations” (as defined in Article Fourteenth of the
Valeant Charter) as set forth in Article Fourteenth of the
Valeant Charter. No “fair price”,
“moratorium”, “control share acquisition” or
other similar antitakeover statute or similar statute or
regulation applies with respect to this Agreement, the Merger or
any of the other transactions contemplated by this Agreement in
respect of Valeant.
Section
4.05.
No
Conflicts; Consents
.
(a) The execution
and delivery by Valeant of this Agreement does not, and the
performance by Valeant of its obligations hereunder and the
consummation of the Merger and the other transactions
contemplated by this Agreement will not, (i) conflict with,
or result in any violation of any provision of, the Valeant
Charter, the Valeant By-laws or the comparable charter or
organizational documents of any Valeant Subsidiary (assuming
that the Valeant Stockholder Approval is obtained),
(ii) conflict with, or result in any violation of or
default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or
acceleration of any obligation, any obligation to make an offer
to purchase or redeem any Indebtedness or capital stock or any
loss of a material benefit under, or result in the creation of
any Lien upon any of the properties or assets of Valeant or any
Valeant Subsidiary under, any provision of, any Contract to
which Valeant or any Valeant Subsidiary is a party or by which
any of their respective properties or assets is bound or any
Valeant Permit or (iii) conflict with, or result in any
violation of any provision of, subject to the filings and other
matters referred to in Section 4.05(b), any Judgment or
Law, in each case, applicable to Valeant or any Valeant
Subsidiary or their respective properties or assets (assuming
that the Valeant Stockholder Approval is obtained), other than,
in the case of clauses (ii) and (iii) above, any
matters that, individually or in the aggregate, have not had and
would not reasonably be expected to have a Valeant Material
Adverse Effect (it being agreed that for purposes of this
Section 4.05(a), effects resulting from or arising in
connection with the matters set forth in clause (iv) of the
definition of the term “Material Adverse Effect” shall
not be excluded in determining whether a Valeant Material
Adverse Effect has occurred or would reasonably be expected to
occur) and would not prevent or materially impede, interfere
with, hinder or delay the consummation of the Merger.
(b) No Consent of or from, or registration, declaration,
notice or filing made to or with any Governmental Entity is
required to be obtained or made by or with respect to Valeant or
any Valeant Subsidiary in connection with the execution and
delivery of this Agreement or its performance of its obligations
hereunder or the consummation of the Merger and the other
transactions contemplated by this Agreement, other than (i)
(A) the filing with the SEC of the Joint Proxy Statement in
definitive form, (B) the filing with the SEC, and
declaration of effectiveness under the Securities Act, of the
Form S-4,
and (C) the filing with the SEC of such reports under, and
such other compliance with, the Exchange Act and the Securities
Act, and the rules and regulations thereunder, as may be
required in connection with this Agreement, the Merger and the
other transactions contemplated by this Agreement,
(ii) compliance with and filings under the HSR Act and, if
required, Part IX of the Competition Act and such other
Consents, registrations, declarations, approvals, notices or
filings as are required to be made or obtained under any foreign
antitrust, competition, foreign investment, trade regulation or
similar Laws, (iii) the filing of the Certificate of Merger
with the Secretary of State of the State of Delaware and
appropriate documents with the relevant authorities of the other
jurisdictions in which Biovail and Valeant are qualified to do
business, (iv) such filings with and approvals of the NYSE
and TSX as are required to permit the consummation of the Merger
and
A-23
(v) such other matters that, individually or in the
aggregate, have not had and would not reasonably be expected to
have a Valeant Material Adverse Effect (it being agreed that for
purposes of this Section 4.05(b), effects resulting from or
arising in connection with the matters set forth in
clause (iv) of the definition of the term “Material
Adverse Effect” shall not be excluded in determining
whether a Valeant Material Adverse Effect has occurred or would
reasonably be expected to occur) and would not prevent or
materially impede, interfere with, hinder or delay the
consummation of the Merger.
Section
4.06.
Reporting
Documents; Undisclosed
Liabilities
.
(a) Valeant has furnished
or filed all reports, schedules, forms, statements and other
documents (including exhibits and other information incorporated
therein) required to be furnished or filed by Valeant with the
SEC since January 1, 2008 (such documents, together with
any documents filed with the SEC during such period by Valeant
on a voluntary basis on a Current Report on
Form 8-K,
but excluding the Joint Proxy Statement and the
Form S-4,
being collectively referred to as the “
Valeant Reporting
Documents
”).
(b) Each Valeant Reporting Document (i) at the time
filed, complied in all material respects with the requirements
of SOX and the Exchange Act or the Securities Act, as the case
may be, and the rules and regulations of the SEC promulgated
thereunder applicable to such Valeant Reporting Document and
(ii) did not at the time it was filed (or if amended or
superseded by a filing or amendment prior to the date of this
Agreement, then at the time of such filing or amendment) contain
any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each
of the consolidated financial statements of Valeant included in
the Valeant Reporting Documents complied at the time it was
filed as to form in all material respects with applicable
accounting requirements and the published rules and regulations
of the SEC with respect thereto, was prepared in accordance with
GAAP (except, in the case of unaudited statements, as permitted
by
Form 10-Q
of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and
fairly presented in all material respects the consolidated
financial position of Valeant and its consolidated Subsidiaries
as of the dates thereof and the consolidated results of their
operations and cash flows for the periods shown (subject, in the
case of unaudited statements, to normal year-end audit
adjustments).
(c) Neither Valeant nor any Valeant Subsidiary has any
liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) that, individually or in the
aggregate, have had or would reasonably be expected to have a
Valeant Material Adverse Effect.
(d) Each of the chief executive officer of Valeant and the
chief financial officer of Valeant (or each former chief
executive officer of Valeant and each former chief financial
officer of Valeant, as applicable) has made all applicable
certifications required by
Rule 13a-14
or
15d-14
under the Exchange Act and Sections 302 and 906 of SOX with
respect to the Valeant Reporting Documents, and the statements
contained in such certifications are true and accurate. None of
Valeant or any of the Valeant Subsidiaries has outstanding, or
has arranged any outstanding, “extensions of credit”
to directors or executive officers within the meaning of
Section 402 of SOX.
(e) Valeant maintains a system of “internal control
over financial reporting” (as defined in
Rules 13a-15(f)
and
15d-15(f)
of
the Exchange Act) sufficient to provide reasonable assurance
(A) that transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP,
consistently applied, (B) that transactions are executed
only in accordance with the authorization of management and
(C) regarding prevention or timely detection of the
unauthorized acquisition, use or disposition of Valeant’s
properties or assets.
(f) The “disclosure controls and procedures” (as
defined in
Rules 13a-15(e)
and
15d-15(e)
of
the Exchange Act) utilized by Valeant are reasonably designed to
ensure that all information (both financial and non-financial)
required to be disclosed by Valeant in the reports that it files
or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the
rules and forms of the SEC and that all such information
required to be disclosed is accumulated and communicated to the
management of Valeant, as appropriate, to allow timely decisions
regarding required disclosure and to enable the chief executive
officer and chief financial officer of Valeant to make the
certifications required under the Exchange Act with respect to
such reports.
A-24
(g) Neither Valeant nor any of the Valeant Subsidiaries is
a party to, or has any commitment to become a party to, any
joint venture, off-balance sheet partnership or any similar
Contract (including any Contract or arrangement relating to any
transaction or relationship between or among Valeant and any of
the Valeant Subsidiaries, on the one hand, and any
unconsolidated Affiliate, including any structured finance,
special purpose or limited purpose entity or Person, on the
other hand, or any “off-balance sheet arrangements”
(as defined in Item 303(a) of
Regulation S-K
under the Exchange Act)), where the result, purpose or intended
effect of such Contract is to avoid disclosure of any material
transaction involving, or material liabilities of, Valeant or
any of the Valeant Subsidiaries in Valeant’s or such
Valeant Subsidiary’s published financial statements or
other Valeant Reporting Documents.
(h) Since January 1, 2009, none of Valeant,
Valeant’s independent accountants, the Valeant Board or the
audit committee of the Valeant Board has received any oral or
written notification of any (x) “significant
deficiency” in the internal controls over financial
reporting of Valeant, (y) “material weakness” in
the internal controls over financial reporting of Valeant or
(z) fraud, whether or not material, that involves
management or other employees of Valeant who have a significant
role in the internal controls over financial reporting of
Valeant.
(i) None of the Valeant Subsidiaries is, or has at any time
since January 1, 2009 been, subject to the reporting
requirements of Section 13(a) or 15(d) of the Exchange Act
or a reporting issuer in any of the provinces of Canada within
the meaning of the Canadian Securities Laws.
Section
4.07.
Information
Supplied
.
None of the information supplied or
to be supplied by Valeant for inclusion or incorporation by
reference in (i) the
Form S-4
will, at the time the
Form S-4
is filed with the SEC, at any time it is amended or supplemented
or at the time it is declared effective under the Securities
Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein not misleading or
(ii) the Joint Proxy Statement will, at the date it is
first mailed to each of Biovail’s stockholders and
Valeant’s stockholders or at the time of each of the
Biovail Stockholders Meeting and the Valeant Stockholders
Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The
Joint Proxy Statement will comply as to form in all material
respects with the requirements of the Exchange Act and the rules
and regulations thereunder, except that no representation is
made by Valeant with respect to statements made or incorporated
by reference therein based on information supplied by Biovail or
Merger Sub for inclusion or incorporation by reference therein.
Section
4.08.
Absence
of Certain Changes or Events
.
From
January 1, 2010 to the date of this Agreement, each of
Valeant and the Valeant Subsidiaries has conducted its
respective business in the ordinary course in all material
respects, and during such period there has not occurred:
(a) any fact, circumstance, effect, change, event or
development that, individually or in the aggregate, has had or
would reasonably be expected to have a Valeant Material Adverse
Effect;
(b) any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of any capital
stock or voting securities of, or other equity interests in,
Valeant or the capital stock or voting securities of, or other
equity interests in, any of the Valeant Subsidiaries (other than
dividends or other distributions by a direct or indirect wholly
owned Valeant Subsidiary to its parent) or any repurchase for
value by Valeant of any capital stock or voting securities of,
or other equity interests in, Valeant or the capital stock or
voting securities of, or other equity interests in, any of the
Valeant Subsidiaries;
(c) any split, reverse split, combination, subdivision or
reclassification of any capital stock or voting securities of,
or other equity interests in, Valeant, securities convertible
into or exercisable or exchangeable for capital stock or voting
securities of, or other equity interests in, Valeant or any
issuance or the authorization of any issuance of any other
securities in respect of, in lieu of or in substitution for
shares of capital stock or voting securities of, or other equity
interests in, Valeant;
(d) any incurrence of material Indebtedness for borrowed
money or any guarantee of such Indebtedness for another Person,
or any issue or sale of debt securities, warrants or other
rights to acquire any debt security of Valeant or any Valeant
Subsidiary other than the issuance of commercial paper in the
ordinary course of business;
A-25
(e) (i) any transfer, lease, license, sale, mortgage,
pledge or other disposal or encumbrance of any of Valeant’s
or Valeant’s Subsidiaries’ property or assets outside
of the ordinary course of business consistent with past practice
with a fair market value in excess of $5,000,000 or
(ii) any acquisitions of businesses, whether by merger,
consolidation, purchase of property or assets or otherwise;
(f) (i) any granting by Valeant to any director or
executive officer of Valeant of any material increase in
compensation, (ii) any granting by Valeant to any director
or executive officer of Valeant of any material increase in
change in control, severance or termination pay, (iii) any
establishment, adoption, entry into or amendment in any material
respect of any collective bargaining agreement or material
Valeant Benefit Plan or (iv) the taking of any action to
accelerate the time of vesting or payment of any material
compensation or benefits under any Valeant Benefit Plan;
(g) any change in accounting methods, principles or
practices by Valeant or any Valeant Subsidiary, except insofar
as may have been required by a change in GAAP; or
(h) any material elections or changes thereto with respect
to Taxes by Valeant or any Valeant Subsidiary or any settlement
or compromise by Valeant or any Valeant Subsidiary of any
material Tax liability or refund, other than in the ordinary
course of business.
Section
4.09.
Taxes
.
(a)
(i) Each of Valeant and each Valeant Subsidiary has timely
filed, taking into account any extensions, all material Tax
Returns required to have been filed and such Tax Returns are
accurate and complete in all material respects; (ii) each
of Valeant and each Valeant Subsidiary has paid all material
Taxes required to have been paid by it other than Taxes that are
not yet due or that are being contested in good faith in
appropriate proceedings; and (iii) no deficiency for any
Tax has been asserted or assessed by a taxing authority against
Valeant or any Valeant Subsidiary which deficiency has not been
paid or is not being contested in good faith in appropriate
proceedings.
(b) No Tax Return of Valeant or any Valeant Subsidiary is
under audit or examination by any taxing authority, and no
written (or, to the Knowledge of Valeant, oral) notice of such
an audit or examination has been received by Valeant or any
Valeant Subsidiary. No deficiencies for any Taxes have been
proposed, asserted or assessed against Valeant or any Valeant
Subsidiary, and no requests for waivers of the time to assess
any such Taxes are pending. There are no outstanding waivers of
any limitation periods or agreements providing for an extension
of time for the filing of any Tax Return, the assessment or
collection thereof by any relevant taxing authority or the
payment of any Tax by Valeant or any Valeant Subsidiary. No
other procedure, proceeding or contest of any refund or
deficiency in respect of Taxes is pending in or on appeal from
any Governmental Entity.
(c) Each of Valeant and each Valeant Subsidiary has
complied in all material respects with all applicable Laws
relating to the withholding, collection and remittance of Taxes
and other deductions required to be withheld.
(d) Other than for Taxes not yet due and delinquent or that
are being contested in good faith in appropriate proceedings,
there are no Liens with respect to Taxes against any of the
assets of Valeant or any Valeant Subsidiary. No written or, to
the Knowledge of Valeant, other claim has been received by
Valeant or any Valeant Subsidiary from an authority in a
jurisdiction where such corporation does not file Tax Returns
that it is or may be subject to material taxation by such
jurisdiction. Neither Valeant nor any Valeant Subsidiary has a
permanent establishment or is resident for Tax purposes outside
of its jurisdiction or territory of incorporation or formation.
(e) Each of Valeant and the Valeant Subsidiaries has not
and has not been deemed to have for purposes of the Income Tax
Act (or any other applicable Law), acquired property from a
non-arm’s length Person, within the meaning of the Income
Tax Act (or such other applicable Law), for consideration, the
value of which is less than the fair market value of the
property in circumstances which could subject it to a liability
under section 160 of the Income Tax Act (or the analogous
provision of such other applicable Law).
(f) With respect to any transaction with any non-arm’s
length Person that is not a resident of Canada within the
meaning of the Income Tax Act, no Valeant Subsidiary resident in
Canada has (i) paid any consideration for any property
(including for the use of property) or services that is in
excess of the fair market value thereof, nor (ii) received
any consideration for any property (including for the use of
property) or services that is less than the fair
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market value thereof. For all such transactions, each Valeant
Subsidiary resident in Canada has made or obtained records or
documents that meet the requirements of
paragraphs 247(4)(a) to (c) of the Income Tax Act.
(g) None of sections 78, 80, 80.01, 80.02, 80.03 and
80.04 of the Income Tax Act, or any equivalent provision of the
Laws of any other jurisdiction, has applied in any material
manner or shall apply in any material manner to any of Valeant
or the Valeant Subsidiaries as of the Closing Date.
(h) Neither Valeant nor any Valeant Subsidiary has received
any material requirement pursuant to section 224 of the
Income Tax Act which remains unsatisfied in any respect.
(i) Neither Valeant nor any Valeant Subsidiary is a party
to or is otherwise bound by any material Tax sharing, allocation
or indemnification agreement or arrangement (other than such an
agreement or arrangement exclusively between or among Valeant
and wholly owned Valeant Subsidiaries).
(j) Within the past three years, neither Valeant nor any
Valeant Subsidiary has been a “distributing
corporation” or a “controlled corporation” in a
distribution intended to qualify for tax-free treatment under
Section 355 of the Code.
(k) Neither Valeant nor any Valeant Subsidiary has
participated in or been a party to a transaction that, as of the
date of this Agreement, constitutes a “listed
transaction” within the meaning of Section 6011 of the
Code and applicable Treasury Regulations thereunder (or a
similar provision of state or foreign Law).
(l) This Agreement (including any exhibits hereto) sets
forth the complete terms of the Merger. Neither Valeant nor any
Valeant Subsidiary has taken any other action or knows of any
other fact relating to the Merger that would reasonably be
expected to prevent the Merger from qualifying for the Intended
Tax Treatment.
(m) No amounts paid or payable by Valeant or any Valeant
Subsidiary as employee compensation, whether under any contract,
plan, program or arrangement, understanding or otherwise
(including any Valeant Benefit Plan or Valeant Benefit
Arrangement), individually or in the aggregate, is or would
reasonably be expected to be non-deductible for federal income
tax purposes by virtue of Section 162(m) or 280G of the
Code.
Section 4.10.
Employee
Benefits
.
(a) Section 4.10(a) of
the Valeant Disclosure Letter sets forth a complete and accurate
list of each material Valeant Benefit Plan and each material
Valeant Benefit Agreement.
(b) With respect to each material Valeant Benefit Plan and
material Valeant Benefit Agreement, Valeant has made available
to Biovail complete and accurate copies of (A) such Valeant
Benefit Plan or Valeant Benefit Agreement, including any
material amendment thereto, and, to the extent applicable,
summary plan description thereof, (B) each trust,
insurance, annuity or other funding Contract related thereto,
(C) the most recent audited financial statements and
actuarial or other valuation reports prepared with respect
thereto, (D) the two most recent annual reports on
Form 5500 required to be filed with the Internal Revenue
Service with respect thereto and the two most recent annual
information returns required to be filed with any Governmental
Entity and (E) the most recently received IRS determination
letter.
(c) Each Valeant Benefit Plan and Valeant Benefit Agreement
(and any related trust or other funding vehicle) has been
administered in accordance with its terms and is in compliance
with ERISA, the Code and all other applicable Laws, other than
instances of non-compliance that, individually or in the
aggregate, have not had and would not reasonably be expected to
have a Valeant Material Adverse Effect.
(d) Except for matters that, individually or in the
aggregate, have not had and would not reasonably be expected to
have a Valeant Material Adverse Effect, neither Valeant nor any
Valeant Subsidiary nor any Valeant Commonly Controlled Entity
currently sponsors, maintains or contributes to, or has
sponsored, maintained, contributed to or been required to
maintain or contribute to, or has any actual or contingent
liability under, any Benefit Plan that is subject to
Section 302 or Title IV of ERISA or Section 412
of the Code or is otherwise a defined benefit plan (including
any such plan maintained outside the United States).
(e) None of the Valeant Benefit Plans is a “registered
pension plan” within the meaning of Section 248(1) of
the Income Tax Act.
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(f) Neither Valeant nor any Valeant Subsidiary has any
liability for providing health, medical or other welfare
benefits after retirement or other termination of employment
(other than for continuation coverage required under
Section 4980(B)(f) of the Code or applicable Law), except
for any liabilities that, individually and in the aggregate,
have not had and would not reasonably be expected to have a
Valeant Material Adverse Effect.
(g) None of the execution and delivery of this Agreement,
the performance by either party of its obligations hereunder or
the consummation of the Merger and the other transactions
contemplated by this Agreement (alone or in conjunction with any
other event, including any termination of employment on or
following the Effective Time) will (i) entitle any Valeant
Personnel to any material compensation or benefit,
(ii) accelerate the time of payment or vesting, or trigger
any payment or funding, of any material compensation or benefit
or trigger any other material obligation under any Valeant
Benefit Plan or Valeant Benefit Agreement or (iii) result
in any breach or violation of, or default under, or limit
Valeant’s right to amend, modify or terminate, any Valeant
Benefit Plan or Valeant Benefit Agreement.
Section 4.11.
Litigation
.
There
is no, and since January 1, 2008, there has been no, suit,
action or other proceeding pending or, to the Knowledge of
Valeant, threatened against or affecting Valeant or any Valeant
Subsidiary (i) that, individually or in the aggregate, has
had or would reasonably be expected to have a Valeant Material
Adverse Effect or (ii) that, as of the date of this
Agreement, challenges or seeks to prevent, enjoin, alter in any
material respect or materially delay the Merger or any of the
other transactions contemplated hereby. There is no, and since
January 1, 2008, there has been no, Judgment outstanding
against or, to the Knowledge of Valeant, investigation by any
Governmental Entity involving, Valeant or any Valeant Subsidiary
or any of their respective properties or assets that,
individually or in the aggregate, has had or would reasonably be
expected to have a Valeant Material Adverse Effect.
Section 4.12.
Compliance
with Applicable Laws
.
Except for matters
that, individually or in the aggregate, have not had and would
not reasonably be expected to have a Valeant Material Adverse
Effect, Valeant and the Valeant Subsidiaries are, and since
January 1, 2008, have been, in compliance with all
applicable Laws and Valeant Permits. Except for matters that,
individually or in the aggregate, have not had and would not
reasonably be expected to have a Valeant Material Adverse
Effect, there is no, and since January 1, 2008, there has
been no, material action, demand or investigation by or before
any Governmental Entity pending or, to the Knowledge of Valeant,
threatened alleging that Valeant or a Valeant Subsidiary is not
in compliance with any applicable Law or Valeant Permit or which
challenges or questions the validity of any rights of the holder
of any Valeant Permit. To the Knowledge of Valeant, Valeant is,
and since January 1, 2008, has been, in material compliance
with the FCPA and any rules and regulations thereunder. This
Section 4.12 does not relate to Tax matters, employee
benefits matters, environmental matters or Intellectual Property
matters, which are the subjects of Sections 4.09, 4.10,
4.13 and 4.16, respectively.
Section 4.13.
Environmental
Matters
.
(a) Except for matters that,
individually or in the aggregate, have not had and would not
reasonably be expected to have a Valeant Material Adverse Effect:
(i) Valeant and the Valeant Subsidiaries are in compliance
with all Environmental Laws (which compliance includes the
possession by Valeant and the Valeant Subsidiaries of all
Permits required under applicable Environmental Laws necessary
for their operations as currently conducted, and compliance with
the terms and conditions thereof), and neither Valeant nor any
Valeant Subsidiary has received any written communication,
whether from a Governmental Entity, citizens group, employee or
otherwise, alleging that Valeant or any Valeant Subsidiary is
not in such compliance, and, to the Knowledge of Valeant, there
are no past or present circumstances, conditions, events or
incidents that would reasonably be expected to prevent or
interfere with such compliance in the future;
(ii) there are no Environmental Claims pending or, to the
Knowledge of Valeant, threatened against Valeant or any of the
Valeant Subsidiaries or, to the Knowledge of Valeant, against
any Person whose liability for any Environmental Claim Valeant
or any of the Valeant Subsidiaries has or may have retained or
assumed, either contractually or by operation of law;
(iii) there have been no Releases of any Hazardous Material
that would reasonably be expected to form the basis of any
Environmental Claim against Valeant or any of the Valeant
Subsidiaries or, to the Knowledge
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of Valeant, against any Person whose liabilities for such
Environmental Claims Valeant or any of the Valeant Subsidiaries
has, or may have, retained or assumed, either contractually or
by operation of Law; and
(iv) neither Valeant nor any of the Valeant Subsidiaries
has retained or assumed, either contractually or by operation of
law, any liabilities or obligations that would reasonably be
expected to form the basis of any Environmental Claim against
Valeant or any of the Valeant Subsidiaries.
Section 4.14.
Contracts
.
(a) As
of the date of this Agreement, neither Valeant nor any Valeant
Subsidiary is a party to any Contract required to be filed by
Valeant as a “material contract” pursuant to
Item 601(b)(10) of
Regulation S-K
under the Securities Act (a “
Filed Valeant
Contract
”) that has not been so filed.
(b) Section 4.14(b) of the Valeant Disclosure Letter
sets forth, as of the date of this Agreement, a true and
complete list of (i) non-competition Contracts or any other
Contract containing terms that expressly (A) limit or
otherwise restrict Valeant or the Valeant Subsidiaries or
(B) to the Knowledge of Valeant, would, after the Effective
Time, by its terms expressly limit or otherwise restrict the
Combined Company from, in the case of either (A) or (B),
engaging or competing in any line of business or in any
geographic area or from developing or commercializing any
compounds, any therapeutic area, class of drugs or mechanism of
action, in a manner that would be reasonably likely to be
material, in the case of (A), to Valeant and the Valeant
Subsidiaries, taken as a whole, or in the case of (B), to the
Combined Company, taken as a whole, (ii) each loan and
credit agreement, note, debenture, bond, indenture or other
similar agreement pursuant to which any Indebtedness of Valeant
or any of the Valeant Subsidiaries is outstanding or may be
incurred, other than any such agreement between or among Valeant
and the wholly owned Valeant Subsidiaries, and (iii) each
partnership, joint venture or similar agreement or understanding
to which Valeant or any of the Valeant Subsidiaries is a party
relating to the formation, creation, operation, management or
control of any partnership or joint venture material to Valeant
and the Valeant Subsidiaries, taken as a whole. Each agreement,
understanding or undertaking of the type described in this
Section 4.14(b) and each Filed Valeant Contract is referred
to herein as a “
Valeant Material Contract
”.
(c) Except for matters which, individually or in the
aggregate, have not had and would not reasonably be expected to
have a Valeant Material Adverse Effect, (i) each Valeant
Material Contract (including, for purposes of this
Section 4.14(c), any Contract entered into after the date
of this Agreement that would have been a Valeant Material
Contract if such Contract existed on the date of this Agreement)
is a valid, binding and legally enforceable obligation of
Valeant or one of the Valeant Subsidiaries, as the case may be,
and, to the Knowledge of Valeant, of the other parties thereto,
except, in each case, as enforcement may be limited by
bankruptcy, insolvency, reorganization or similar Laws affecting
creditors’ rights generally and by general principles of
equity, (ii) each such Valeant Material Contract is in full
force and effect and (iii) none of Valeant or any of the
Valeant Subsidiaries is (with or without notice or lapse of
time, or both) in breach or default under any such Valeant
Material Contract and, to the Knowledge of Valeant, no other
party to any such Valeant Material Contract is (with or without
notice or lapse of time, or both) in breach or default
thereunder.
Section 4.15.
Properties
.
(a) Valeant
and each Valeant Subsidiary has good and valid title to, and
with respect to real property owned by Valeant or any Valeant
Subsidiary, marketable and insurable fee simple interest in, or
valid license or leasehold interests in, all their respective
properties and assets, except in respects that, individually or
in the aggregate, have not had and would not reasonably be
expected to have a Valeant Material Adverse Effect. All such
properties and assets, other than properties and assets in which
Valeant or any of the Valeant Subsidiaries has a license or
leasehold interest, are free and clear of all conditions,
encroachments, easements, rights of way, restrictions and Liens,
except for such conditions, encroachments, easements, rights of
way, restrictions and Liens that, individually or in the
aggregate, have not had and would not reasonably be expected to
have a Valeant Material Adverse Effect. This Section 4.15
does not relate to Intellectual Property matters, which are the
subject of Section 4.16.
(b) Valeant and each of the Valeant Subsidiaries has
complied with the terms of all leases to which it is a party,
and all leases to which Valeant or any Valeant Subsidiary is a
party are in full force and effect, except for such
noncompliance or failure to be in full force and effect that,
individually or in the aggregate, has not had and would not
reasonably be expected to have a Valeant Material Adverse
Effect. Valeant and each Valeant Subsidiary is in possession of
the properties or assets purported to be leased under all its
leases, except for such failures to have such
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possession as, individually or in the aggregate, have not had
and would not reasonably be expected to have a Valeant Material
Adverse Effect.
Section 4.16.
Intellectual
Property
.
(a) Except for matters that,
individually or in the aggregate, have not had and would not
reasonably be expected to have a Valeant Material Adverse
Effect, (i) to the Knowledge of Valeant, Valeant and each
of the Valeant Subsidiaries owns, or is licensed to use (in each
case, free and clear of any Liens), all Intellectual Property
used in or necessary for the conduct of its business as
currently conducted, and to its Knowledge all such Intellectual
Property is valid, enforceable and subsisting; (ii) to the
Knowledge of Valeant, the use of any Intellectual Property by
Valeant and the Valeant Subsidiaries does not infringe on or
otherwise violate the rights of any Person and is in accordance
with any applicable license pursuant to which Valeant or any
Valeant Subsidiary acquired the right to use any Intellectual
Property; (iii) to the Knowledge of Valeant, no Person is
challenging, infringing on or otherwise violating any right of
Valeant or any of the Valeant Subsidiaries with respect to any
Intellectual Property owned by or licensed to Valeant or any of
the Valeant Subsidiaries; and (iv) to the Knowledge of
Valeant, neither Valeant nor any of the Valeant Subsidiaries has
received any written notice or otherwise has Knowledge of any
pending claim, order or proceeding with respect to any
Intellectual Property used by Valeant and the Valeant
Subsidiaries and to its Knowledge no Intellectual Property owned
or licensed by Valeant or the Valeant Subsidiaries is being used
or enforced in a manner that would reasonably be expected to
result in the abandonment, cancellation or unenforceability of
such Intellectual Property. This Section 4.16(a)
constitutes the only representation and warranty of Valeant with
respect to any actual or alleged infringement or other violation
of Intellectual Property of any other Person.
(b) Valeant and the Valeant Subsidiaries have taken
reasonable steps to protect the confidentiality and value of all
trade secrets and any other confidential information that are
owned, used or held by Valeant and the Valeant Subsidiaries in
confidence, including entering into licenses and Contracts that
require employees, licensees, contractors and other Persons with
access to trade secrets or other confidential information to
safeguard and maintain the secrecy and confidentiality of such
trade secrets and confidential information. To the Knowledge of
Valeant, such trade secrets and confidential information have
not been used, disclosed to or discovered by any Person except
pursuant to a valid non-disclosure, license or other appropriate
Contract which has not been breached.
(c) To the Knowledge of Valeant, Valeant and the Valeant
Subsidiaries are in compliance with all applicable Law, as well
as their own policies, relating to privacy, data protection, and
the collection and use of personal information collected, used,
or held for use by Valeant or the Valeant Subsidiaries, and as
of the date hereof no claims are pending or threatened in
writing against Valeant or the Valeant Subsidiaries alleging a
violation of any Person’s privacy or personal information.
(d) Except for matters that, individually or in the
aggregate, have not had and would not reasonably be expected to
have a Valeant Material Adverse Effect (it being agreed that for
purposes of this Section 4.16(d), effects resulting from or
arising in connection with the matters set forth in
clause (iv) of the definition of the term “Material
Adverse Effect” shall not be excluded in determining
whether a Valeant Material Adverse Effect has occurred or would
reasonably be expected to occur) and except as set forth in
Section 4.16(d) of the Valeant Disclosure Letter, to the
Knowledge of Valeant, the consummation of the transactions
contemplated by this Agreement will not (i) result in the
loss of, or otherwise adversely affect, any rights of Valeant or
the Valeant Subsidiaries in any Intellectual Property,
(ii) grant or require Valeant or the Valeant Subsidiaries
to grant to any Person any rights with respect to any
Intellectual Property of Valeant or the Valeant Subsidiaries,
(iii) subject Valeant or any of the Valeant Subsidiaries to
any increase in royalties or other payments in respect of any
Intellectual Property, (iv) by the terms of any Contract to
which Valeant or a Subsidiary of Valeant is a party, diminish
any royalties or other payments Valeant or a Subsidiary of
Valeant would otherwise be entitled to in respect of any
Intellectual Property or (v) result in the breach or, by
the terms of such Contract, termination of any agreement
relating to the Intellectual Property of Valeant.
Section 4.17.
Regulatory
Matters
.
(a) Except as has not had and
would not reasonably be expected to have, individually or in the
aggregate, a Valeant Material Adverse Effect, (i) each of
Valeant and the Valeant Subsidiaries holds all Valeant Permits,
including all authorizations under the FDCA, the PHSA, and the
regulations of the FDA promulgated thereunder, the Food and
Drugs Act, the CDSA and the regulations of Health Canada
promulgated thereunder, and any other Governmental Entity that
is concerned with the quality, identity, strength, purity,
safety, efficacy, manufacturing, distribution, sale, import or
export of the Valeant Products (any such Governmental Entity,
A-30
a “
Valeant Regulatory Agency
”) necessary for
the lawful operating of the businesses of Valeant or any of the
Valeant Subsidiaries and the testing, manufacturing, sale or
distribution, as applicable, of each of the Valeant Products
(the “
Valeant Regulatory Permits
”) and
(ii) all such Valeant Regulatory Permits are valid and in
full force and effect. Since January 1, 2009, there has not
occurred any violation of, default (with or without notice or
lapse of time or both) under, or event giving to others any
right of termination, amendment or cancellation of, with or
without notice or lapse of time or both, any Valeant Regulatory
Permit, except as has not had and would not reasonably be
expected to have, individually or in the aggregate, a Valeant
Material Adverse Effect. Valeant and each of the Valeant
Subsidiaries are in compliance in all material respects with the
terms of all Valeant Regulatory Permits, and no event has
occurred that, to the Knowledge of Valeant, would reasonably be
expected to result in a penalty under or the revocation,
cancellation, non-renewal or adverse modification of any Valeant
Regulatory Permit, except as has not had and would not
reasonably be expected to have, individually or in the
aggregate, a Valeant Material Adverse Effect.
(b) Except as would not, individually or in the aggregate,
reasonably be expected to have a Valeant Material Adverse
Effect, the businesses of each of Valeant and the Valeant
Subsidiaries are being conducted in compliance with all
applicable Laws, including (i) the FDCA, including the
rules and regulations promulgated thereunder; (ii) federal
Medicare and Medicaid statutes and related state or local
statutes or regulations; (iii) the Food and Drugs Act and
the CDSA, including the rules and regulations promulgated
thereunder; (iv) provincial formulary and drug pricing
statutes, including the rules and regulations promulgated
thereunder; (v) any comparable foreign Laws for any of the
foregoing; (vi) federal, state or provincial criminal or
civil Laws (including the federal Anti-Kickback Statute
(42 U.S.C.
§1320a-7(b)),
Stark Law (42 U.S.C. §1395nn), False Claims Act
(42 U.S.C.
§1320a-7b(a)),
Health Insurance Portability and Accountability Act of 1996
(42 U.S.C. § 1320d et. seq. and any comparable
state, provincial or local Laws) and (vii) state or
provincial licensing, disclosure and reporting requirements.
(c) All pre-clinical and clinical investigations conducted
or sponsored by each of Valeant and the Valeant Subsidiaries are
being conducted in compliance in all material respects with all
applicable Laws administered or issued by the applicable
Regulatory Authorities, including (i) FDA standards for
conducting non-clinical laboratory studies contained in
Title 21 part 58 of the Code of Federal Regulations,
(ii) FDA standards for the design, conduct, performance,
monitoring, auditing, recording, analysis and reporting of
clinical trials contained in Title 21 parts 50, 54, 56,
312, 314 and 320 of the Code of Federal Regulations,
(iii) Division 5 of the Food and Drug Regulations
regarding Drugs for Clinical Trials Involving Human Subjects,
and (iv) federal, state and provincial Laws restricting the
collection, use and disclosure of individually identifiable
health information and personal information.
(d) Neither Valeant nor any of the Valeant Subsidiaries has
received any written information from the FDA, the EMEA or
Health Canada or any foreign agency with jurisdiction over the
marketing, sale, use, handling and control, safety, efficacy,
reliability, or manufacturing of drugs which would reasonably be
expected to lead to the denial of any application for marketing
approval currently pending before the FDA, Health Canada or such
other Valeant Regulatory Agency.
(e) All material reports, documents, claims, permits and
notices required to be filed, maintained or furnished to the
FDA, Health Canada or any other Valeant Regulatory Agency by
Valeant and the Valeant Subsidiaries have been so filed,
maintained or furnished. All such reports, documents, claims,
permits and notices were complete and accurate in all material
respects on the date filed (or were corrected in or supplemented
by a subsequent filing) such that no liability exists with
respect to such filing. Neither Valeant nor any of the Valeant
Subsidiaries, nor, to the Knowledge of Valeant, any officer,
employee, agent or distributor of Valeant or any of the Valeant
Subsidiaries, has made an untrue statement of a material fact or
a fraudulent statement to the FDA, Health Canada or any other
Valeant Regulatory Agency, failed to disclose a material fact
required to be disclosed to the FDA, Health Canada or any other
Valeant Regulatory Agency, or committed an act, made a
statement, or failed to make a statement that, at the time such
disclosure was made, would reasonably be expected to provide a
basis for the FDA, Health Canada or any other Valeant Regulatory
Agency to invoke its policy respecting “Fraud, Untrue
Statements of Material Facts, Bribery, and Illegal
Gratuities”, set forth in 56 Fed. Reg. 46191
(September 10, 1991) or any similar policy. Neither
Valeant nor any of the Valeant Subsidiaries, nor, to the
Knowledge of Valeant, any officer, employee, agent or
distributor of Valeant or any of the Valeant Subsidiaries, has
been convicted of any crime or engaged in any conduct for which
debarment is mandated by 21 U.S.C. § 335a(a) or
any similar Law or authorized by 21 U.S.C.
§ 335a(b) or any similar Law. Neither Valeant nor any
of the Valeant Subsidiaries, nor, to the Knowledge of Valeant,
any
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officer, employee, agent or distributor of Valeant or any of the
Valeant Subsidiaries, has been convicted of any crime or engaged
in any conduct for which such Person could be excluded from
participating in the federal health care programs under
Section 1128 of the Social Security Act of 1935, as
amended, or any similar Law or program.
(f) As to each Valeant Product or Valeant Product candidate
subject to the FDCA and the regulations of the FDA promulgated
thereunder, the Food and Drugs Act , the CDSA and the
regulations of Health Canada promulgated thereunder, or similar
Law in any foreign jurisdiction that is or has been developed,
manufactured, tested, distributed or marketed by or on behalf of
Valeant or any of the Valeant Subsidiaries, each such Valeant
Product or Valeant Product candidate is being or has been
developed, manufactured, tested, distributed or marketed in
compliance in all material respects with all applicable
requirements under the FDCA and the regulations of the FDA
promulgated thereunder, the Food and Drugs Act, the CDSA and the
regulations of Health Canada promulgated thereunder, and similar
Laws in any foreign jurisdiction, including those relating to
investigational use, premarket clearance or marketing approval,
good manufacturing practices, good clinical practices, good
laboratory practices, labeling, advertising, record keeping,
filing of reports, and security. There is no action or
proceeding pending or threatened, including any prosecution,
injunction, seizure, civil fine, debarment, suspension or
recall, in each case alleging any violation applicable to any
Valeant Product or Valeant Product candidate by Valeant or any
of the Valeant Subsidiaries of any Law, except as would not,
individually or in the aggregate, reasonably be expected to have
a Valeant Material Adverse Effect.
(g) Since January 1, 2009, each of Valeant and the
Valeant Subsidiaries have neither voluntarily nor involuntarily
initiated, conducted or issued, or caused to be initiated,
conducted or issued, any recall, field notifications, field
corrections, market withdrawal or replacement, safety alert,
warning, “dear doctor” letter, investigator notice,
safety alert or other notice or action relating to an alleged
lack of safety, efficacy or regulatory compliance of any Valeant
Product. Each of Valeant and the Valeant Subsidiaries are not
aware of any facts which are reasonably likely to cause
(i) the recall, market withdrawal or replacement of any
Valeant Product sold or intended to be sold by Valeant or the
Valeant Subsidiaries, (ii) a change in the marketing
classification or a material change in the labeling of any such
Valeant Products, or (iii) a termination or suspension of
the marketing of such Valeant Products.
(h) To Valeant’s Knowledge, no data generated by
Valeant or any of the Valeant Subsidiaries with respect to the
Valeant Products that has been provided to its customers or
otherwise made public or filed with a Valeant Regulatory Agency
is the subject of any regulatory or other action, either pending
or threatened, by any Valeant Regulatory Agency relating to the
truthfulness or scientific adequacy of such data.
(i) Since January 1, 2009, neither Valeant nor any of
the Valeant Subsidiaries has received any written notice that
the FDA, Health Canada or any other Valeant Regulatory Agency
has (i) commenced, or threatened to initiate, any action to
request the recall of any product sold or intended to be sold by
Valeant or the Valeant Subsidiaries, or (ii) commenced, or
threatened to initiate, any action to enjoin manufacture or
distribution of any product sold or intended to be sold by
Valeant or the Valeant Subsidiaries.
(j) Since January 1, 2009, neither Valeant nor any of
the Valeant Subsidiaries has received any written notice from
the FDA, Health Canada or any other Valeant Regulatory Agency
regarding inappropriate advertising or marketing of a Valeant
Product or a negative change in reimbursement status of a
Valeant Product.
(k) Except as would not, individually or in the aggregate,
reasonably be expected to have a Valeant Material Adverse
Effect, no Valeant Product manufactured or distributed by
Valeant or any of the Valeant Subsidiaries is
(i) adulterated within the meaning of 21 U.S.C.
§351 (or any similar Law), (ii) misbranded within the
meaning of 21 U.S.C. §352 (or any similar Law).
(l) To the Knowledge of Valeant, all of its vendors are in
compliance in all material respects with good manufacturing
practice and similar regulations promulgated by regulatory
agencies with jurisdiction over Valeant’s vendors.
(m) This Section 4.17 does not apply to environmental
matters, which are the subject of Section 4.13.
Section 4.18.
Insurance
.
Since
January 1, 2009, Valeant and the Valeant Subsidiaries have
maintained continuous insurance coverage, in each case, in those
amounts and covering those risks as are in accordance, in all
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material respects, with normal industry practice for companies
of the size and financial condition of Valeant engaged in
businesses similar to those of Valeant and the Valeant
Subsidiaries.
Section 4.19.
Labor
and Employment Matters
.
Neither Valeant nor
any Valeant Subsidiary is a party to any collective bargaining
agreement and, as of the date of this Agreement, there are not,
to the Knowledge of Valeant, any union organizing activities
concerning any employees of Valeant or any of the Valeant
Subsidiaries, other than any such activities that, individually
or in the aggregate, have not had and would not reasonably be
expected to have a Valeant Material Adverse Effect. As of the
date of this Agreement, there are no labor strikes, slowdowns,
work stoppages or lockouts pending or, to the Knowledge of
Valeant, threatened in writing against Valeant or any Valeant
Subsidiary, other than any such matters that, individually or in
the aggregate, have not had and would not reasonably be expected
to have a Valeant Material Adverse Effect.
Section 4.20.
Brokers’
Fees and Expenses
.
No broker, investment
banker, financial advisor or other Person, other than Goldman,
Sachs & Co. and Jefferies & Company, Inc.
(the ‘‘
Valeant Financial Advisors
”), the
fees and expenses of which will be paid by Valeant, is entitled
to any broker’s, finder’s, financial advisor’s or
other similar fee or commission in connection with the Merger or
any of the other transactions contemplated by this Agreement
based upon arrangements made by or on behalf of Valeant. Valeant
has furnished to Biovail true and complete copies of all
agreements between Valeant and any of the Valeant Financial
Advisors relating to the Merger or any of the other transactions
contemplated by this Agreement.
Section 4.21.
Opinion
of Financial Advisor
.
Valeant has received an
opinion from each of the Valeant Financial Advisors, dated the
date of this Agreement, to the effect that, as of such date,
subject to the assumptions and qualifications set forth therein,
the Exchange Ratio, together with the Pre-Merger Special
Dividend, is fair to the holders of Valeant Common Stock (other
than Biovail and its affiliates) from a financial point of view.
Section 4.22.
Affiliate
Transactions
.
Except for (i) Contracts
filed or incorporated by reference as an exhibit to the Filed
Valeant Reporting Documents, (ii) Valeant Benefits Plans,
(iii) indemnification agreements between Valeant or any
Valeant Subsidiary, on the one hand, and, on the other hand, any
current or former executive officer or director of Valeant or
any Valeant Subsidiary, or (iv) Contracts or arrangements
entered into in the ordinary course of business with customers,
suppliers or service providers, Section 4.22 of the Valeant
Disclosure Letter sets forth a correct and complete list of the
contracts or arrangements that are in existence as of the date
of this Agreement between Valeant or any of its Subsidiaries, on
the one hand, and, on the other hand, any (x) present
executive officer or director of either Valeant or any of the
Valeant Subsidiaries or any person that has served as such an
executive officer or director within the last five years or any
of such officer’s or director’s immediate family
members, (y) record or beneficial owner of more than 5% of
the shares of Valeant Common Stock as of the date hereof or
(z) to the Knowledge of Valeant, any affiliate of any such
officer, director or owner (other than Valeant or any of the
Valeant Subsidiaries).
Section 4.23.
No
Other Representations or Warranties
.
Except
for the representations and warranties contained in this
Article IV, Biovail acknowledges that none of Valeant, the
Valeant Subsidiaries or any other Person on behalf of Valeant
makes any other express or implied representation or warranty in
connection with the transactions contemplated by this Agreement.
ARTICLE V
Covenants
Relating to Conduct of Business
Section 5.01.
Conduct
of Business
.
(a)
Conduct of
Business by Biovail
.
Except for matters set
forth in the Biovail Disclosure Letter or otherwise expressly
permitted or expressly contemplated by this Agreement (including
matters with respect to the Financing) or with the prior written
consent of Valeant (which shall not be unreasonably withheld,
conditioned or delayed), from the date of this Agreement to the
Effective Time, Biovail shall, and shall cause each Biovail
Subsidiary to, (i) conduct its business in the ordinary
course in all material respects and (ii) use reasonable
best efforts to preserve intact its business organization and
advantageous business relationships and keep available the
services of its current officers and employees. In addition, and
without limiting the generality of the foregoing, except for
matters set forth in the Biovail Disclosure Letter or otherwise
expressly permitted or expressly contemplated by this Agreement
(including matters with respect to the Financing) or with the
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prior written consent of Valeant (which shall not be
unreasonably withheld, conditioned or delayed), from the date of
this Agreement to the Effective Time, Biovail shall not, and
shall not permit any Biovail Subsidiary to, do any of the
following:
(i) (A) declare, set aside or pay any dividends on, or
make any other distributions (whether in cash, stock or property
or any combination thereof) in respect of, any of its capital
stock, other equity interests or voting securities, other than
(x) regular quarterly cash dividends payable by Biovail in
respect of shares of Biovail Common Stock not exceeding $0.095
per share of Biovail Common Stock with usual declaration, record
and payment dates and in accordance with Biovail’s current
dividend policy and (y) dividends and distributions by a
direct or indirect wholly owned Biovail Subsidiary to its
parent, (B) split, combine, consolidate, subdivide or
reclassify any of its capital stock, other equity interests or
voting securities or securities convertible into or exchangeable
or exercisable for capital stock or other equity interests or
voting securities or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution
for its capital stock, other equity interests or voting
securities, other than as permitted by Section 5.01(a)(ii),
or (C) repurchase, redeem or otherwise acquire, or offer to
repurchase, redeem or otherwise acquire, any capital stock or
voting securities of, or equity interests in, Biovail or any
Biovail Subsidiary or any securities of Biovail or any Biovail
Subsidiary convertible into or exchangeable or exercisable for
capital stock or voting securities of, or equity interests in,
Biovail or any Biovail Subsidiary, or any warrants, calls,
options or other rights to acquire any such capital stock,
securities or interests, other than (1) the acquisition by
Biovail of shares of Biovail Common Stock in connection with the
surrender of shares of Biovail Common Stock by holders of
Biovail Stock Options in order to pay the exercise price
thereof, (2) the withholding of shares of Biovail Common
Stock to satisfy tax obligations with respect to awards granted
pursuant to the Biovail Stock Plans and (3) the acquisition
by Biovail of awards granted pursuant to the Biovail Stock Plans
in connection with the forfeiture of such awards;
(ii) issue, deliver, sell, grant, pledge or otherwise
encumber or subject to any Lien (A) any shares of capital
stock of Biovail or any Biovail Subsidiary, (B) any other
equity interests or voting securities of Biovail or any Biovail
Subsidiary, (C) any securities convertible into or
exchangeable or exercisable for capital stock or voting
securities of, or other equity interests in, Biovail or any
Biovail Subsidiary, (D) any warrants, calls, options or
other rights to acquire any capital stock or voting securities
of, or other equity interests in, Biovail or any Biovail
Subsidiary, (E) any rights issued by Biovail or any Biovail
Subsidiary that are linked in any way to the price of any class
of Biovail Capital Stock or any shares of capital stock of any
Biovail Subsidiary, the value of Biovail, any Biovail Subsidiary
or any part of Biovail or any Biovail Subsidiary or any
dividends or other distributions declared or paid on any shares
of capital stock of Biovail or any Biovail Subsidiary or
(F) any Biovail Voting Debt, in each case other than the
issuance of shares of Biovail Common Stock upon the conversion
of the Biovail Convertible Notes, upon the exercise of Biovail
Stock Options or pursuant to Biovail Restricted Stock Units, in
each case outstanding on the date of this Agreement and in
accordance with their terms on the date of this Agreement;
(iii) (A) amend the Biovail Charter or the Biovail
By-laws or (B) amend the charter or organizational
documents of any Biovail Subsidiary in a manner which would be
reasonably likely to have a Biovail Material Adverse Effect or
to prevent or materially impede, interfere with, hinder or delay
the consummation by Biovail of the Merger or any of the other
transactions contemplated by this Agreement, except, in the case
of each of the foregoing clauses (A) and (B), as may be
required by Law or the rules and regulations of the SEC, the
Canadian Securities Authorities, the NYSE or the TSX;
(iv) (A) grant to any director or executive officer of
Biovail any material increase in compensation, (B) grant to
any director or executive officer of Biovail any material
increase in change in control, severance or termination pay,
(C) establish, adopt, enter into or amend in any material
respect any collective bargaining agreement or material Biovail
Benefit Plan or Biovail Benefit Agreement (or any plan or
agreement that would be a Biovail Benefit Plan or Biovail
Benefit Agreement if in existence on the date hereof),
(D) take any action to accelerate the time of vesting or
payment of any material compensation or benefits under any
Biovail Benefit Plan or Biovail Benefit Agreement or
(E) except as may be required by GAAP, materially change
any actuarial or other assumptions used to calculate funding
obligations with respect to any Biovail Benefit Plan or
materially change the manner in which contributions to such
plans are made or the basis on which such contributions are
determined, except in the case of the foregoing clauses (A)
through (E) for (1) actions
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required pursuant to the terms of any Biovail Benefit Plan or
Biovail Benefit Agreement or other written agreement, in each
case in effect on the date of this Agreement, and
(2) actions required by Law;
provided
,
however
, that the foregoing clauses (A) and
(B) shall not restrict Biovail or any Biovail Subsidiary
from entering into or making available to newly hired employees
or to employees in the context of promotions based on job
performance or workplace requirements, in each case in the
ordinary course of business, plans, agreements, benefits and
compensation arrangements (including incentive grants) that have
a value that is consistent with the past practice of making
compensation and benefits available to newly hired or promoted
employees in similar positions;
(v) make any change in financial accounting methods,
principles or practices, except insofar as may have been
required by a change in GAAP (after the date of this Agreement);
(vi) directly or indirectly (i) acquire or agree to
acquire in any transaction any equity interest in or business of
any firm, corporation, partnership, company, limited liability
company, trust, joint venture, association or other entity or
division thereof or any properties or assets or (ii) enter
into any in-licensing agreement or similar agreement or
arrangement relating to rights to any active pharmaceutical
ingredient (including any formulation or product containing such
active pharmaceutical ingredient), if the aggregate amount of
the consideration paid or transferred by Biovail and the Biovail
Subsidiaries in connection with all such transactions under the
preceding clauses (i) and (ii) would exceed,
individually or in the aggregate, $50,000,000 or
(iii) out-license or otherwise encumber any rights in any
material Intellectual Property owned or used by Biovail in the
conduct of its Business;
(vii) sell, lease (as lessor), license, mortgage, sell and
leaseback or otherwise encumber or subject to any Lien, or
otherwise dispose of any properties or assets or any interests
therein that, individually or in the aggregate, have a fair
market value in excess of $25,000,000, except in relation to
mortgages, liens and pledges to secure Indebtedness for borrowed
money permitted to be incurred under Section 5.01(a)(viii)
and except for pharmaceutical products in the ordinary course of
business;
(viii) incur any Indebtedness, except for
(A) Indebtedness incurred in the ordinary course of
business not to exceed $25,000,000 in the aggregate,
(B) Indebtedness in replacement of existing Indebtedness or
(C) guarantees by Biovail of Indebtedness of any wholly
owned Biovail Subsidiary;
(ix) make, or agree or commit to make, any capital
expenditure except in accordance with the capital plan for 2010
previously made available to Valeant, plus a 10% variance for
any such expenditure;
(x) enter into or amend any Contract, or take any other
action or omit to take any other action (except in connection
with Section 5.02 or Article VIII), if such Contract,
amendment of a Contract or action or omission would reasonably
be expected to prevent or materially impede, interfere with,
hinder or delay the consummation of the Merger or any of the
other transactions contemplated by this Agreement or adversely
affect in a material respect the expected benefits (taken as a
whole) of the Merger;
(xi) enter into or amend any material Contract to the
extent consummation of the Merger or compliance by Biovail or
any Biovail Subsidiary with the provisions of this Agreement
would reasonably be expected to conflict with, or result in a
violation of or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation, any obligation
to make an offer to purchase or redeem any Indebtedness or
capital stock or any loss of a material benefit under, or result
in the creation of any Lien upon any of the material properties
or assets of Biovail or any Biovail Subsidiary under, or require
Biovail, Valeant or any of their respective Subsidiaries to
license or transfer any of its material properties or assets
under, or give rise to any increased, additional, accelerated,
or guaranteed right or entitlements of any third party under, or
result in any material alteration of, any provision of such
Contract or amendment;
(xii) waive, release or assign any material claim of
Biovail or any of the Biovail Subsidiaries;
(xiii) settle or compromise any claim, action or
proceeding, other than settlements or compromises resulting in
the payment of monetary damages not to exceed $15,000,000 in the
aggregate;
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(xiv) (i) make, change or rescind any material method
of Tax accounting, (ii) make a request for a Tax ruling or
enter into a closing agreement, or settle or compromise any
material audit, assessment, Tax claim or other controversy
relating to Taxes, (iii) file any material amended Tax
Return, (iv) surrender any material right to claim a refund
or offset of any Taxes or (v) change the classification of
Biovail or any Biovail Subsidiary for U.S. tax
purposes; or
(xv) authorize any of, or commit, resolve or agree to take
any of, or participate in any negotiations or discussions with
any other Person regarding any of, the foregoing actions.
(b)
Conduct of Business by
Valeant
.
Except for matters set forth in the
Valeant Disclosure Letter or otherwise expressly permitted or
expressly contemplated by this Agreement (including matters with
respect to the Financing and the Pre-Merger Special Dividend) or
with the prior written consent of Biovail (which shall not be
unreasonably withheld, conditioned or delayed), from the date of
this Agreement to the Effective Time, Valeant shall, and shall
cause each Valeant Subsidiary to, (i) conduct its business
in the ordinary course in all material respects and
(ii) use reasonable best efforts to preserve intact its
business organization and advantageous business relationships
and keep available the services of its current officers and
employees. In addition, and without limiting the generality of
the foregoing, except for matters set forth in the Valeant
Disclosure Letter or otherwise expressly permitted or expressly
contemplated by this Agreement (including matters with respect
to the Financing and the Pre-Merger Special Dividend) or with
the prior written consent of Biovail (which shall not be
unreasonably withheld, conditioned or delayed), from the date of
this Agreement to the Effective Time, Valeant shall not, and
shall not permit any Valeant Subsidiary to, do any of the
following:
(i) (A) declare, set aside or pay any dividends on, or
make any other distributions (whether in cash, stock or property
or any combination thereof) in respect of, any of its capital
stock, other equity interests or voting securities, other than
(x) the Pre-Merger Special Dividend in respect of each
share of Valeant Common Stock and (y) dividends and
distributions by a direct or indirect wholly owned Valeant
Subsidiary to its parent, (B) split, combine, consolidate
subdivide or reclassify any of its capital stock, other equity
interests or voting securities or securities convertible into or
exchangeable or exercisable for capital stock or other equity
interests or voting securities or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for its capital stock, other equity interests or
voting securities, other than as permitted by
Section 5.01(b)(ii), or (C) repurchase, redeem or
otherwise acquire, or offer to repurchase, redeem or otherwise
acquire, any capital stock or voting securities of, or equity
interests in, Valeant or any Valeant Subsidiary or any
securities of Valeant or any Valeant Subsidiary convertible into
or exchangeable or exercisable for capital stock or voting
securities of, or equity interests in, Valeant or any Valeant
Subsidiary, or any warrants, calls, options or other rights to
acquire any such capital stock, securities or interests, other
than (1) the acquisition by Valeant of shares of Valeant
Common Stock in connection with the surrender of shares of
Valeant Common Stock by holders of Valeant Stock Options or
Valeant Warrants in order to pay the exercise price thereof,
(2) the withholding of shares of Valeant Common Stock to
satisfy tax obligations with respect to awards granted pursuant
to the Valeant Stock Plans, (3) the acquisition by Valeant
of awards granted pursuant to the Valeant Stock Plans in
connection with the forfeiture of such awards, (4) the
acquisition, redemption or repurchase or cash settlement by
Valeant or any Valeant Subsidiary of its obligations under any
Valeant Convertible Notes or Valeant Warrants, or (5) any
payment made to holders of Valeant Convertible Notes at the
maturity dates thereof;
(ii) issue, deliver, sell, grant, pledge or otherwise
encumber or subject to any Lien (A) any shares of capital
stock of Valeant or any Valeant Subsidiary, (B) any other
equity interests or voting securities of Valeant or any Valeant
Subsidiary, (C) any securities convertible into or
exchangeable or exercisable for capital stock or voting
securities of, or other equity interests in, Valeant or any
Valeant Subsidiary, (D) any warrants, calls, options or
other rights to acquire any capital stock or voting securities
of, or other equity interests in, Valeant or any Valeant
Subsidiary, (E) any rights issued by Valeant or any Valeant
Subsidiary that are linked in any way to the price of any class
of Valeant Capital Stock or any shares of capital stock of any
Valeant Subsidiary, the value of Valeant, any Valeant Subsidiary
or any part of Valeant or any Valeant Subsidiary or any
dividends or other distributions declared or paid on any shares
of capital stock of Valeant or any Valeant Subsidiary or
(F) any Valeant Voting Debt, in each case other than the
issuance of shares of Valeant Common Stock upon the acquisition
or conversion of the Valeant Convertible Notes, upon the
exercise of Valeant Warrants, Valeant
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Stock Options or rights under the Valeant ESPP or pursuant to
Valeant Restricted Stock Units, in each case outstanding on the
date of this Agreement and in accordance with their terms on the
date of this Agreement;
(iii) (A) amend the Valeant Charter or the Valeant
By-laws or (B) amend the charter or organizational
documents of any Valeant Subsidiary in a manner which would be
reasonably likely to have a Valeant Material Adverse Effect or
to prevent or materially impede, interfere with, hinder or delay
the consummation by Valeant of the Merger or any of the other
transactions contemplated by this Agreement, except, in the case
of each of the foregoing clauses (A) and (B), as may be
required by Law or the rules and regulations of the SEC or the
NYSE;
(iv) (A) grant to any director or executive officer of
Valeant any material increase in compensation, (B) grant to
any director or executive officer of Valeant any material
increase in change in control, severance or termination pay,
(C) establish, adopt, enter into or amend in any material
respect any collective bargaining agreement or material Valeant
Benefit Plan or Valeant Benefit Agreement (or any plan or
agreement that would be a Valeant Benefit Plan or Valeant
Benefit Agreement if in existence on the date hereof),
(D) take any action to accelerate the time of vesting or
payment of any material compensation or benefits under any
Valeant Benefit Plan or Valeant Benefit Agreement or
(E) except as may be required by GAAP, materially change
any actuarial or other assumptions used to calculate funding
obligations with respect to any Valeant Benefit Plan or
materially change the manner in which contributions to such
plans are made or the basis on which such contributions are
determined, except in the case of the foregoing clauses (A)
through (E) for (1) actions required pursuant to the
terms of any Valeant Benefit Plan or Valeant Benefit Agreement
or other written agreement, in each case in effect on the date
of this Agreement, and (2) actions required by Law;
provided
,
however
, that the foregoing
clauses (A) and (B) shall not restrict Valeant or any
Valeant Subsidiary from entering into or making available to
newly hired employees or to employees in the context of
promotions based on job performance or workplace requirements,
in each case in the ordinary course of business, plans,
agreements, benefits and compensation arrangements (including
incentive grants) that have a value that is consistent with the
past practice of making compensation and benefits available to
newly hired or promoted employees in similar positions;
(v) make any change in financial accounting methods,
principles or practices, except insofar as may have been
required by a change in GAAP (after the date of this Agreement);
(vi) directly or indirectly (i) acquire or agree to
acquire in any transaction any equity interest in or business of
any firm, corporation, partnership, company, limited liability
company, trust, joint venture, association or other entity or
division thereof or any properties or assets or (ii) enter
into any in-licensing agreement or similar agreement or
arrangement relating to rights to any active pharmaceutical
ingredient (including any formulation or product containing such
active pharmaceutical ingredient), if the aggregate amount of
the consideration paid or transferred by Valeant and the Valeant
Subsidiaries in connection with all such transactions under the
preceding clauses (i) and (ii) would exceed,
individually or in the aggregate, $50,000,000 or
(iii) out-license or otherwise encumber any rights in any
material Intellectual Property owned or used by Valeant in the
conduct of its Business;
(vii) sell, lease (as lessor), license, mortgage, sell and
leaseback or otherwise encumber or subject to any Lien, or
otherwise dispose of any properties or assets or any interests
therein that, individually or in the aggregate, have a fair
market value in excess of $25,000,000, except in relation to
mortgages, liens and pledges to secure Indebtedness for borrowed
money permitted to be incurred under Section 5.01(b)(viii)
and except for pharmaceutical products in the ordinary course of
business;
(viii) incur any Indebtedness, except for
(A) Indebtedness incurred in the ordinary course of
business not to exceed $25,000,000 in the aggregate,
(B) Indebtedness in replacement of existing Indebtedness or
(C) guarantees by Valeant of Indebtedness of any wholly
owned Valeant Subsidiary;
(ix) make, or agree or commit to make, any capital
expenditure except in accordance with the capital plan for 2010
previously made available to Biovail, plus a 10% variance for
any such expenditure;
(x) enter into or amend any Contract, or take any other
action or omit to take any other action (except in connection
with Section 5.03 or Article VIII), if such Contract,
amendment of a Contract or action or omission
A-37
would reasonably be expected to prevent or materially impede,
interfere with, hinder or delay the consummation of the Merger
or any of the other transactions contemplated by this Agreement
or adversely affect in a material respect the expected benefits
(taken as a whole) of the Merger;
(xi) enter into or amend any material Contract to the
extent consummation of the Merger or compliance by Valeant or
any Valeant Subsidiary with the provisions of this Agreement
would reasonably be expected to conflict with, or result in a
violation of or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation, any obligation
to make an offer to purchase or redeem any Indebtedness or
capital stock or any loss of a material benefit under, or result
in the creation of any Lien upon any of the material properties
or assets of Valeant or any Valeant Subsidiary under, or require
Biovail, Valeant or any of their respective Subsidiaries to
license or transfer any of its material properties or assets
under, or give rise to any increased, additional, accelerated,
or guaranteed right or entitlements of any third party under, or
result in any material alteration of, any provision of such
Contract or amendment;
(xii) waive, release or assign any material claim of
Valeant or any of the Valeant Subsidiaries;
(xiii) settle or compromise any claim, action or
proceeding, other than settlements or compromises resulting in
the payment of monetary damages not to exceed $15,000,000 in the
aggregate;
(xiv) (i) make, change or rescind any material method
of Tax accounting, (ii) make a request for a Tax ruling or
enter into a closing agreement, or settle or compromise any
material audit, assessment, Tax claim or other controversy
relating to Taxes, (iii) file any material amended Tax
Return, (iv) surrender any material right to claim a refund
or offset of any Taxes or (v) change the classification of
Valeant or any Valeant Subsidiary for U.S. tax
purposes; or
(xv) authorize any of, or commit, resolve or agree to take
any of, or participate in any negotiations or discussions with
any other Person regarding any of, the foregoing actions.
(c)
No Control of Biovail’s
Business
.
Valeant acknowledges and agrees
that (i) nothing contained in this Agreement is intended to
give Valeant, directly or indirectly, the right to control or
direct the operations of Biovail or any Biovail Subsidiary prior
to the Effective Time, and (ii) prior to the Effective
Time, Biovail shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision
over its and the Biovail Subsidiaries’ respective
operations.
(d)
No Control of Valeant’s
Business
.
Biovail acknowledges and agrees
that (i) nothing contained in this Agreement is intended to
give Biovail, directly or indirectly, the right to control or
direct the operations of Valeant or any Valeant Subsidiary prior
to the Effective Time, and (ii) prior to the Effective
Time, Valeant shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision
over its and the Valeant Subsidiaries’ respective
operations.
(e)
Advice of Changes
.
Each of
Biovail and Valeant shall promptly advise the other orally and
in writing of any change or event that, individually or in the
aggregate with all past changes and events of which Biovail or
Valeant, as the case may be, has notified the other party under
this Section 5.01(e), has had or would reasonably be
expected to have a Biovail Material Adverse Effect or a Valeant
Material Adverse Effect, respectively.
Section 5.02.
No
Solicitation by Biovail; Biovail Board
Recommendation
.
(a) Biovail shall not,
nor shall it authorize or permit any of its Affiliates or any of
its and their respective directors, officers or employees or any
of their respective investment bankers, accountants, attorneys
or other advisors, agents or representatives (collectively,
‘‘
Representatives
”) to, (i) directly
or indirectly solicit, initiate, knowingly encourage, induce or
facilitate any Biovail Takeover Proposal or any inquiry or
proposal that may reasonably be expected to lead to a Biovail
Takeover Proposal, (ii) directly or indirectly participate
in any discussions or negotiations with any Person (other than
Biovail’s Representatives) regarding, or furnish to any
Person any information with respect to, or cooperate in any way
with any Person (whether or not a Person making a Biovail
Takeover Proposal) with respect to any Biovail Takeover Proposal
or any inquiry or proposal that may reasonably be expected to
lead to a Biovail Takeover Proposal or (iii) waive,
terminate, modify or fail to enforce any provision of any
confidentiality or “standstill” or similar obligation
of any Person (other than the other party hereto) with respect
to Biovail or any Biovail Subsidiary.
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Biovail (A) shall, and shall cause its Affiliates and its
and their respective Representatives to, immediately cease and
cause to be terminated all existing discussions or negotiations
with any Person conducted heretofore with respect to any Biovail
Takeover Proposal, or any inquiry or proposal that may
reasonably be expected to lead to a Biovail Takeover Proposal,
request the prompt return or destruction of all confidential
information previously furnished and immediately terminate all
physical and electronic dataroom access previously granted to
any such Person or its Representatives and (B) shall
immediately take all steps necessary to terminate any approval
under any confidentiality or “standstill” or similar
provision that may have been heretofore given by it or any
Biovail Subsidiary under any such provisions authorizing any
Person to make a Takeover Proposal. Notwithstanding the
foregoing, at any time prior to obtaining the Biovail
Stockholder Approval, in response to a bona fide written Biovail
Takeover Proposal that the Biovail Board determines in good
faith (after consultation with outside counsel and a financial
advisor of nationally recognized reputation) constitutes or is
reasonably likely to lead to a Superior Biovail Proposal, and
which Biovail Takeover Proposal was not solicited by Biovail,
its Affiliates or Representatives after the date of this
Agreement and was made after the date of this Agreement and did
not otherwise result from a breach of this Section 5.02(a),
Biovail, and its Representatives at the request of Biovail, may,
subject to compliance with Section 5.02(c),
(A) furnish information with respect to Biovail and the
Biovail Subsidiaries to the Person making such Biovail Takeover
Proposal (and its Representatives) (
provided
that all
such information has previously been provided to Valeant or is
provided to Valeant prior to or substantially concurrent with
the time it is provided to such Person) pursuant to a customary
confidentiality agreement not less restrictive of such Person
than the Confidentiality Agreement (other than with respect to
standstill provisions), and (B) participate in discussions
regarding the terms of such Biovail Takeover Proposal and the
negotiation of such terms with, and only with, the Person making
such Biovail Takeover Proposal (and such Person’s
Representatives). Without limiting the foregoing, it is agreed
that any violation of the restrictions set forth in this
Section 5.02(a) by any Representative of Biovail or any of
its Affiliates shall constitute a breach of this
Section 5.02(a) by Biovail.
(b) Except as set forth below, neither the Biovail Board
nor any committee thereof shall (i) (A) withdraw (or modify
in any manner adverse to Valeant), or propose publicly to
withdraw (or modify in any manner adverse to Valeant), the
approval, recommendation or declaration of advisability by the
Biovail Board or any such committee thereof with respect to this
Agreement or (B) approve, recommend or declare advisable,
or propose publicly to approve, recommend or declare advisable,
any Biovail Takeover Proposal (any action in this
clause (i) being referred to as a ‘‘
Biovail
Adverse Recommendation Change
”) or (ii) approve,
recommend or declare advisable, or propose publicly to approve,
recommend or declare advisable, or allow Biovail or any of its
Affiliates to execute or enter into, any letter of intent,
memorandum of understanding, agreement in principle, merger
agreement, acquisition agreement, option agreement, joint
venture agreement, alliance agreement, partnership agreement or
other agreement or arrangement (other than a confidentiality
agreement referred to in Section 5.02(a)) (an
“
Acquisition Agreement
”) constituting or
related to, or that is intended to or would reasonably be
expected to lead to, any Biovail Takeover Proposal, or
requiring, or reasonably expected to cause, Biovail, BAC or
Merger Sub to abandon, terminate, delay or fail to consummate,
or that would otherwise impede, interfere with or be
inconsistent with, the Merger or any of the other transactions
contemplated by this Agreement, or requiring, or reasonably
expected to cause, Biovail to fail to comply with this
Agreement. Notwithstanding the foregoing, at any time prior to
obtaining the Biovail Stockholder Approval, the Biovail Board
may make a Biovail Adverse Recommendation Change
(A) following receipt of a Biovail Takeover Proposal after
the execution of this Agreement that did not result from a
breach of Section 5.02(a) and that the Biovail Board or an
authorized and empowered committee thereof determines in good
faith, after consultation with its outside financial and legal
advisors constitutes a Superior Biovail Proposal or
(B) solely in response to any material event, development,
circumstance, occurrence or change in circumstances or facts
(including any material change in probability or magnitude of
circumstances), not related to a Biovail Takeover Proposal, and
that first occurred following the execution of this Agreement (a
‘‘
Biovail Intervening Event
”); in each
case referred to in the foregoing clauses (A) and (B), only
if the Biovail Board determines in good faith (after
consultation with outside counsel and a financial advisor of
nationally recognized reputation) that the failure to do so
would be inconsistent with its fiduciary duties under applicable
Law;
provided
,
however
, that Biovail shall not be
entitled to exercise its right to make a Biovail Adverse
Recommendation Change until after the fifth business day
following Valeant’s receipt of written notice (a
‘‘
Biovail Notice of Recommendation
Change
”) from Biovail advising Valeant that the Biovail
Board intends to make a Biovail Notice of Recommendation Change
and specifying the reasons therefor, including in the case of a
Superior Biovail Proposal
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the terms and conditions of any Superior Biovail Proposal that
is the basis of the proposed action by the Biovail Board (it
being understood and agreed that any amendment to any material
term of such Superior Biovail Proposal shall require a new
Biovail Notice of Recommendation Change and a new five
business-day
period). In determining whether to make a Biovail Adverse
Recommendation Change, the Biovail Board shall take into account
any changes to the terms of this Agreement proposed by Valeant
in response to a Biovail Notice of Recommendation Change or
otherwise, and if requested by Valeant, Biovail shall engage in
good faith negotiations with Valeant regarding any changes to
the terms of this Agreement proposed by Valeant.
(c) In addition to the obligations of Biovail set forth in
paragraphs (a) and (b) of this Section 5.02,
Biovail shall promptly advise (and in any event within
24 hours) Valeant orally and in writing of any Biovail
Takeover Proposal, the material terms and conditions of any such
Biovail Takeover Proposal (including any changes thereto) and
the identity of the person making any such Biovail Takeover
Proposal. Biovail shall(i) keep Valeant informed in all material
respects on a reasonably current basis of the status and details
(including any change to the terms thereof) of any Biovail
Takeover Proposal and (ii) provide to Valeant as soon as
practicable after receipt or delivery thereof copies of all
correspondence and other written material exchanged between
Biovail or any of its Subsidiaries, on the one hand, and the
Person making any such Biovail Takeover Proposal, on the other
hand, that describes any of the terms or conditions of any
Biovail Takeover Proposal. Notwithstanding anything to the
contrary contained in this Agreement, neither the Biovail Board
nor any committee thereof shall be entitled to make a Biovail
Adverse Recommendation Change pursuant to Section 5.02(b)
with respect to a Biovail Intervening Event, unless Biovail has
provided Valeant with written information describing such
Biovail Intervening Event in reasonable detail promptly after
becoming aware of it, and keeps Valeant reasonably informed of
material developments with respect to such Biovail Intervening
Event.
(d) Nothing contained in this Section 5.02 shall
prohibit Biovail from (i) complying with
Rule 14d-9
and
Rule 14e-2
promulgated under the Exchange Act or (ii) making any
disclosure to the stockholders of Biovail if, in the good faith
judgment of the Biovail Board (after consultation with outside
counsel) failure to so disclose would be inconsistent with its
obligations under applicable Law;
provided
,
however
, that in no event shall Biovail or the Biovail
Board or any committee thereof take, or agree or resolve to
take, any action prohibited by Section 5.02(b).
(e) For purposes of this Agreement:
‘‘
Biovail Takeover Proposal
”
means
any proposal or offer (whether or not in writing), with respect
to any (i) merger, amalgamation, arrangement,
consolidation, share exchange, other business combination or
similar transaction involving Biovail or any Biovail Subsidiary,
(ii) sale, lease, contribution or other disposition,
directly or indirectly (including by way of merger,
consolidation, share exchange, other business combination,
partnership, joint venture, sale of capital stock of or other
equity interests in a Biovail Subsidiary or otherwise) of any
business or assets of Biovail or the Biovail Subsidiaries
representing 20% or more of the consolidated revenues, net
income or assets of Biovail and the Biovail Subsidiaries, taken
as a whole, (iii) issuance, sale or other disposition,
directly or indirectly, to any Person (or the stockholders of
any Person) or group of securities (or options, rights or
warrants to purchase, or securities convertible into or
exchangeable for, such securities) representing 20% or more of
the voting power of Biovail, (iv) transaction in which any
Person (or the stockholders of any Person) shall acquire,
directly or indirectly, beneficial ownership, or the right to
acquire beneficial ownership, or formation of any group which
beneficially owns or has the right to acquire beneficial
ownership of, 20% or more of the Biovail Common Stock or
(v) any combination of the foregoing (in each case, other
than the Merger).
‘‘
Superior Biovail Proposal
”
means
a binding bona fide written Biovail Takeover Proposal (with all
references to “20% or more” in the definition of
Biovail Takeover Proposal being deemed to reference “more
than 50%”) (i) on terms which the Biovail Board
determines in good faith (after consultation with outside
counsel and a financial advisor of nationally recognized
reputation) to be superior from a financial point of view to the
holders of Biovail Common Stock than the Merger, taking into
account all the terms and conditions of such proposal (including
the legal, financial, regulatory, timing and other aspects of
the proposal and the identity of the Person making the proposal)
and this Agreement (including any changes proposed by Valeant to
the terms of this Agreement) and (ii) that is fully
financed or reasonably capable of being fully financed,
A-40
reasonably likely to receive all required governmental approvals
on a timely basis and otherwise reasonably capable of being
completed on the terms proposed.
Section 5.03.
No
Solicitation by Valeant; Valeant Board
Recommendation
.
(a) Valeant shall not,
nor shall it authorize or permit any of its Affiliates or any of
its and their respective Representatives to, (i) directly
or indirectly solicit, initiate, knowingly encourage, induce or
facilitate any Valeant Takeover Proposal or any inquiry or
proposal that may reasonably be expected to lead to a Valeant
Takeover Proposal, (ii) directly or indirectly participate
in any discussions or negotiations with any Person (other than
Valeant’s Representatives) regarding, or furnish to any
Person any information with respect to, or cooperate in any way
with any Person (whether or not a Person making a Valeant
Takeover Proposal) with respect to any Valeant Takeover Proposal
or any inquiry or proposal that may reasonably be expected to
lead to a Valeant Takeover Proposal or (iii) waive,
terminate, modify or fail to enforce any provision of any
confidentiality or “standstill” or similar obligation
of any Person (other than the other party hereto) with respect
to Valeant or any Valeant Subsidiary. Valeant (A) shall,
and shall cause its Affiliates and its and their respective
Representatives to, immediately cease and cause to be terminated
all existing discussions or negotiations with any Person
conducted heretofore with respect to any Valeant Takeover
Proposal, or any inquiry or proposal that may reasonably be
expected to lead to a Valeant Takeover Proposal, request the
prompt return or destruction of all confidential information
previously furnished and immediately terminate all physical and
electronic dataroom access previously granted to any such Person
or its Representatives and (B) shall immediately take all
steps necessary to terminate any approval under any
confidentiality or “standstill” or similar provision
that may have been heretofore given by it or any Valeant
Subsidiary under any such provisions authorizing any Person to
make a Takeover Proposal. Notwithstanding the foregoing, at any
time prior to obtaining the Valeant Stockholder Approval, in
response to a bona fide written Valeant Takeover Proposal that
the Valeant Board determines in good faith (after consultation
with outside counsel and a financial advisor of nationally
recognized reputation) constitutes or is reasonably likely to
lead to a Superior Valeant Proposal, and which Valeant Takeover
Proposal was not solicited by Valeant, its Affiliates or
Representatives after the date of this Agreement and was made
after the date of this Agreement and did not otherwise result
from a breach of this Section 5.03(a), Valeant, and its
Representatives at the request of Valeant, may, subject to
compliance with Section 5.03(c), (A) furnish
information with respect to Valeant and the Valeant Subsidiaries
to the Person making such Valeant Takeover Proposal (and its
Representatives) (
provided
that all such information has
previously been provided to Valeant or is provided to Valeant
prior to or substantially concurrent with the time it is
provided to such Person) pursuant to a customary confidentiality
agreement not less restrictive of such Person than the
Confidentiality Agreement (other than with respect to standstill
provisions), and (B) participate in discussions regarding
the terms of such Valeant Takeover Proposal and the negotiation
of such terms with, and only with, the Person making such
Valeant Takeover Proposal (and such Person’s
Representatives). Without limiting the foregoing, it is agreed
that any violation of the restrictions set forth in this
Section 5.03(a) by any Representative of Valeant or any of
its Affiliates shall constitute a breach of this
Section 5.03(a) by Valeant.
(b) Except as set forth below, neither the Valeant Board
nor any committee thereof shall (i) (A) withdraw (or modify
in any manner adverse to Biovail), or propose publicly to
withdraw (or modify in any manner adverse to Biovail), the
approval, recommendation or declaration of advisability by the
Valeant Board or any such committee thereof with respect to this
Agreement or (B) approve, recommend or declare advisable,
or propose publicly to approve, recommend or declare advisable,
any Valeant Takeover Proposal (any action in this
clause (i) being referred to as a ‘‘
Valeant
Adverse Recommendation Change
”) or (ii) approve,
recommend or declare advisable, or propose publicly to approve,
recommend or declare advisable, or allow Valeant or any of its
Affiliates to execute or enter into, any Acquisition Agreement
constituting or related to, or that is intended to or would
reasonably be expected to lead to, any Valeant Takeover
Proposal, or requiring, or reasonably expected to cause, Valeant
to abandon, terminate, delay or fail to consummate, or that
would otherwise impede, interfere with or be inconsistent with,
the Merger or any of the other transactions contemplated by this
Agreement, or requiring, or reasonably expected to cause,
Valeant to fail to comply with this Agreement. Notwithstanding
the foregoing, at any time prior to obtaining the Valeant
Stockholder Approval, the Valeant Board may make a Valeant
Adverse Recommendation Change (A) following receipt of a
Valeant Takeover Proposal after the execution of this Agreement
that did not result from a breach of Section 5.03(a) and
that the Valeant Board or an authorized and empowered committee
thereof determines in good faith, after consultation with its
outside financial and legal advisors constitutes a Superior
Valeant Proposal or (B) solely in response to any material
event, development, circumstance, occurrence
A-41
or change in circumstances or facts (including any material
change in probability or magnitude of circumstances), not
related to a Valeant Takeover Proposal, and that first occurred
following the execution of this Agreement (a “
Valeant
Intervening Event
”); in each case referred to in the
foregoing clauses (A) and (B), only if the Valeant Board
determines in good faith (after consultation with outside
counsel and a financial advisor of nationally recognized
reputation) that the failure to do so would be inconsistent with
its fiduciary duties under applicable Law;
provided
,
however
, that Valeant shall not be entitled to exercise
its right to make a Valeant Adverse Recommendation Change until
after the fifth business day following Biovail’s receipt of
written notice (a “
Valeant Notice of Recommendation
Change
”) from Valeant advising Biovail that the Valeant
Board intends to make a Valeant Notice of Recommendation Change
and specifying the reasons therefor, including in the case of a
Superior Valeant Proposal the terms and conditions of any
Superior Valeant Proposal that is the basis of the proposed
action by the Valeant Board (it being understood and agreed that
any amendment to any material term of such Superior Valeant
Proposal shall require a new Valeant Notice of Recommendation
Change and a new five
business-day
period). In determining whether to make a Valeant Adverse
Recommendation Change, the Valeant Board shall take into account
any changes to the terms of this Agreement proposed by Biovail
in response to a Valeant Notice of Recommendation Change or
otherwise, and if requested by Biovail, Valeant shall engage in
good faith negotiations with Biovail regarding any changes to
the terms of this Agreement proposed by Biovail.
(c) In addition to the obligations of Valeant set forth in
paragraphs (a) and (b) of this Section 5.03,
Valeant shall promptly advise (and in any event within
24 hours) Biovail orally and in writing of any Valeant
Takeover Proposal, the material terms and conditions of any such
Valeant Takeover Proposal (including any changes thereto) and
the identity of the person making any such Valeant Takeover
Proposal. Valeant shall (i) keep Biovail informed in all
material respects on a reasonably current basis of the status
and details (including any change to the terms thereof) of any
Valeant Takeover Proposal, and (ii) provide to Biovail as
soon as practicable after receipt or delivery thereof copies of
all correspondence and other written material exchanged between
Valeant or any of its Subsidiaries, on the one hand, and the
Person making any such Valeant Takeover Proposal, on the other
hand, that describes any of the terms or conditions of any
Valeant Takeover Proposal. Notwithstanding anything to the
contrary contained in this Agreement, neither the Valeant Board
nor any committee thereof shall be entitled to make a Valeant
Adverse Recommendation Change pursuant to Section 5.03(b)
with respect to a Valeant Intervening Event, unless Valeant has
provided Biovail with written information describing such
Valeant Intervening Event in reasonable detail promptly after
becoming aware of it, and keeps Biovail reasonably informed of
material developments with respect to such Valeant Intervening
Event.
(d) Nothing contained in this Section 5.03 shall
prohibit Valeant from (i) complying with
Rule 14d-9
and
Rule 14e-2
promulgated under the Exchange Act, or (iii) making any
disclosure to the stockholders of Valeant if, in the good faith
judgment of the Valeant Board (after consultation with outside
counsel) failure to so disclose would be inconsistent with its
obligations under applicable Law;
provided
,
however
, that in no event shall Valeant or the Valeant
Board or any committee thereof take, or agree or resolve to
take, any action prohibited by Section 5.03(b).
(e) For purposes of this Agreement:
‘‘
Valeant Takeover Proposal
”
means
any proposal or offer (whether or not in writing), with respect
to any (i) merger, amalgamation, arrangement,
consolidation, share exchange, other business combination or
similar transaction involving Valeant or any Valeant Subsidiary,
(ii) sale, lease, contribution or other disposition,
directly or indirectly (including by way of merger,
consolidation, share exchange, other business combination,
partnership, joint venture, sale of capital stock of or other
equity interests in a Valeant Subsidiary or otherwise) of any
business or assets of Valeant or the Valeant Subsidiaries
representing 20% or more of the consolidated revenues, net
income or assets of Valeant and the Valeant Subsidiaries, taken
as a whole, (iii) issuance, sale or other disposition,
directly or indirectly, to any Person (or the stockholders of
any Person) or group of securities (or options, rights or
warrants to purchase, or securities convertible into or
exchangeable for, such securities) representing 20% or more of
the voting power of Valeant, (iv) transaction in which any
Person (or the stockholders of any Person) shall acquire,
directly or indirectly, beneficial ownership, or the right to
acquire beneficial ownership, or formation of any group which
beneficially owns or has the right to acquire beneficial
ownership of, 20% or more of the Valeant Common Stock or
(v) any combination of the foregoing (in each case, other
than the Merger).
A-42
‘‘
Superior Valeant Proposal
”
means
a binding bona fide written Valeant Takeover Proposal (with all
references to “20% or more” in the definition of
Valeant Takeover Proposal being deemed to reference “more
than 50%”) (i) on terms which the Valeant Board
determines in good faith (after consultation with outside
counsel and a financial advisor of nationally recognized
reputation) to be superior from a financial point of view to the
holders of Valeant Common Stock than the Merger, taking into
account all the terms and conditions of such proposal (including
the legal, financial, regulatory, timing and other aspects of
the proposal and the identity of the Person making the proposal)
and this Agreement (including any changes proposed by Biovail to
the terms of this Agreement), and (ii) that is fully
financed or reasonably capable of being fully financed,
reasonably likely to receive all required governmental approvals
on a timely basis and otherwise reasonably capable of being
completed on the terms proposed.
ARTICLE VI
Additional
Agreements
Section
6.01.
Preparation
of the
Form S-4
and the Joint Proxy Statement; Stockholders
Meetings
.
(a) As promptly as practicable
following the date of this Agreement, Biovail and Valeant shall
jointly prepare and cause to be filed with the SEC and pursuant
to Canadian Securities Laws a joint proxy statement to be sent
to the stockholders of each of Biovail and Valeant relating to
the Biovail Stockholders Meeting and the Valeant Stockholders
Meeting (together with any amendments or supplements thereto,
the “
Joint Proxy Statement
”) and Biovail shall
prepare and cause to be filed with the SEC the
Form S-4,
in which the Joint Proxy Statement will be included as a
prospectus, and Biovail and Valeant shall use their respective
reasonable best efforts to have the
Form S-4
declared effective under the Securities Act as promptly as
practicable after such filing. Each of Valeant and Biovail shall
furnish all information concerning such Person and its
Affiliates to the other, and provide such other assistance, as
may be reasonably requested in connection with the preparation,
filing and distribution of the
Form S-4
and Joint Proxy Statement, and the
Form S-4
and Joint Proxy Statement shall include all information
reasonably requested by such other party to be included therein.
Each of Valeant and Biovail shall promptly notify the other upon
the receipt of any comments from the SEC or the Canadian
Securities Authorities or any request from the SEC or the
Canadian Securities Authorities for amendments or supplements to
the
Form S-4
or Joint Proxy Statement and shall provide the other with copies
of all correspondence between it and its Representatives, on the
one hand, and the SEC or the Canadian Securities Authorities, on
the other hand. Each of Valeant and Biovail shall use its
reasonable best efforts to respond as promptly as practicable to
any comments from the SEC or the Canadian Securities Authorities
with respect to the
Form S-4
or Joint Proxy Statement. Notwithstanding the foregoing, prior
to filing the
Form S-4
(or any amendment or supplement thereto) or mailing the Joint
Proxy Statement (or any amendment or supplement thereto) or
responding to any comments of the SEC or the Canadian Securities
Authorities with respect thereto, each of Valeant and Biovail
(i) shall provide the other an opportunity to review and
comment on such document or response (including the proposed
final version of such document or response), (ii) shall
consider in good faith all comments reasonably proposed by the
other and (iii) shall not file or mail such document or
respond to the SEC or the Canadian Securities Authorities prior
to receiving the approval of the other, which approval shall not
be unreasonably withheld, conditioned or delayed. Each of
Valeant and Biovail shall advise the other, promptly after
receipt of notice thereof, of the time of effectiveness of the
Form S-4,
the issuance of any stop order relating thereto or the
suspension of the qualification of the Merger Consideration for
offering or sale in any jurisdiction, and each of Valeant and
Biovail shall use its reasonable best efforts to have any such
stop order or suspension lifted, reversed or otherwise
terminated. Each of Valeant and Biovail shall also take any
other action (other than qualifying to do business in any
jurisdiction in which it is not now so qualified) required to be
taken under the Securities Act, the Exchange Act, any applicable
foreign or state securities or “blue sky” laws and the
rules and regulations thereunder in connection with the Merger
and the issuance of the Merger Consideration.
(b) If prior to the Effective Time, any event occurs with
respect to Biovail or any Biovail Subsidiary, or any change
occurs with respect to other information supplied by Biovail for
inclusion in the Joint Proxy Statement or the
Form S-4,
which is required to be described in an amendment of, or a
supplement to, the Joint Proxy Statement or the
Form S-4,
Biovail shall promptly notify Valeant of such event, and Biovail
and Valeant shall cooperate in the prompt filing with the SEC
and the Canadian Securities Authorities of any necessary
amendment or supplement to the Joint Proxy Statement or the
Form S-4
and, as required by Law, in disseminating the information
contained in
A-43
such amendment or supplement to Biovail’s stockholders and
Valeant’s stockholders. Nothing in this
Section 6.01(b) shall limit the obligations of any party
under Section 6.01(a).
(c) If prior to the Effective Time, any event occurs with
respect to Valeant or any Valeant Subsidiary, or any change
occurs with respect to other information supplied by Valeant for
inclusion in the Joint Proxy Statement or the
Form S-4,
which is required to be described in an amendment of, or a
supplement to, the Joint Proxy Statement or the
Form S-4,
Valeant shall promptly notify Biovail of such event, and Valeant
and Biovail shall cooperate in the prompt filing with the SEC
and the Canadian Securities Authorities of any necessary
amendment or supplement to the Joint Proxy Statement or the
Form S-4
and, as required by Law, in disseminating the information
contained in such amendment or supplement to Biovail’s
stockholders and Valeant’s stockholders. Nothing in this
Section 6.01(c) shall limit the obligations of any party
under Section 6.01(a).
(d) Biovail shall, as soon as practicable following the
date of this Agreement, duly call, give notice of, convene and
hold the Biovail Stockholders Meeting for the sole purpose of
seeking the Biovail Stockholder Approval. Biovail shall use its
reasonable best efforts to (i) cause the Joint Proxy
Statement to be mailed to Biovail’s stockholders and to
hold the Biovail Stockholders Meeting as soon as practicable
after the
Form S-4
is declared effective under the Securities Act, in each case in
accordance with applicable Law, the Biovail Charter and the
Biovail Bylaws and (ii) solicit the Biovail Stockholder
Approval. Biovail shall, through the Biovail Board, recommend to
its stockholders that they give the Biovail Stockholder Approval
and shall include such recommendation in the Joint Proxy
Statement, except to the extent that the Biovail Board shall
have made a Biovail Adverse Recommendation Change as permitted
by Section 5.02(b). Except as expressly contemplated by the
foregoing sentence, Biovail agrees that its obligations pursuant
to this Section 6.01 shall not be affected by the
commencement, public proposal, public disclosure or
communication to Biovail of any Biovail Takeover Proposal, the
occurrence of a Biovail Intervening Event or by the making of
any Biovail Adverse Recommendation Change by the Biovail Board;
provided
,
however
, that if the public announcement
of a Biovail Adverse Recommendation Change or the delivery of a
Biovail Notice of Recommendation Change is less than ten
Business Days prior to the Biovail Stockholders Meeting, Biovail
shall be entitled to postpone the Biovail Stockholders Meeting
to a date not more than ten Business Days after such event.
(e) Valeant shall, as soon as practicable following the
date of this Agreement, duly call, give notice of, convene and
hold the Valeant Stockholders Meeting for the sole purpose of
seeking the Valeant Stockholder Approval. Valeant shall use its
reasonable best efforts to (i) cause the Joint Proxy
Statement to be mailed to Valeant’s stockholders and to
hold the Valeant Stockholders Meeting as soon as practicable
after the
Form S-4
is declared effective under the Securities Act, in each case in
accordance with applicable Law, the Valeant Charter and the
Valeant Bylaws, and (ii) solicit the Valeant Stockholder
Approval. Valeant shall, through the Valeant Board, recommend to
its stockholders that they give the Valeant Stockholder Approval
and shall include such recommendation in the Joint Proxy
Statement, except to the extent that the Valeant Board shall
have made a Valeant Adverse Recommendation Change as permitted
by Section 5.03(b). Except as expressly contemplated by the
foregoing sentence, Valeant agrees that its obligations pursuant
to this Section 6.01 shall not be affected by the
commencement, public proposal, public disclosure or
communication to Valeant of any Valeant Takeover Proposal, the
occurrence of a Valeant Intervening Event or by the making of
any Valeant Adverse Recommendation Change by the Valeant Board;
provided
,
however
, that if the public announcement
of a Valeant Adverse Recommendation Change or the delivery of a
Valeant Notice of Recommendation Change is less than ten
Business Days prior to the Valeant Stockholders Meeting, Valeant
shall be entitled to postpone the Valeant Stockholders Meeting
to a date not more than ten Business Days after such event.
(f) Each of Valeant and Biovail shall use commercially
reasonable efforts to hold the Valeant Stockholders Meeting and
the Biovail Stockholders Meeting, respectively, at the same time
and on the same date as the other party.
(g) Biovail shall take all action to ensure that all
Biovail Common Stock constituting the Merger Consideration and
all Biovail Common Stock issued upon the conversion of Valeant
Convertible Notes, the exercise of Valeant Warrants or Valeant
Stock Options or the vesting of Valeant Restricted Stock Units,
in each case, issued or distributed to Canadian residents, will
be free from restriction on the first trade of such Biovail
Common Stock by such resident.
A-44
Section 6.02.
Access
to Information; Confidentiality
.
Subject to
applicable Law, each of Biovail and Valeant shall, and shall
cause each of its respective Subsidiaries to, afford to the
other party and to the Representatives of such other party
reasonable access, upon reasonable advance notice, during the
period from the date of this Agreement to the earlier of the
Effective Time or termination of this Agreement pursuant to
Section 8.01, to all their respective properties, books,
contracts, commitments, personnel and records and, during such
period, each of Biovail and Valeant shall, and shall cause each
of its respective Subsidiaries to, make available promptly to
the other party (a) to the extent not publicly available, a
copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the
requirements of securities laws and (b) all other
information concerning its business, properties and personnel as
such other party may reasonably request;
provided
,
however
, that either party may withhold any document or
information that is subject to the terms of a confidentiality
agreement with a third party (
provided
that the
withholding party shall use its reasonable best efforts to
obtain the required consent of such third party to such access
or disclosure) or subject to any attorney-client privilege
(
provided
that the withholding party shall use its
reasonable best efforts to allow for such access or disclosure
(or as much of it as possible) in a manner that does not result
in a loss of attorney-client privilege). If any material is
withheld by such party pursuant to the proviso to the preceding
sentence, such party shall inform the other party as to the
general nature of what is being withheld. Without limiting the
generality of the foregoing, each of Valeant and Biovail shall,
within two Business Days of request by the other party therefor,
provide to such other party the information described in
Rule 14a-7(a)(2)(ii)
under the Exchange Act and any information to which a holder of
Valeant Common Stock would be entitled under Section 220 of
the DGCL (assuming such holder met the requirements of such
section). All information exchanged pursuant to this
Section 6.02 shall be subject to the confidentiality
agreement dated September 28, 2009, as amended on
February 18, 2010, between Biovail and Valeant
Pharmaceuticals North America (the “
Confidentiality
Agreement
”).
Section 6.03.
Required
Actions
.
(a) Subject to the terms and
conditions of this Agreement, each of the parties shall use
their respective reasonable best efforts to take, or cause to be
taken, all actions, and do, or cause to be done, and assist and
cooperate with the other parties in doing, all things reasonably
appropriate to consummate and make effective, as soon as
reasonably possible, the Merger and the other transactions
contemplated by this Agreement.
(b) In connection with and without limiting
Section 6.03(a), Valeant and the Valeant Board and Biovail
and the Biovail Board, as the case may be, shall use their
respective reasonable best efforts to (x) take all action
reasonably appropriate to ensure that no takeover statute or
similar statute or regulation is or becomes applicable to this
Agreement or any transaction contemplated by this Agreement and
(y) if any takeover statute or similar statute or
regulation becomes applicable to this Agreement or any
transaction contemplated by this Agreement, take all action
reasonably appropriate to ensure that the Merger and the other
transactions contemplated by this Agreement may be consummated
as promptly as practicable on the terms contemplated by this
Agreement.
(c) In connection with and without limiting
Section 6.03(a), promptly following the execution and
delivery by the parties of this Agreement, Valeant and Biovail
shall use their respective reasonable best efforts to enter into
discussions with the Governmental Entities from whom Consents or
nonactions are required to be obtained in connection with the
consummation of the Merger and the other transactions
contemplated by this Agreement in order to obtain all such
required Consents or nonactions from such Governmental Entities,
in each case with respect to the Merger, so as to enable the
Closing to occur as soon as reasonably possible. To the extent
necessary in order to accomplish the foregoing and subject to
the limitations set forth in Section 6.03(e), Valeant and
Biovail shall use their respective reasonable best efforts to
jointly propose, negotiate, commit to and effect, by consent
decree, hold separate order or otherwise, the sale, divestiture
or disposition of, or prohibition or limitation on the ownership
or operation by Valeant, Biovail or any of their respective
Subsidiaries of, any portion of the business, properties or
assets of Valeant, Biovail or any of their respective
Subsidiaries;
provided
,
however
, that neither
Biovail nor Valeant shall be required pursuant to this
Section 6.03(c) to propose, commit to or effect any action
that is not conditioned upon the consummation of the Merger or
that would reasonably be expected (after giving effect to any
reasonably expected proceeds of any divestiture or sale of
assets) to have a Combined Company Material Adverse Effect.
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(d) In connection with and without limiting the generality
of the foregoing, each of Biovail and Valeant shall:
(i) make or cause to be made, in consultation and
cooperation with the other and as promptly as practicable after
the date of this Agreement, (A) an appropriate filing of a
Notification and Report Form pursuant to the HSR Act relating to
the Merger, (B) if required, a notification pursuant to
Section 114(1) of the Competition Act and an application
for an advance ruling certificate pursuant to Section 102
of the Competition Act relating to Merger and (C) all other
necessary registrations, declarations, notices, applications and
filings relating to the Merger with other Governmental Entities
under any other antitrust, competition, foreign investment,
trade regulation or similar Laws;
(ii) use its reasonable best efforts to furnish to the
other all assistance, cooperation and information required for
any such registration, declaration, notice or filing and in
order to achieve the effects set forth in Section 6.03(c);
(iii) give the other reasonable prior notice of any such
registration, declaration, notice or filing and, to the extent
reasonably practicable, of any communication with any
Governmental Entity regarding the Merger (including with respect
to any of the actions referred to in Section 6.03(c) and in
this Section 6.03(d)), and permit the other to review and
discuss in advance, and consider in good faith the views of, and
secure the participation of, the other in connection with any
such registration, declaration, notice, filing or communication;
(iv) respond as promptly as practicable under the
circumstances to any inquiries received from any Governmental
Entity or any other authority enforcing applicable antitrust,
competition, foreign investment, trade regulation or similar
Laws for additional information or documentation in connection
with antitrust, competition, foreign investment, trade
regulation or similar matters (including a “second
request” under the HSR Act and a “Supplementary
Information Request” under the Competition Act), and not
extend any waiting period under the HSR Act or Competition Act
or enter into any agreement with such Governmental Entities or
other authorities not to consummate any of the transactions
contemplated by this Agreement, except with the prior written
consent of the other parties hereto, which consent shall not be
unreasonably withheld or delayed; and
(v) unless prohibited by applicable Law or by the
applicable Governmental Entity, (A) to the extent
reasonably practicable, not participate in or attend any
meeting, or engage in any substantive conversation with any
Governmental Entity in respect of the Merger (including with
respect to any of the actions referred to in
Section 6.03(c) and in this Section 6.03(d)) without
the other, (B) to the extent reasonably practicable, give
the other reasonable prior notice of any such meeting or
conversation, (C) in the event one party is prohibited by
applicable Law or by the applicable Governmental Entity from
participating in or attending any such meeting or engaging in
any such conversation, keep such party reasonably apprised with
respect thereto, (D) cooperate in the filing of any
substantive memoranda, white papers, filings, correspondence or
other written communications explaining or defending this
Agreement and the Merger, articulating any regulatory or
competitive argument or responding to requests or objections
made by any Governmental Entity and (E) furnish the other
party with copies of all correspondence, filings and
communications (and memoranda setting forth the substance
thereof) between it and its Affiliates and their respective
Representatives on the one hand, and any Governmental Entity or
members of any Governmental Entity’s staff, on the other
hand, with respect to this Agreement and the Merger.
(e) Notwithstanding anything else contained herein, the
provisions of this Section 6.03 shall not be construed to
(i) require Valeant or any Valeant Subsidiary or Biovail or
any Biovail Subsidiary or (ii) permit Valeant or any
Valeant Subsidiary without the prior written consent of Biovail,
or permit Biovail or any Biovail Subsidiary without the prior
written consent of Valeant, to undertake any efforts or to take
any action if the taking of such efforts or action would or
would reasonably be expected to result (after giving effect to
any reasonably expected proceeds of any divestiture or sale of
assets) in a Combined Company Material Adverse Effect.
(f) Notwithstanding anything else contained in this
Agreement, (i) neither Biovail nor any of its Affiliates or
any of their respective Representatives shall cooperate with any
third party in seeking regulatory clearance of any
A-46
Biovail Takeover Proposal and (ii) neither Valeant nor any
of its Affiliates or any of their respective Representatives
shall cooperate with any third party in seeking regulatory
clearance of any Valeant Takeover Proposal.
(g) Biovail shall give prompt notice to Valeant, and
Valeant shall give prompt notice to Biovail, of (i) any
representation or warranty made by it contained in this
Agreement that is qualified as to materiality or Biovail
Material Adverse Effect or Valeant Material Adverse Effect, as
applicable, becoming untrue or inaccurate in any respect or any
such representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect or
(ii) the failure by it to comply with or satisfy in any
material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement;
provided
,
however
, that no such notification shall
affect the representations, warranties, covenants or agreements
of the parties or the conditions to the obligations of the
parties under this Agreement.
Section
6.04.
Equity
Awards; Change in Control Provisions
.
(a)
Options
.
(i) Prior to the Pre-Merger Special Dividend Time, the
Valeant Board (or, if appropriate, any committee thereof) shall
adopt such resolutions or take such other actions (including
using reasonable efforts to obtain any required consents) to
adjust the terms of all outstanding Valeant Stock Options to
provide that, at the Pre-Merger Special Dividend Time and prior
to the Effective Time, each Valeant Stock Option outstanding
immediately prior to the Pre-Merger Special Dividend Time shall
be converted into an option to acquire, on the same terms and
conditions as were applicable under such Valeant Stock Option
immediately prior to the Pre-Merger Special Dividend Time, a
number of shares of Valeant Common Stock, rounded down to the
nearest whole share, determined by multiplying the number of
shares of Valeant Common Stock subject to such Valeant Stock
Option immediately prior to the Pre-Merger Special Dividend Time
by the Pre-Merger Special Dividend Adjustment Ratio, at a per
share exercise price, rounded up to the nearest whole cent,
determined by dividing the per share exercise price of such
Valeant Stock Option by the Pre-Merger Special Dividend
Adjustment Ratio;
provided
,
however
, that the
adjustments provided in this Section 6.04(a)(i) with
respect to any Valeant Stock Options, whether or not they are
“incentive stock options” as defined in
Section 422 of the Code, are intended to be effected in a
manner that is consistent with Section 424(a) of the Code
and Section 409A of the Code.
(ii) Prior to the Effective Time, the Valeant Board (or, if
appropriate, any committee thereof) shall adopt such resolutions
or take such other actions (including using reasonable efforts
to obtain any required consents) to adjust the terms of all
outstanding Valeant Stock Options to provide that, at the
Effective Time, each Valeant Stock Option outstanding
immediately prior to the Effective Time shall be converted into
an option to acquire, on the same terms and conditions as were
applicable under such Valeant Stock Option following the
Pre-Merger Special Dividend Time and immediately prior to the
Effective Time, a number of shares of Biovail Common Stock,
rounded down to the nearest whole share, determined by
multiplying the number of shares of Valeant Common Stock subject
to such Valeant Stock Option following the Pre-Merger Special
Dividend Time and immediately prior to the Effective Time by the
Equity Award Exchange Ratio, at a per share exercise price,
rounded up to the nearest whole cent, determined by dividing the
per share exercise price of such Valeant Stock Option by the
Equity Award Exchange Ratio;
provided
,
however
,
that the adjustments provided in this Section 6.04(a)(ii)
with respect to any Valeant Stock Options, whether or not they
are “incentive stock options” as defined in
Section 422 of the Code, are intended to be effected in a
manner that is consistent with Section 424(a) of the Code
and Section 409A of the Code.
(b)
Time-Based Restricted Stock Units
.
(i) Prior to the Pre-Merger Special Dividend Time, the
Valeant Board (or, if appropriate, any committee thereof) shall
adopt such resolutions or take such other actions (including
using reasonable efforts to obtain any required consents) to
adjust the terms of all outstanding Valeant Restricted Stock
Units that are scheduled to vest, or which have already become
vested, solely based on the passage of time (“
Valeant
Time-Based Restricted Stock Units
”) to provide that,
unless otherwise agreed to by the award holder:
(A) at the Pre-Merger Special Dividend Time and prior to
the Effective Time, except as provided in subparagraph
(B) below, each award of Valeant Time-Based Restricted
Stock Units outstanding immediately prior to the Pre-Merger
Special Dividend Time shall represent the right to receive, on
the same terms and conditions as were applicable under such
award immediately prior to the Pre-Merger Special Dividend Time,
a
A-47
number of shares of Valeant Common Stock, rounded down to the
nearest whole share, determined by multiplying the number of
shares of Valeant Common Stock subject to such award of Valeant
Time-Based Restricted Stock Units immediately prior to the
Pre-Merger Special Dividend Time by the Pre-Merger Special
Dividend Adjustment Ratio; and
(B) with respect to each award of Valeant Time-Based
Restricted Stock Units that, by its terms as in effect on the
date hereof, will vest (in whole or in part) as a result of the
Merger (each such award, a “
Single-Trigger
RSU
”), such Single-Trigger RSU shall vest as of the day
prior to the date on which occurs the Pre-Merger Special
Dividend Time to the extent provided under the terms of such
Single-Trigger RSU as in effect on the date hereof, as if such
day was the date on which the Effective Time occurs (the portion
so vested, an “
Accelerated RSU
”) and shall
represent, immediately after the Pre-Merger Special Dividend
Time and prior to the Effective Time, the right to receive,
(1) the same number of shares of Valeant Common Stock
underlying the Accelerated RSU (the “
Accelerated Valeant
RSU Shares
”) plus (2) an amount of cash equal to
the product of the Pre-Merger Special Dividend and the number of
Accelerated Valeant RSU Shares, which cash amount shall be paid
(net of applicable withholding) to or on behalf of the holder of
the Accelerated RSU on the date on which occurs the Pre-Merger
Special Dividend Time. Any portion of the Single-Trigger RSU
that does not become an Accelerated RSU (and any right to the
associated Pre-Merger Special Dividend) shall be forfeited for
no consideration at the Pre-Merger Dividend Time.
(ii) Prior to the Effective Time, the Valeant Board (or, if
appropriate, any committee thereof) shall adopt such resolutions
or take such other actions (including using reasonable efforts
to obtain any required consents) to adjust the terms of all
outstanding Valeant Time-Based Restricted Stock Units to provide
that, at the Effective Time each award of Valeant Time-Based
Restricted Stock Units outstanding immediately prior to the
Effective Time shall represent, immediately after the Effective
Time, the right to receive, on the same terms and conditions as
were applicable under such award following the Pre-Merger
Special Dividend Time and immediately prior to the Effective
Time, a number of shares of Biovail Common Stock, rounded down
to the nearest whole share, determined by multiplying the number
of shares of Valeant Common Stock subject to such award of
Valeant Time-Based Restricted Stock Units following the
Pre-Merger Special Dividend Time and immediately prior to the
Effective Time by the Equity Award Exchange Ratio. For the sake
of clarity, holders of Accelerated RSUs shall be entitled to
receive shares of Biovail Common Stock (net of applicable
withholding) in settlement of such Accelerated RSUs as soon as
practicable following the date on which the Effective Time
occurs.
(c)
Performance-Based Restricted Stock Units
.
(i) Prior to the Pre-Merger Special Dividend Time, the
Valeant Board (or, if appropriate, any committee thereof) shall
adopt such resolutions or take such other actions (including
using reasonable efforts to obtain any required consents) to
adjust the terms of all outstanding Valeant Restricted Stock
Units that are scheduled to vest based in whole or in part on
the achievement of performance criteria (“
Valeant
Performance-Based Restricted Stock Units
”) to provide
that, except as disclosed in Section 6.04(c) of the Valeant
Disclosure Letter or unless otherwise agreed to by the award
holder:
(A) all relevant performance periods applicable to the
Valeant Performance-Based Restricted Stock Units shall end on
the day immediately preceding the date on which occurs the
Pre-Merger Special Dividend Time, as if such day were the date
on which the Effective Time occurs, and, as of such day, the
number of shares of Valeant Common Stock underlying each award
of Valeant Performance-Based Restricted Stock Units shall be
adjusted to reflect performance through such day in accordance
with the terms of such Valeant Performance-Based Restricted
Stock Unit as in effect on the date hereof (the Valeant
Performance-Based Restricted Stock award, as so adjusted, being
referred to as the “
Valeant Adjusted PSU
”). Any
additional Valeant Performance-Based Restricted Stock Units
which could have been earned through performance but which are
not so earned (and any right to the associated Pre-Merger
Special Dividend) shall be forfeited for no consideration at the
Pre-Merger Special Dividend Time; and
(B) each Valeant Adjusted PSU outstanding immediately prior
to the Pre-Merger Special Dividend Time shall represent,
immediately after the Pre-Merger Special Dividend Time, the
right to receive, on the same terms and conditions as were
applicable to such Valeant Performance-Based Restricted Stock
Unit immediately prior to the Pre-Merger Special Dividend Time
(but determined as if the Effective Time had occurred),
A-48
(1) the same number of shares of Valeant Common Stock
underlying the Valeant Adjusted PSU (the “
Valeant
Adjusted PSU Shares
”), plus (2) an amount of cash
equal to the product of the Pre-Merger Special Dividend
multiplied by the number of Valeant Adjusted PSU Shares, which
cash amount shall be paid (net of any applicable withholdings)
to or on behalf of the holders of Valeant Adjusted PSUs on the
date on which occurs the Pre-Merger Special Dividend Time.
(ii) Prior to the Effective Time, the Valeant Board (or, if
appropriate, any committee thereof) shall adopt such resolutions
or take such other actions (including using reasonable efforts
to obtain any required consents) to adjust the terms of all
outstanding Valeant Adjusted PSUs to provide that, at the
Effective Time, each award of Valeant Adjusted PSUs outstanding
immediately prior to the Effective Time shall represent the
right to receive, as soon as practicable following the Effective
Time and net of applicable withholding, a number of shares of
Biovail Common Stock, rounded down to the nearest whole share,
determined by multiplying the number of Valeant Adjusted PSU
Shares subject to such award by the Equity Award Exchange Ratio.
(d) Prior to the Effective Time, the Valeant Board (or, if
appropriate, any committee thereof) shall adopt such resolutions
or take such other actions (including using reasonable efforts
to obtain any required consents) to effect the following,
without further action by any Person:
(i) after the date hereof, no future offering periods shall
be commenced under the Valeant ESPP. The current offering period
in effect on the date hereof under the Valeant ESPP will
continue in accordance with its terms, and options under the
current offering period will be exercisable at the normally
scheduled time under the Valeant ESPP in accordance with its
terms;
provided
,
however
, that in all events the
expiration of such offering period and the final exercise under
the Valeant ESPP shall occur prior to the Effective Time. The
Valeant ESPP shall terminate, effective immediately as of the
Effective Time;
(ii) ensure that, following the Effective Time, no holder
of a Valeant Stock Option or Valeant Restricted Stock Unit (or
former holder of a Valeant Stock Option or Valeant Restricted
Stock Unit or any current or former participant in the Valeant
Stock Plan, or in any other Valeant Benefit Plan or Valeant
Benefit Agreement), will have any right thereunder to acquire
any capital stock of Valeant or any Valeant Subsidiary or any
other equity interest therein; and
(iii) make such other changes to the Valeant Stock Plans as
it deems appropriate to give effect to the Merger.
(e) At the Effective Time, Biovail shall assume all the
obligations of Valeant under the Valeant Stock Plans, each
Valeant Stock Option and Valeant Restricted Stock Unit
outstanding at the Effective Time and the agreements evidencing
the grants thereof (the “
Valeant Stock Plan
Assumption
”). As soon as practicable after the
Effective Time, Biovail shall deliver to the holders of Valeant
Stock Options and Valeant Restricted Stock Units appropriate
notices setting forth such holders’ rights pursuant to the
respective Valeant Stock Plans, and the agreements evidencing
the grants of such Valeant Stock Options and Valeant Restricted
Stock Units shall continue in effect on the same terms and
conditions (subject to the adjustments required by this
Section 6.04 after giving effect to the Merger).
(f) Biovail shall take all corporate action necessary to
reserve for issuance a sufficient number of shares of Biovail
Common Stock for delivery upon exercise or settlement of the
Valeant Stock Options and Valeant Restricted Stock Units assumed
in accordance with this Section 6.04. As soon as reasonably
practicable after the Effective Time, Biovail shall file a
registration statement on
Form S-8
(or any successor or other appropriate form) with respect to the
shares of Biovail Common Stock subject to Valeant Stock Options
and Valeant Restricted Stock Units and shall use its reasonable
best efforts to maintain the effectiveness of such registration
statement or registration statements (and maintain the current
status of the prospectus or prospectuses contained therein) for
so long as such Valeant Stock Options and Valeant Restricted
Stock Units remain outstanding.
(g) Prior to the Effective Time, each of the Biovail Board
and the Valeant Board shall irrevocably declare that the
transactions contemplated by this Agreement constitute a change
in control (or the equivalent thereof) under the Biovail Benefit
Plans (and awards thereunder), the Biovail Benefit Agreements,
the Valeant Benefit Plans (and awards thereunder) and the
Valeant Benefit Agreements, as the case may be.
A-49
Section
6.05.
Indemnification,
Exculpation and Insurance
.
(a) For a
period of six years from the Effective Time, Biovail shall
maintain in effect the exculpation, indemnification and
advancement of expenses provisions of any certificate of
incorporation and by-laws or similar organization documents of
each of Biovail, the Biovail Subsidiaries, Valeant and the
Valeant Subsidiaries in effect immediately prior to the
Effective Time and with respect to acts or omissions prior to
the Effective Time or in any indemnification agreements of
Biovail, the Biovail Subsidiaries, Valeant or the Valeant
Subsidiaries with any of their respective directors, officers or
employees in effect immediately prior to the Effective Time and
with respect to acts or omissions prior to the Effective Time,
and shall not amend, repeal or otherwise modify any such
provisions or the exculpation, indemnification or advancement of
expenses provisions of Biovail’s or the Surviving
Company’s certificate of incorporation and by-laws in any
manner that would adversely affect the rights thereunder of any
individuals who at the Effective Time were current or former
directors, officers or employees of Biovail, any of the Biovail
Subsidiaries, Valeant or any of the Valeant Subsidiaries.
(b) For a period of six years after the Effective Time,
Biovail shall indemnify and hold harmless the individuals who on
or prior to the Effective Time were officers, directors and
employees of Biovail or the Biovail Subsidiaries or were serving
at the request of Biovail as an officer, director or employee of
any other corporation, partnership or joint venture, trust,
employee benefit plan or other enterprise (collectively, the
“
Biovail Indemnitees
”) with respect to all acts
or omissions by them in their capacities as such or taken at the
request of Biovail or any of the Biovail Subsidiaries at any
time prior to the Effective Time to the extent provided under
the Biovail Charter or Biovail Bylaws in effect on the date of
this Agreement (including with respect to the advancement of
expenses).
(c) For a period of six years after the Effective Time,
Biovail shall, and shall cause the Surviving Company to,
indemnify and hold harmless the individuals who on or prior to
the Effective Time were officers, directors and employees of
Valeant or the Valeant Subsidiaries or were serving at the
request of Valeant as an officer, director or employee of any
other corporation, partnership or joint venture, trust, employee
benefit plan or other enterprise (collectively, the
“
Valeant Indemnitees
” and, together with the
Biovail Indemnitees, the “
Indemnitees
”) with
respect to all acts or omissions by them in their capacities as
such or taken at the request of Valeant or any of the Valeant
Subsidiaries at any time prior to the Effective Time to the
extent provided under the Valeant Charter or Valeant Bylaws in
effect on the date of this Agreement (including with respect to
the advancement of expenses). Biovail shall, and shall cause the
Surviving Company to, honor all indemnification agreements with
the Indemnitees (including under the Valeant Bylaws) in effect
as of the date of this Agreement in accordance with the terms
thereof.
(d) For six years after the Effective Time, Biovail shall
procure the provision of officers’ and directors’
liability insurance in respect of acts or omissions occurring
prior to the Effective Time covering each such Person currently
covered by Biovail’s officers’ and directors’
liability insurance policy on terms with respect to coverage and
in amounts no less than those of the policy in effect on the
date of this Agreement. In lieu of such insurance, prior to the
Closing Date, Biovail may, following consultation with Valeant,
purchase a “tail” directors’ and officers’
liability insurance policy and fiduciary liability insurance
policy for Biovail and its respective current and former
directors and officers who are currently covered by the
directors’ and officers’ and fiduciary liability
insurance coverage currently maintained by Biovail, in which
event Biovail shall cease to have any obligations under the
first sentence of this Section 6.05(d).
(e) For six years after the Effective Time, Biovail shall
procure the provision of officers’ and directors’
liability insurance in respect of acts or omissions occurring
prior to the Effective Time covering each such Person currently
covered by Valeant’s officers’ and directors’
liability insurance policy on terms with respect to coverage and
in amounts no less than those of the policy in effect on the
date of this Agreement. In lieu of such insurance, prior to the
Closing Date, Valeant may, following consultation with Biovail,
purchase a “tail” directors’ and officers’
liability insurance policy and fiduciary liability insurance
policy for Valeant and its respective current and former
directors and officers who are currently covered by the
directors’ and officers’ and fiduciary liability
insurance coverage currently maintained by Valeant, in which
event Biovail or the Surviving Company, as the case may be,
shall cease to have any obligations under the first sentence of
this Section 6.05(e).
(f) In the event that Biovail or the Surviving Company or
any of its successors or assigns (i) consolidates with or
merges into any other Person and is not the continuing or
surviving corporation or entity of such consolidation or
A-50
merger or (ii) transfers or conveys all or substantially
all its properties and assets to any Person, then, and in each
such case, Biovail shall cause proper provision to be made so
that the successors and assigns of Biovail or the Surviving
Company, as the case may be, assume the obligations set forth in
this Section 6.05.
(g) The provisions of this Section 6.05 (i) shall
survive consummation of the Merger, (ii) are intended to be
for the benefit of, and will be enforceable by, each Indemnitee,
his or her heirs and his or her representatives and
(iii) are in addition to, and not in substitution for, any
other rights to indemnification or contribution that any such
Person may have by contract or otherwise. Biovail shall pay all
reasonable expenses, including reasonable attorneys’ fees,
that may be incurred by any Indemnitee in enforcing the
indemnity and other obligations provided in this
Section 6.05, provided that such Indemnitee is successful
in enforcing any such enforcement claim.
Section
6.06.
Fees
and Expenses
.
(a) Except as provided
below, all fees and expenses incurred in connection with the
Merger and the other transactions contemplated by this Agreement
shall be paid by the party incurring such fees or expenses,
whether or not such transactions are consummated.
(b) BAC shall pay (
provided
that if BAC fails to pay
when due, Biovail will pay when due on behalf of BAC) to Valeant
a fee of $100,000,000 (the “
Biovail Termination
Fee
”) if:
(i) Valeant terminates this Agreement pursuant to
Section 8.01(e);
provided
that if either Valeant or
Biovail terminates this Agreement pursuant to Section
8.01(b)(iii) at any time after Valeant would have been permitted
to terminate this Agreement pursuant to Section 8.01(e),
this Agreement shall be deemed terminated pursuant to
Section 8.01(e) for purposes of this
Section 6.06(b)(i); or
(ii) (A) prior to the Biovail Stockholders Meeting, a
Biovail Takeover Proposal shall have been made to Biovail or
shall have been made directly to the stockholders of Biovail
generally or shall otherwise become publicly known or any Person
shall have publicly announced an intention (whether or not
conditional) to make a Biovail Takeover Proposal, (B) this
Agreement is terminated by Biovail pursuant to
(1) Section 8.01(b)(i) and the Biovail Stockholders
Meeting has not been held on or prior to the fifth Business Day
prior to the date of such termination or
(2) Section 8.01(b)(iii) and (C) within
12 months of such termination, Biovail enters into a
definitive Contract to consummate a Biovail Takeover Proposal or
any Biovail Takeover Proposal is consummated. For the purposes
of Section 6.06(b)(ii)(C) only, the term “Biovail
Takeover Proposal” shall have the meaning assigned to such
term in Section 5.02(e) except that all references to
“20%” therein shall be deemed to be references to
“40%”.
Any Biovail Termination Fee due under this Section 6.06(b)
shall be paid by wire transfer of
same-day
funds (x) in the case of clause (i) above, on the
Business Day immediately following the date of termination of
this Agreement and (y) in the case of clause (ii)
above, on the date of the first to occur of the events referred
to in clause (ii)(C) above.
(c) Valeant shall pay to Biovail a fee of $100,000,000 (the
“
Valeant Termination Fee
”) if:
(i) Biovail terminates this Agreement pursuant to
Section 8.01(f);
provided
that if either Valeant or
Biovail terminates this Agreement pursuant to
Section 8.01(b)(iv) at any time after Biovail would have
been permitted to terminate this Agreement pursuant to
Section 8.01(f), this Agreement shall be deemed terminated
pursuant to Section 8.01(f) for purposes of this
Section 6.06(c)(i); or
(ii) (A) prior to the Valeant Stockholders Meeting, a
Valeant Takeover Proposal shall have been made to Valeant or
shall have been made directly to the stockholders of Valeant
generally or shall otherwise become publicly known or any Person
shall have publicly announced an intention (whether or not
conditional) to make a Valeant Takeover Proposal, (B) this
Agreement is terminated pursuant to
(1) Section 8.01(b)(i) and the Valeant Stockholders
Meeting has not been held at or prior to the fifth Business Day
prior to the date of such termination or
(2) Section 8.01(b)(iv) and (C) within
12 months of such termination, Valeant enters into a
definitive Contract to consummate a Valeant Takeover Proposal or
a Valeant Takeover Proposal is consummated. For the purposes of
Section 6.06(c)(ii)(C) only, the term “Valeant Takeover
Proposal” shall have the meaning assigned to such term in
Section 5.03(e) except that all references to
“20%” therein shall be deemed to be references to
“40%”.
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Any Valeant Termination Fee due under this Section 6.06(c)
shall be paid by wire transfer of
same-day
funds (x) in the case of clause (i) above, on the
Business Day immediately following the date of termination of
this Agreement and (y) in the case of clause (ii)
above, on the date of the first to occur of the events referred
to in clause (ii)(C) above.
(d) Biovail and Valeant acknowledge and agree that the
agreements contained in Sections 6.06(b) and 6.06(c) are an
integral part of the transactions contemplated by this
Agreement, and that, without these agreements, neither Valeant
nor Biovail would enter into this Agreement. Accordingly, if
Biovail fails promptly to pay the amount due pursuant to
Section 6.06(b) or Valeant fails promptly to pay the amount
due pursuant to Section 6.06(c), and, in order to obtain
such payment, the Person owed such payment commences a suit,
action or other proceeding that results in a Judgment in its
favor for such payment, the Person owing such payment shall pay
to the Person owed such payment its costs and expenses
(including attorneys’ fees and expenses) in connection with
such suit, action or other proceeding, together with interest on
the amount of such payment from the date such payment was
required to be made until the date of payment at the prime rate
of JPMorgan Chase Bank, N.A. in effect on the date such payment
was required to be made. In no event shall either party be
obligated to pay more than one termination fee pursuant to this
Section 6.06.
Section
6.07.
Certain
Tax Matters
.
Each of Valeant, Biovail, BAC
and Merger Sub shall use its reasonable best efforts to cause
the Merger to qualify for the Intended Tax Treatment and to
obtain the Tax opinions described in Sections 7.02(d) and
7.03(d), including by (i) making representations and
covenants requested by Tax counsel in order to render such Tax
opinions, (ii) not taking any action that such party knows
is reasonably likely to prevent such qualification or to prevent
the obtaining of such Tax opinions and (iii) executing such
amendments to this Agreement as may be reasonably required in
order to obtain such qualification (it being understood that no
party will be required to agree to any such amendment). Each of
Valeant, Biovail, BAC and Merger Sub shall use its reasonable
best efforts not to take or cause to be taken any action that
would cause to be untrue (or fail to take or cause not to be
taken any action which inaction would cause to be untrue) any of
the representations and covenants made to Tax counsel in
furtherance of such Tax opinions. Each of Valeant, Biovail, BAC
and Merger Sub will report the Merger and the other transactions
contemplated by this Agreement in a manner consistent with the
Intended Tax Treatment.
Section
6.08.
Transaction
Litigation
.
Biovail shall give Valeant the
opportunity to participate in the defense or settlement of any
litigation against Biovail or its directors relating to the
Merger and the other transactions contemplated by this
Agreement, and no such settlement shall be agreed to without the
prior written consent of Valeant, which consent shall not be
unreasonably withheld, conditioned or delayed. Valeant shall
give Biovail the opportunity to participate in the defense or
settlement of any stockholder litigation against Valeant or its
directors relating to the Merger and the other transactions
contemplated by this Agreement, and no such settlement shall be
agreed to without the prior written consent of Biovail, which
consent shall not be unreasonably withheld, conditioned or
delayed. Without limiting in any way the parties’
obligations under Section 6.03, each of Biovail and Valeant
shall cooperate, shall cause the Biovail Subsidiaries and
Valeant Subsidiaries, as applicable, to cooperate, and shall use
its reasonable best efforts to cause its Representatives to
cooperate, in the defense against such litigation.
Section
6.09.
Section 16
Matters
.
Prior to the Effective Time,
Valeant, Biovail and Merger Sub each shall take all such steps
as may be required to cause (a) any dispositions of Valeant
Common Stock (including derivative securities with respect to
Valeant Common Stock) resulting from the Merger and the other
transactions contemplated by this Agreement by each individual
who will be subject to the reporting requirements of
Section 16(a) of the Exchange Act with respect to Valeant
immediately prior to the Effective Time to be exempt under
Rule 16b-3
promulgated under the Exchange Act and (b) any acquisitions
of Biovail Common Stock (including derivative securities with
respect to Biovail Common Stock) resulting from the Merger and
the other transactions contemplated by this Agreement by each
individual who may become or is reasonably expected to become
subject to the reporting requirements of Section 16(a) of
the Exchange Act with respect to Biovail to be exempt under
Rule 16b-3
promulgated under the Exchange Act.
Section
6.10.
Governance
Matters
.
Biovail, Merger Sub and Valeant
shall take all actions necessary so that the matters set forth
on
Exhibit A
occur on the Closing Date.
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Section
6.11.
Financing
.
(a) From
the date hereof until the earlier of (a) the Closing Date
and (b) termination of this Agreement pursuant to
Section 8.01, Biovail and Valeant shall use, and shall
cause the Biovail Subsidiaries and Valeant Subsidiaries,
respectively, to use, their respective reasonable best efforts
to take, or cause to be taken, all actions and to do, or cause
to be done, all things necessary, proper or advisable to arrange
the financing and related transactions (including the payment,
refinancing and tendering of existing indebtedness) (the
‘‘
Financing
”) described in the executed
commitment letter attached hereto as
Exhibit C
(the
“
Commitment Letter
”), including using
reasonable best efforts to (i) negotiate and enter into
definitive agreements with respect thereto on the terms and
conditions contemplated by the Commitment Letter,
(ii) satisfy on a timely basis all conditions to obtaining
the Financing set forth therein and (iii) consummate the
Financing at or prior to Closing, including
(A) participating in a reasonable number of meetings, road
shows, rating agency sessions and drafting sessions, and
participating in reasonable and customary due diligence,
(B) furnishing the financial institutions providing or
arranging the Financing (the “
Financing
Sources
”) with such financial and other pertinent
information as may be reasonably requested to consummate the
Financing, including all financial statements and financial data
of the type required by
Regulation S-X
and
Regulation S-K
under the Securities Act (including any required audits thereof,
which shall be unqualified) and of the type and form customarily
included in private placements pursuant to Rule 144A
promulgated under the Securities Act, (C) assisting the
Financing Sources in the preparation of (1) an offering
document for any portion of the Financing and (2) materials
for rating agency presentations, (D) reasonably cooperating
with the marketing efforts for any portion of the Financing and
(E) causing their respective independent accountants to
provide assistance and cooperation in the Financing, including
(1) participating in a reasonable number of drafting
sessions and accounting due diligence sessions,
(2) providing any necessary consents to use their audit
reports relating to Biovail or Valeant, as applicable, and
(3) providing any necessary “comfort letters.”
Biovail and Valeant shall, and shall cause their respective
Subsidiaries to, refrain from taking, directly or indirectly,
any action that would reasonably be expected to result in the
failure of any of the conditions contained in the Commitment
Letter or in any definitive agreement related to the Financing.
In the event any portion of the Financing becomes unavailable on
the terms and conditions set forth in the Commitment Letter,
Biovail and Valeant shall use their reasonable best efforts to
obtain alternative financing from alternative sources as
promptly as reasonably practicable following the occurrence of
such event. Biovail shall give Valeant prompt notice of any
material breach by any party to the Commitment Letter of which
Biovail becomes aware. Valeant shall give Biovail prompt notice
of any material breach by any party to the Commitment Letter of
which Valeant becomes aware.
(b) All non-public or otherwise confidential information
regarding Valeant obtained by Biovail pursuant to the
arrangement of the Financing shall be kept confidential in
accordance with the Confidentiality Agreement;
provided
,
however
, that disclosure shall be permitted as necessary
and consistent with customary practices in connection with the
Financing upon the prior written consent of Valeant (such
consent not to be unreasonably withheld, conditioned or
delayed). All non-public or otherwise confidential information
regarding Biovail obtained by Valeant pursuant to the
arrangement of the Financing shall be kept confidential in
accordance with the Confidentiality Agreement;
provided
,
however
, that disclosure shall be permitted as necessary
and consistent with customary practices in connection with the
Financing upon the prior written consent of Biovail (such
consent not to be unreasonably withheld, conditioned or delayed).
Section
6.12.
Public
Announcements
.
Except with respect to any
Valeant Adverse Recommendation Change or Biovail Adverse
Recommendation Change made in accordance with the terms of this
Agreement, Biovail and Valeant shall consult with each other
before issuing, and give each other the opportunity to review
and comment upon, any press release or other public statements
with respect to the transactions contemplated by this Agreement,
including the Merger, and shall not issue any such press release
or make any such public statement prior to such consultation,
except as such party may reasonably conclude may be required by
applicable Law, court process or by obligations pursuant to any
listing agreement with any national securities exchange or
national securities quotation system. Valeant and Biovail agree
that the initial press release to be issued with respect to the
transactions contemplated by this Agreement shall be in a form
agreed to by the parties.
Section
6.13.
Stock
Exchange Listing
.
Biovail shall use its
reasonable best efforts to cause the shares of Biovail Common
Stock to be issued (a) in the Merger and (b) upon the
conversion of Valeant Convertible Notes, the exercise of Valeant
Warrants or Valeant Stock Options or the vesting of Valeant
Restricted Stock Units, in each case under this clause (b)
following the Effective Time, to be approved for listing on the
NYSE and the TSX, in each case
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subject to official notice of issuance, prior to the Closing
Date. Valeant shall cooperate with Biovail in connection with
the foregoing, including the provision of information reasonably
requested by Biovail in connection therewith.
Section
6.14.
Joinder
Agreement
.
In the event that Biovail and
Valeant agree in writing that a newly-formed, direct or indirect
and wholly owned subsidiary of Biovail incorporated under the
laws of Delaware (“
New Merger Sub
”) shall be
substituted for Merger Sub for purposes of this Agreement,
(i) Biovail and Valeant shall, and Biovail shall cause New
Merger Sub to, execute and deliver a joinder agreement with
respect to this Agreement, substantially in the form set forth
on
Exhibit C
(the “
Joinder
Agreement
”), (ii) Biovail, as sole stockholder of
New Merger Sub, shall, immediately following the execution and
delivery of the Joinder Agreement, adopt the Joinder Agreement,
and (iii) all references to “Merger Sub” in this
Agreement shall be deemed to refer to “New Merger Sub”.
Section
6.15.
Entity
Name
.
The parties shall take all action
necessary so that the name of the Combined Company shall be
Valeant Pharmaceuticals International, Inc. on the Closing Date.
Section
6.16.
Valeant
Warrants and Valeant Convertible Notes
.
(a) As and when required by the Valeant Warrants as in
effect on the date of this Agreement, and only to the extent any
such Valeant Warrants remain outstanding at such time,
(i) Valeant shall deliver notice of the proposed record
date for the Pre-Merger Special Dividend to the registered
holders of any then-outstanding Valeant Warrants, and
(ii) Valeant shall furnish to the registered holders of any
then-outstanding Valeant Warrants the certificate required by
the Valeant Warrants as in effect on the date of this Agreement
setting forth the adjustment of the Purchase Price (as defined
in the Valeant Warrants) resulting from payment of the
Pre-Merger Special Dividend and showing the facts upon which
such adjustment is based.
(b) As and when required by the Valeant Convertible Notes
Indenture, as in effect on the date of this Agreement,
(i) Valeant shall mail notice of the proposed record date
for the Pre-Merger Special Dividend to the Initial Purchasers
(as defined in the Valeant Convertible Notes Indenture) and to
the Holders (as defined in the Valeant Convertible Notes
Indenture) of any then-outstanding Valeant Convertible Notes and
shall file such notice with the Trustee (as defined in the
Valeant Convertible Notes Indenture), and (ii) Valeant
shall notify the Initial Purchasers and the Trustee and mail to
Holders of any then-outstanding Valeant Convertible Notes the
notice required by the Valeant Convertible Notes Indenture as in
effect on the date of this Agreement of the adjustment of the
Conversion Rate (as defined in the Valeant Convertible Notes
Indenture) resulting from payment of the Pre-Merger Special
Dividend and file with the Trustee the required certificate
stating the facts requiring such adjustment and the manner of
computing it.
(c) As and when required by the Valeant Warrants as in
effect on the date of this Agreement, and only to the extent any
such Valeant Warrants remain outstanding at such time,
(i) Valeant shall deliver notice of the proposed record
date for approval of the Merger to the registered holders of any
then-outstanding Valeant Warrants, and (ii) Valeant shall
furnish to the registered holders of any then-outstanding
Valeant Warrants the certificate required by the Valeant
Warrants as in effect on the date of this Agreement setting
forth the adjustment to the Valeant Warrants resulting from the
Merger and showing the facts upon which such adjustment is based.
(d) As and when required by the Valeant Convertible Notes
Indenture as in effect on the date of this Agreement,
(i) Valeant shall mail notice of the proposed record date
for approval of the Merger to the Initial Purchasers and to the
Holders of any then-outstanding Valeant Convertible Notes and
shall file such notice with the Trustee, and (ii) prior to
the Effective Time, Biovail and Valeant shall execute and
deliver to the Trustee a supplemental indenture to the Valeant
Convertible Notes Indenture containing the provisions required
by the Valeant Convertible Notes Indenture as in effect on the
date of this Agreement, providing that, at the Effective Time,
each then-outstanding Valeant Convertible Note shall no longer
be convertible into shares of Valeant Common Stock and shall
thereafter be convertible solely into the number of shares of
Biovail Common Stock that the Holder of such Valeant Convertible
Note would have received pursuant to the Merger if such Holder
had converted such Valeant Convertible Note immediately before
the Effective Time.
Section
6.17.
Pre-Merger
Special Dividend
.
As promptly as practicable
following the satisfaction of the conditions set forth in
Section 7.01, Section 7.02 and Section 7.03
(other than (a) those conditions that by their nature are
to be satisfied by actions taken at the Closing but which
conditions would be satisfied (including the delivery of
officers’ certificates without qualifications or
exceptions) if such date were the Closing Date and (b) the
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contemplated payment of the Pre-Merger Special Dividend), the
Valeant Board intends to, subject to applicable Law and the
Valeant Charter and Valeant Bylaws, declare a special dividend
in an amount equal to $16.77 per share of Valeant Common Stock
(subject to customary adjustments for any stock dividend,
subdivision, reclassification, recapitalization, split,
combination, exchange of shares or similar event following the
date of this Agreement) (any such dividend, the
‘‘
Pre-Merger Special Dividend
”), and set
the record date and payment date for such Pre-Merger Special
Dividend in its sole discretion;
provided
, that each of
the record date and payment date for such Pre-Merger Special
Dividend shall be one Business Day immediately prior to the
Closing Date.
ARTICLE VII
Conditions
Precedent
Section
7.01.
Conditions
to Each Party’s Obligation to Effect the
Merger
.
The respective obligation of each
party to effect the Merger is subject to the satisfaction or
waiver on or prior to the Closing Date of the following
conditions:
(a)
Stockholder Approvals
.
The
Biovail Stockholder Approval and the Valeant Stockholder
Approval shall have been obtained.
(b)
Listing
.
The shares of Biovail
Common Stock issuable (i) as Merger Consideration pursuant
to this Agreement and (ii) upon the conversion of Valeant
Convertible Notes, the exercise of Valeant Warrants or Valeant
Stock Options or the vesting of Valeant Restricted Stock Units,
in each case under this clause (ii) following the Effective
Time, shall have been approved for listing on the NYSE and the
TSX, in each case subject to official notice of issuance and, in
the case of the TSX, to the making of certain prescribed filings
following the Effective Time.
(c)
Governmental Approvals
.
Any
waiting period (and any extension thereof) applicable to the
Merger under the HSR Act shall have been terminated or shall
have expired. If the Merger is subject to the notification
provisions of Part IX of the Competition Act, either
(i) the Commissioner of Competition or a person authorized
by her (the “
Commissioner
”) shall have issued
an advance ruling certificate under Section 102 of the
Competition Act or (ii) the applicable waiting period under
subsection 123(1) of the Competition Act shall have expired or
shall have been terminated early under subsection 123(2) of the
Competition Act, or the obligation to submit a notification
under Part IX of the Competition Act shall have been waived
pursuant to paragraph 113(c) of the Competition Act and,
unless waived by Biovail, the Commissioner shall have issued a
No-Action Letter. For the purposes of the preceding sentence, a
“
No-Action Letter
” means written advice to
Biovail that the Commissioner presently does not have sufficient
grounds on which to apply to the Competition Tribunal under
Section 92 or any other section of Part VIII of the
Competition Act and, therefore, does not, at such time, intend
to make such application with respect to the Merger, such advice
not being conditional upon or having terms and conditions that
would reasonably be expected to result in a Combined Company
Material Adverse Effect. All Consents, if any, required to be
obtained (i) under any other foreign antitrust,
competition, foreign investment, trade regulation or similar
Laws or (ii) from or of any other Governmental Entity, in
each case in connection with the consummation of the Merger and
the transactions contemplated by this Agreement, shall have been
obtained, except for those Consents which are immaterial to the
Combined Company .
(d)
No Legal Restraints
.
No
applicable Law and no Judgment, preliminary, temporary or
permanent, issued by any court or tribunal of competent
jurisdiction (collectively, the ‘‘
Legal
Restraints
”) shall be in effect, and no suit, action or
other proceeding shall have been instituted by any Governmental
Entity and remain pending which is reasonably likely to result
in a Legal Restraint, in each case, that prevents, makes
illegal, or prohibits the consummation of the Merger or that is
(i) seeking to prohibit, materially restrain or otherwise
materially interfere with the Merger or the ownership or
operation of all or any material portion of the business or
assets of Valeant or any of the Valeant Subsidiaries or of
Biovail or any of the Biovail Subsidiaries or to compel Biovail
or any Biovail Subsidiary to dispose of or hold separate all or
any material portion of the business or assets of Valeant or any
of the Valeant Subsidiaries or of Biovail or any of the Biovail
Subsidiaries, or (ii) seeking divestiture of any shares of
Valeant Common Stock (or shares of stock of the Surviving
Company) or seeking to impose or confirm limitations on the
ability of Biovail or any Biovail
A-55
Subsidiary effectively to exercise full rights of ownership of
the shares of Valeant Common Stock (or shares of stock of the
Surviving Company), including the right to vote, in the case of
clause (i) or clause (ii), which would reasonably be
expected (after giving effect to any reasonably expected
proceeds of any divestiture or sale of assets) to have a
Combined Company Material Adverse Effect.
(e)
Form S-4
.
The
Form S-4
shall have become effective under the Securities Act and shall
not be the subject of any stop order or proceedings seeking a
stop order, and Biovail shall have received all state securities
or “blue sky” authorizations necessary for the
issuance of the Merger Consideration.
(f)
Financing
.
The Financing (or,
in the event that alternative financing has been jointly
arranged by Biovail and Valeant, the alternative financing)
shall have been consummated.
(g)
Pre-Merger Special
Dividend
.
The Pre-Merger Special Dividend
shall have been paid to holders of Valeant Common Stock in
accordance with Section 6.17. For purposes of this
Section 7.01(g), the Pre-Merger Special Dividend shall be
deemed to have been paid to holders of Valeant Common Stock at
the time Valeant irrevocably transfers cash for the Pre-Merger
Special Dividend to the relevant paying agent for the benefit of
such stockholders.
Section
7.02.
Conditions
to Obligations of Valeant
.
The obligation of
Valeant to consummate the Merger is further subject to the
following conditions:
(a)
Representations and
Warranties
.
The representations and
warranties of Biovail, BAC and Merger Sub contained in this
Agreement (except for the representations and warranties
contained in Section 3.03 and 3.17(c)) shall be true and
correct (without giving effect to any limitation as to
“materiality” or “Biovail Material Adverse
Effect” set forth therein) at and as of the date of this
Agreement and at and as of the Closing Date as if made at and as
of such time (except to the extent expressly made as of an
earlier date, in which case as of such earlier date), except
where the failure of such representations and warranties to be
true and correct (without giving effect to any limitation as to
“materiality” or “Biovail Material Adverse
Effect” set forth therein), individually or in the
aggregate, has not had and would not reasonably be expected to
have a Biovail Material Adverse Effect, and the representations
and warranties of Biovail, BAC and Merger Sub contained in
Section 3.03 and Section 3.17(c) shall be true and
correct in all material respects at and as of the date of this
Agreement and at and as of the Closing Date as if made at and as
of such time (except to the extent expressly made as of an
earlier date, in which case as of such earlier date). Valeant
shall have received a certificate signed on behalf of each of
Biovail, BAC and Merger Sub by an executive officer of each of
Biovail, BAC and Merger Sub, respectively, to such effect.
(b)
Performance of Obligations of Biovail, BAC and
Merger Sub
.
Biovail and Merger Sub shall have
performed in all material respects all obligations required to
be performed by them under this Agreement at or prior to the
Closing Date, and Valeant shall have received a certificate
signed on behalf of each of Biovail, BAC and Merger Sub by an
executive officer of each of Biovail, BAC and Merger Sub,
respectively, to such effect.
(c)
Absence of Biovail Material Adverse
Effect
.
Since the date of this Agreement,
there shall not have occurred any fact, circumstance, effect,
change, event or development that, individually or in the
aggregate, has had or would reasonably be expected to have a
Biovail Material Adverse Effect.
(d)
Tax Opinion
.
Valeant shall
have received the opinion of Skadden, Arps, Slate,
Meagher & Flom LLP, or such other nationally
recognized Tax counsel reasonably satisfactory to Valeant, as of
the Closing Date to the effect that the Merger should qualify
for the Intended Tax Treatment. In rendering the opinion
described in this Section 7.02(d), the Tax counsel
rendering such opinion may require and rely upon (and may
incorporate by reference) reasonable and customary
representations and covenants, including those contained in
certificates of officers of Valeant and Biovail.
Section
7.03.
Conditions
to Obligation of Biovail, BAC and Merger
Sub
.
The obligations of Biovail, BAC and
Merger Sub to consummate the Merger are further subject to the
following conditions:
(a)
Representations and
Warranties
.
The representations and
warranties of Valeant contained in this Agreement (except for
the representations and warranties contained in
Section 4.03 and the third sentence of Section 4.12)
shall be true and correct (without giving effect to any
limitation as to “materiality” or “Valeant
A-56
Material Adverse Effect” set forth therein) at and as of
the date of this Agreement and at and as of the Closing Date as
if made at and as of such time (except to the extent expressly
made as of an earlier date, in which case as of such earlier
date), except where the failure of such representations and
warranties to be true and correct (without giving effect to any
limitation as to “materiality” or “Valeant
Material Adverse Effect” set forth therein), individually
or in the aggregate, has not had and would not reasonably be
expected to have a Valeant Material Adverse Effect, and the
representations and warranties of Valeant contained in
Sections 4.03 and the third sentence of Section 4.12
shall be true and correct in all material respects at and as of
the date of this Agreement and at and as of the Closing Date as
if made at and as of such time (except to the extent expressly
made as of an earlier date, in which case as of such earlier
date). Biovail shall have received a certificate signed on
behalf of Valeant by an executive officer of Valeant to such
effect.
(b)
Performance of Obligations of
Valeant
.
Valeant shall have performed in all
material respects all obligations required to be performed by it
under this Agreement at or prior to the Closing Date, and
Biovail shall have received a certificate signed on behalf of
Valeant by an executive officer of Valeant to such effect.
(c)
Absence of Valeant Material Adverse
Effect
.
Since the date of this Agreement,
there shall not have occurred any fact, circumstance, effect,
change, event or development that, individually or in the
aggregate, has had or would reasonably be expected to have a
Valeant Material Adverse Effect.
(d)
Tax Opinion
.
Biovail shall
have received the opinion of Cravath, Swaine & Moore
LLP, or such other nationally recognized Tax counsel reasonably
satisfactory to Biovail, as of the Closing Date to the effect
that the Merger should qualify for the Intended Tax Treatment.
In rendering the opinion described in this Section 7.03(d),
the Tax counsel rendering such opinion may require and rely upon
(and may incorporate by reference) reasonable and customary
representations and covenants, including those contained in
certificates of officers of Valeant and Biovail.
ARTICLE VIII
Termination,
Amendment and Waiver
Section
8.01.
Termination
.
This
Agreement may be terminated at any time prior to the Effective
Time, whether before or after receipt of the Biovail Stockholder
Approval or the Valeant Stockholder Approval:
(a) by mutual written consent of Valeant and Biovail;
(b) by either Valeant or Biovail:
(i) if the Merger is not consummated on or before the End
Date. The “
End Date
” shall mean
February 28, 2011;
provided
,
however
, that
the right to terminate this Agreement under this
Section 8.01(b)(i) shall not be available to any party if
such failure of the Merger to occur on or before the End Date is
the result of a breach of this Agreement by such party or the
failure of any representation or warranty of such party
contained in this Agreement to be true and correct;
(ii) if the condition set forth in Section 7.01(d) is
not satisfied and the Legal Restraint giving rise to such
non-satisfaction shall have become final and non-appealable;
provided
that the terminating party shall have complied
with its obligations to use its reasonable best efforts pursuant
to Section 6.03;
(iii) if the Biovail Stockholder Approval is not obtained
at the Biovail Stockholders Meeting duly convened (unless such
Biovail Stockholders Meeting has been adjourned, in which case
at the final adjournment thereof); or
(iv) if the Valeant Stockholder Approval is not obtained at
the Valeant Stockholders Meeting duly convened (unless such
Valeant Stockholders Meeting has been adjourned, in which case
at the final adjournment thereof);
(c) by Valeant, if Biovail, BAC or Merger Sub breaches or
fails to perform any of its covenants or agreements contained in
this Agreement, or if any of the representations or warranties
of Biovail, BAC or Merger Sub contained herein fails to be true
and correct, which breach or failure (i) would give rise to
the
A-57
failure of a condition set forth in Section 7.02(a) or
7.02(b) and (ii) is not reasonably capable of being cured
by Biovail, BAC or Merger Sub, as the case may be, by the End
Date or is not cured by Biovail, BAC or Merger Sub, as the case
may be, within forty-five days after receiving written notice
from Valeant (
provided
that Valeant is not then in breach
of any covenant or agreement contained in this Agreement and no
representation or warranty of Valeant contained herein then
fails to be true and correct such that the conditions set forth
in Section 7.03(a) or 7.03(b) could not then be satisfied);
(d) by Biovail, if Valeant breaches or fails to perform any
of its covenants or agreements contained in this Agreement, or
if any of the representations or warranties of Valeant contained
herein fails to be true and correct, which breach or failure
(i) would give rise to the failure of a condition set forth
in Section 7.03(a) or 7.03(b) and (ii) is not
reasonably capable of being cured by Valeant by the End Date or
is not cured by Valeant within forty-five days after receiving
written notice from Biovail (
provided
that Biovail is not
then in breach of any covenant or agreement contained in this
Agreement and no representation or warranty of Biovail contained
herein then fails to be true and correct such that the
conditions set forth in Section 7.02(a) or 7.02(b) could
not then be satisfied);
(e) by Valeant, in the event that a Biovail Adverse
Recommendation Change shall have occurred;
provided
that
Valeant shall no longer be entitled to terminate this Agreement
pursuant to this Section 8.01(e) if the Biovail Stockholder
Approval is obtained at the Biovail Stockholders Meeting; or
(f) by Biovail, in the event that a Valeant Adverse
Recommendation Change shall have occurred;
provided
that
Biovail shall no longer be entitled to terminate this Agreement
pursuant to this Section 8.01(f) if the Valeant Stockholder
Approval is obtained at the Valeant Stockholders Meeting.
The party desiring to terminate this Agreement pursuant to
clause (b), (c), (d), (e) or (f) of this
Section 8.01 shall give written notice of such termination
to the other parties in accordance with Section 9.02,
specifying the provision of this Agreement pursuant to which
such termination is effected.
Section
8.02.
Effect
of Termination
.
In the event of termination
of this Agreement by either Biovail or Valeant as provided in
Section 8.01, this Agreement shall forthwith become void
and have no effect, without any liability or obligation on the
part of Valeant or Biovail, other than Section 3.20,
Section 4.20, the last sentence of Section 6.02,
Section 6.06, this Section 8.02 and Article IX,
which provisions shall survive such termination, and except in
the case of fraud or any intentional misrepresentation by a
party or any intentional breach by a party of any covenant or
agreement set forth in this Agreement.
Section
8.03.
Amendment
.
This
Agreement may be amended by the parties at any time before or
after receipt of the Biovail Stockholder Approval or the Valeant
Stockholder Approval;
provided
,
however
, that
(i) after receipt of the Biovail Stockholder Approval,
there shall be made no amendment that by Law requires further
approval by the stockholders of Biovail without the further
approval of such stockholders, (ii) after receipt of the
Valeant Stockholder Approval, there shall be made no amendment
that by Law requires further approval by the stockholders of
Valeant without the further approval of such stockholders,
(iii) no amendment shall be made to this Agreement after
the Effective Time and (iv) except as provided above, no
amendment of this Agreement shall require the approval of the
stockholders of Biovail or the stockholders of Valeant. This
Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties.
Section
8.04.
Extension;
Waiver
.
At any time prior to the Effective
Time, the parties may (a) extend the time for the
performance of any of the obligations or other acts of the other
parties, (b) waive any inaccuracies in the representations
and warranties contained in this Agreement or in any document
delivered pursuant to this Agreement, (c) waive compliance
with any covenants and agreements contained in this Agreement or
(d) waive the satisfaction of any of the conditions
contained in this Agreement. No extension or waiver by Biovail
shall require the approval of the stockholders of Biovail unless
such approval is required by Law and no extension or waiver by
Valeant shall require the approval of the stockholders of
Valeant unless such approval is required by Law. Any agreement
on the part of a party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement
to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of such rights.
A-58
Section
8.05.
Procedure
for Termination, Amendment, Extension or
Waiver
.
A termination of this Agreement
pursuant to Section 8.01, an amendment of this Agreement
pursuant to Section 8.03 or an extension or waiver pursuant
to Section 8.04 shall, in order to be effective, require,
in the case of Valeant, Biovail, BAC or Merger Sub, action by
its Board of Directors or the duly authorized designee of its
Board of Directors. Termination of this Agreement prior to the
Effective Time shall not require the approval of the
stockholders of Biovail or Valeant.
Section
8.06.
Alternative
Structure
.
The parties hereby agree to
cooperate in the consideration of alternative structures to
implement the transactions contemplated by this Agreement as
long as there is no change in the economic terms thereof and
such alternative structure does not impose any material delay
on, or condition to, the consummation of the Merger, or
adversely affect any of the parties hereto or either
Biovail’s or Valeant’s stockholders or result in
additional liability to Biovail’s or Valeant’s
directors or officers.
ARTICLE IX
General
Provisions
Section
9.01.
Nonsurvival
of Representations and Warranties
.
None of
the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive
the Effective Time. This Section 9.01 shall not limit
Section 8.02 or any covenant or agreement of the parties
which by its terms contemplates performance after the Effective
Time.
Section
9.02.
Notices
.
All
notices, requests, claims, demands and other communications
under this Agreement shall be in writing and shall be deemed
given upon receipt by the parties at the following addresses (or
at such other address for a party as shall be specified by like
notice):
(a) if to Valeant, to:
Valeant Pharmaceuticals International
One Enterprise
Aliso Viejo, California 92656
Phone:
(973) 549-5292
Facsimile:
(949) 315-3818
Attention: Steve T. Min
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Phone:
(212) 735-3000
Facsimile:
(212) 735-2000
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|
|
|
Attention:
|
Stephen F. Arcano, Esq.
Jeffrey A. Brill, Esq.
|
(b) if to Biovail, BAC or Merger Sub, to:
Biovail Corporation
7150 Mississauga Road
Mississauga, Ontario
L5N 8M5
Phone:
(905) 286-3202
Facsimile:
(905) 286-3061
Attention: Gregory Gubitz
A-59
with a copy to:
Cravath, Swaine & Moore LLP
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Phone:
(212) 474-1000
Facsimile:
(212) 474-3700
|
|
|
|
Attention:
|
Erik R. Tavzel, Esq.
Eric L. Schiele, Esq.
|
Section
9.03.
Definitions
.
For
purposes of this Agreement:
An
“
Affiliate
”
of any Person means
another Person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common
control with, such first Person;
provided
that neither
ValueAct Capital Master Fund L.P.
(“
ValueAct
”) nor any entity (other than Valeant
or the Valeant Subsidiaries) that directly or indirectly
controls or is controlled by ValueAct shall be deemed to be an
“Affiliate” of Valeant.
“
Biovail Benefit Agreement
”
means each
employment, consulting, bonus, incentive or deferred
compensation, equity or equity-based compensation, severance,
change in control, retention, termination or other material
Contract between Biovail or any Biovail Subsidiary, on the one
hand, and any Biovail Personnel, on the other hand.
“
Biovail Benefit Plan
”
means each
(i) pension plan (as defined in Section 3(2) of ERISA)
or post-retirement or employment health or medical plan,
program, policy or arrangement, (ii) bonus, incentive or
deferred compensation or equity or equity-based compensation
plan, program, policy or arrangement, (iii) severance,
change in control, retention or termination plan, program,
policy or arrangement or (iv) other material compensation,
pension, retirement savings or other benefit plan, program,
policy or arrangement, in each case, sponsored, maintained,
contributed to or required to be maintained or contributed to by
Biovail, any Biovail Subsidiary or any Biovail Commonly
Controlled Entity for the benefit of any Biovail Personnel.
“
Biovail Commonly Controlled Entity
”
means any person or entity, other than Biovail and the Biovail
Subsidiaries, that, together with Biovail, is treated as a
single employer under Section 414 of the Code.
“
Biovail Deferred Share Unit
”
means any
deferred share unit payable in shares of Biovail Common Stock or
the value of which is determined with reference to the value of
shares of Biovail Common Stock, whether granted under any
Biovail Stock Plan or otherwise.
“
Biovail Material Adverse Effect
”
means
a Material Adverse Effect with respect to Biovail.
“
Biovail Personnel
”
means any current or
former director, officer or employee of Biovail or any Biovail
Subsidiary.
“
Biovail Product
”
means any biological,
drug or consumer product being tested in clinical trials,
manufactured, sold or distributed by Biovail or any of the
Biovail Subsidiaries.
“
Biovail Restricted Stock Unit
”
means
any restricted stock unit payable in shares of Biovail Common
Stock or the value of which is determined with reference to the
value of shares of Biovail Common Stock, whether granted under
any Biovail Stock Plan or otherwise.
“
Biovail Stock Option
”
means any option
to purchase Biovail Common Stock, whether granted under any
Biovail Stock Plan or otherwise.
“
Biovail Stock Plans
”
means the Biovail
2007 Equity Compensation Plan, the Biovail 2004 Stock Option
Plan, the Biovail 1993 Stock Option Plan, the Biovail Deferred
Share Unit Plan for Canadian Directors, the Biovail Deferred
Share Unit Plan for U.S. Directors and the Biovail
Laboratories International SRL Deferred Share Unit Plan.
A-60
“
Business Day
”
means any day other than
(i) a Saturday or a Sunday or (ii) a day on which
banking and savings and loan institutions are authorized or
required by Law to be closed in New York City.
“
Code
”
means the Internal Revenue Code
of 1986, as amended.
“
Combined Company
”
means Valeant, the
Valeant Subsidiaries, Biovail and the Biovail Subsidiaries,
taken as a whole, combined in the manner currently intended by
the parties.
“
Combined Company Material Adverse
Effect
”
means a Material Adverse Effect with
respect to the Combined Company.
“
Equity Award Exchange Ratio
”
means
1.7809.
“
ERISA
”
means the Employee Retirement
Income Security Act of 1974, as amended.
“
Indebtedness
”
means, with respect to
any Person, without duplication, (i) all obligations of
such Person for borrowed money, or with respect to deposits or
advances of any kind to such Person, (ii) all obligations
of such Person evidenced by bonds, debentures, notes or similar
instruments, (iii) all capitalized lease obligations of
such Person, (iv) all guarantees and arrangements having
the economic effect of a guarantee of such Person of any
Indebtedness of any other Person, or (v) all obligations or
undertakings of such Person to maintain or cause to be
maintained the financial position or covenants of others or to
purchase the obligations or property of others.
The “
Knowledge
” of any Person that is not an
individual means, with respect to any matter in question, the
actual knowledge of the individuals set forth in
Section 9.03 of the Valeant Disclosure Letter or
Section 9.03 of the Biovail Disclosure Letter, as
applicable, after having made due inquiry of those persons
reporting directly to such individual, but without further
investigation by such individual.
“
Material Adverse Effect
”
with respect
to any Person means any fact, circumstance, effect, change,
event or development that materially adversely affects the
business, properties, financial condition or results of
operations of such Person and its Subsidiaries, taken as a
whole, excluding any effect that results from or arises in
connection with (i) changes or conditions generally
affecting the industries in which such Person and any of its
Subsidiaries operate, except to the extent such effect has a
materially disproportionate effect on such Person and its
Subsidiaries, taken as a whole, relative to others in the
industries in which such Person and any of its Subsidiaries
operate, (ii) general economic or regulatory, legislative
or political conditions or securities, credit, financial or
other capital markets conditions, in each case in the United
States, Canada or any foreign jurisdiction, except to the extent
such effect has a materially disproportionate effect on such
Person and its Subsidiaries, taken as a whole, relative to
others in the industries in which such Person and any of its
Subsidiaries operate, (iii) any failure, in and of itself,
by such Person to meet any internal or published projections,
forecasts, estimates or predictions in respect of revenues,
earnings or other financial or operating metrics for any period
(it being understood that the facts or occurrences giving rise
to or contributing to such failure may be deemed to constitute,
or be taken into account in determining whether there has been
or will be, a Material Adverse Effect), (iv) the execution
and delivery of this Agreement or the public announcement or
pendency of the Merger or any of the other transactions
contemplated by this Agreement, including the impact thereof on
the relationships, contractual or otherwise, of such Person or
any of its Subsidiaries with employees, labor unions, customers,
suppliers or partners, (v) any change, in and of itself, in
the market price, credit rating or trading volume of such
Person’s securities (it being understood that the facts or
occurrences giving rise to or contributing to such change may be
deemed to constitute, or be taken into account in determining
whether there has been or will be, a Material Adverse Effect),
(vi) any change in applicable Law, regulation or GAAP (or
authoritative interpretation thereof), except to the extent such
effect has a materially disproportionate effect on such Person
and its Subsidiaries, taken as a whole, relative to others in
the industries in which such Person and any of its Subsidiaries
operate, (vii) geopolitical conditions, the outbreak or
escalation of hostilities, any acts of war, sabotage or
terrorism, or any escalation or worsening of any such acts of
war, sabotage or terrorism
A-61
threatened or underway as of the date of this Agreement or
(viii) any hurricane, tornado, flood, earthquake or other
natural disaster.
“
Person
”
means any natural person, firm,
corporation, partnership, company, limited liability company,
trust, joint venture, association, Governmental Entity or other
entity.
“
Post-Merger Special Dividend
”
means,
subject to the discretion of the Board of the Combined Company
and to applicable Law, an amount contemplated to be $1.00 per
share of Biovail Common Stock, payable to holders of record of
Biovail Common Stock on December 1, 2010 and contemplated
to be paid on December 31, 2010, or such other record date
and payment date as the Board of the Combined Company shall
determine (subject to customary adjustments for any stock
dividend, subdivision, reclassification, recapitalization,
split, combination, exchange of shares or similar event).
“
Pre-Merger Special Dividend Adjustment
Ratio
”
means 1.5710.
“
Pre-Merger Special Dividend Time
”
means
the time at which payment of the Pre-Merger Special Dividend
occurs.
A “
Subsidiary
” of any Person means another
Person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is sufficient
to elect at least a majority of its Board of Directors or other
governing body (or, if there are no such voting interests, more
than 50% of the equity interests of which) is owned directly or
indirectly by such first Person.
“
Tax Return
”
means all Tax returns,
declarations, statements, reports, schedules, forms and
information returns and any amended Tax return relating to Taxes.
“
Taxes
”
means all taxes, customs,
tariffs, imposts, levies, duties, fees or other like assessments
or charges of any kind imposed by a Governmental Entity,
together with all interest, penalties and additions imposed with
respect to such amounts.
“
Valeant Benefit Agreement
”
means each
employment, consulting, bonus, incentive or deferred
compensation, equity or equity-based compensation, severance,
change in control, retention, termination or other material
Contract between Valeant or any Valeant Subsidiary, on the one
hand, and any Valeant Personnel, on the other hand.
“
Valeant Benefit Plan
”
means each
(i) pension plan (as defined in Section 3(2) of ERISA)
or post-retirement or employment health or medical plan,
program, policy or arrangement, (ii) bonus, incentive or
deferred compensation or equity or equity-based compensation
plan, program, policy or arrangement, (iii) severance,
change in control, retention or termination plan, program,
policy or arrangement or (iv) other material compensation,
pension, retirement savings or other benefit plan, program,
policy or arrangement, in each case, sponsored, maintained,
contributed to or required to be maintained or contributed to by
Valeant, any Valeant Subsidiary or any Valeant Commonly
Controlled Entity for the benefit of any Valeant Personnel.
“
Valeant Commonly Controlled Entity
”
means any person or entity, other than Valeant and the Valeant
Subsidiaries, that, together with Valeant, is treated as a
single employer under Section 414 of the Code.
“
Valeant ESPP
”
means the Valeant 2009
Employee Stock Purchase Plan.
“
Valeant Material Adverse Effect
”
means
a Material Adverse Effect with respect to Valeant.
“
Valeant Personnel
”
means any current or
former director, officer or employee of Valeant or any Valeant
Subsidiary.
“
Valeant Product
”
means any biological,
drug or consumer product being tested in clinical trials,
manufactured, sold or distributed by Valeant or any of the
Valeant Subsidiaries.
“
Valeant Restricted Stock Unit
”
means
any restricted stock unit payable in shares of Valeant Common
Stock or the value of which is determined with reference to the
value of shares of Valeant Common Stock, whether granted under
any Valeant Stock Plan or otherwise.
A-62
“
Valeant Stock Option
”
means any option
to purchase Valeant Common Stock, whether granted under any
Valeant Stock Plan or otherwise.
“
Valeant Stock Plans
”
means the Valeant
2006 Equity Incentive Plan and the Valeant 2003 Equity Incentive
Plan.
Section
9.04.
Interpretation
.
When
a reference is made in this Agreement to an Article or a
Section, such reference shall be to an Article or a Section of
this Agreement unless otherwise indicated. The table of
contents, index of defined terms and headings contained in this
Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. Any
capitalized term used in any Exhibit but not otherwise defined
therein shall have the meaning assigned to such term in this
Agreement. Whenever the words “include”,
“includes” or “including” are used in this
Agreement, they shall be deemed to be followed by the words
“without limitation”. The words “hereof”,
“hereto”, “hereby”, “herein” and
“hereunder” and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not
to any particular provision of this Agreement. The term
“or” is not exclusive. The word “extent” in
the phrase “to the extent” shall mean the degree to
which a subject or other thing extends, and such phrase shall
not mean simply “if”. The definitions contained in
this Agreement are applicable to the singular as well as the
plural forms of such terms. Any agreement, instrument or Law
defined or referred to herein means such agreement, instrument
or Law as from time to time amended, modified or supplemented,
unless otherwise specifically indicated. References to a person
are also to its permitted successors and assigns. Unless
otherwise specifically indicated, all references to
“dollars” and “$” will be deemed references
to the lawful money of the United States of America.
Section
9.05.
Severability
.
If
any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule or Law, or
public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so
long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially
adverse to any party or such party waives its rights under this
Section 9.05 with respect thereto. Upon such determination
that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate
in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an
acceptable manner to the end that transactions contemplated by
this Agreement are fulfilled to the extent possible.
Section
9.06.
Counterparts
.
This
Agreement may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and shall
become effective when one or more counterparts have been signed
by each of the parties and delivered to the other parties.
Section
9.07.
Entire
Agreement; No Third-Party Beneficiaries
.
This
Agreement, taken together with the Biovail Disclosure Letter,
the Valeant Disclosure Letter and the Confidentiality Agreement,
(a) constitutes the entire agreement, and supersedes all
prior agreements and understandings, both written and oral,
between the parties with respect to the Merger and the other
transactions contemplated by this Agreement and (b) except
for Section 6.05, is not intended to confer upon any Person
other than the parties any rights or remedies.
Section
9.08.
GOVERNING
LAW
.
THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE,
REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER ANY
APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS OF THE STATE OF
DELAWARE.
Section
9.09.
Assignment
.
Neither
this Agreement nor any of the rights, interests or obligations
under this Agreement shall be assigned, in whole or in part, by
operation of Law or otherwise by any of the parties without the
prior written consent of the other parties. Any purported
assignment without such consent shall be void. Subject to the
preceding sentences, this Agreement will be binding upon, inure
to the benefit of, and be enforceable by, the parties and their
respective successors and assigns.
Section
9.10.
Specific
Enforcement
.
The parties acknowledge and
agree that irreparable damage would occur in the event that any
of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached,
and that monetary damages, even if available, would not be an
adequate remedy therefor. It is accordingly agreed that, prior
to the termination of this Agreement pursuant to
Article VIII, the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the
A-63
performance of terms and provisions of this Agreement in any
court referred to in clause (a) below, without proof of
actual damages (and each party hereby waives any requirement for
the securing or posting of any bond in connection with such
remedy), this being in addition to any other remedy to which
they are entitled at law or in equity. The parties further agree
not to assert that a remedy of specific enforcement is
unenforceable, invalid, contrary to Law or inequitable for any
reason, nor to assert that a remedy of monetary damages would
provide an adequate remedy for any such breach. In addition,
each of the parties hereto (a) consents to submit itself to
the personal jurisdiction of any Delaware state court or any
Federal court located in the State of Delaware in the event any
dispute arises out of this Agreement, the Merger or any of the
other transactions contemplated by this Agreement,
(b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from
any such court and (c) agrees that it will not bring any
action relating to this Agreement, the Merger or any of the
other transactions contemplated by this Agreement in any court
other than any Delaware state court or any Federal court sitting
in the State of Delaware.
Section
9.11.
Waiver
of Jury Trial
.
Each party hereto hereby
waives, to the fullest extent permitted by applicable Law, any
right it may have to a trial by jury in respect of any suit,
action or other proceeding arising out of this Agreement, the
Merger or any of the other transactions contemplated by this
Agreement. Each party hereto (a) certifies that no
representative, agent or attorney of any other party has
represented, expressly or otherwise, that such party would not,
in the event of any action, suit or proceeding, seek to enforce
the foregoing waiver and (b) acknowledges that it and the
other parties hereto have been induced to enter into this
Agreement by, among other things, the mutual waiver and
certifications in this Section 9.11.
[Remainder
of page left intentionally blank]
A-64
IN WITNESS WHEREOF, Valeant, Biovail, BAC and Merger Sub have
duly executed this Agreement, both as of the date first written
above.
VALEANT PHARMACEUTICALS INTERNATIONAL,
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by
|
/s/ J.
Michael Pearson
|
Name: J. Michael Pearson
Title: Chief Executive Officer
BIOVAIL CORPORATION,
Name: William M. Wells
Title: Chief Executive Officer
BIOVAIL AMERICAS CORP.,
Name: Gilbert Godin
Title: President
BEACH MERGER CORP.,
Name: William M. Wells
Title: President
A-65
Index
of Defined Terms
|
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Term
|
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Section
|
|
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Accelerated RSU
|
|
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6.04(b
|
)
|
Accelerated Valeant RSU Shares
|
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6.04(b
|
)
|
Acquisition Agreement
|
|
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5.02(b
|
)
|
Affiliate
|
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9.03
|
|
Agreement
|
|
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Preamble
|
|
Appraisal Shares
|
|
|
2.01(d
|
)
|
BAC
|
|
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Preamble
|
|
Biovail
|
|
|
Preamble
|
|
Biovail Adverse Recommendation Change
|
|
|
5.02(b
|
)
|
Biovail Benefit Agreement
|
|
|
9.03
|
|
Biovail Benefit Plan
|
|
|
9.03
|
|
Biovail Board
|
|
|
3.04(a
|
)
|
Biovail By-laws
|
|
|
3.01
|
|
Biovail Capital Stock
|
|
|
3.03(a
|
)
|
Biovail Charter
|
|
|
3.01
|
|
Biovail Class A Stock
|
|
|
3.03(a
|
)
|
Biovail Common Stock
|
|
|
2.01(c
|
)
|
Biovail Commonly Controlled Entity
|
|
|
9.03
|
|
Biovail Convertible Notes
|
|
|
3.03(a
|
)
|
Biovail Deferred Share Unit
|
|
|
9.03
|
|
Biovail Disclosure Letter
|
|
|
Article III
|
|
Biovail Financial Advisor
|
|
|
3.20
|
|
Biovail Indemnitees
|
|
|
6.05(b
|
)
|
Biovail Intervening Event
|
|
|
5.02(b
|
)
|
Biovail Material Adverse Effect
|
|
|
9.03
|
|
Biovail Material Contract
|
|
|
3.14(b
|
)
|
Biovail Notice of Recommendation Change
|
|
|
5.02(b
|
)
|
Biovail Permits
|
|
|
3.01
|
|
Biovail Personnel
|
|
|
9.03
|
|
Biovail Product
|
|
|
9.03
|
|
Biovail Regulatory Agency
|
|
|
3.17(a
|
)
|
Biovail Regulatory Permits
|
|
|
3.17(a
|
)
|
Biovail Reporting Documents
|
|
|
3.06(a
|
)
|
Biovail Restricted Stock Unit
|
|
|
9.03
|
|
Biovail-selected Directors
|
|
|
Exhibit A
|
|
Biovail Stock Option
|
|
|
9.03
|
|
Biovail Stock Plans
|
|
|
9.03
|
|
Biovail Stockholder Approval
|
|
|
3.04(a
|
)
|
Biovail Stockholders Meeting
|
|
|
3.04(a
|
)
|
Biovail Subsidiaries
|
|
|
3.01(a
|
)
|
Biovail Takeover Proposal
|
|
|
5.02(e
|
)
|
Biovail Termination Fee
|
|
|
6.06(b
|
)
|
Biovail Voting Debt
|
|
|
3.03(b
|
)
|
Business Day
|
|
|
9.03
|
|
Canadian Securities Authorities
|
|
|
3.05(b
|
)
|
Canadian Securities Laws
|
|
|
3.05(b
|
)
|
CBCA
|
|
|
3.03(b
|
)
|
A-Index of Defined Terms
|
|
|
|
|
Term
|
|
Section
|
|
|
CDSA
|
|
|
3.17(a
|
)
|
Certificate
|
|
|
2.01(c
|
)
|
Certificate of Merger
|
|
|
1.03
|
|
chief executive officer
|
|
|
3.06(d
|
)
|
chief financial officer
|
|
|
3.06(d
|
)
|
Closing
|
|
|
1.02
|
|
Closing Date
|
|
|
1.02
|
|
Code
|
|
|
9.03
|
|
Combined Company
|
|
|
9.03
|
|
Combined Company Material Adverse Effect
|
|
|
9.03
|
|
Commissioner
|
|
|
7.01(c
|
)
|
Commitment Letter
|
|
|
6.11(a
|
)
|
Competition Act
|
|
|
3.05(b
|
)
|
Confidentiality Agreement
|
|
|
6.02
|
|
Consent
|
|
|
3.05(b
|
)
|
Contract
|
|
|
3.05(a
|
)
|
Converted Shares
|
|
|
2.01(a
|
)
|
DGCL
|
|
|
1.01
|
|
Effective Time
|
|
|
1.03
|
|
EMEA
|
|
|
3.17(e
|
)
|
End Date
|
|
|
8.01(b
|
)
|
Environmental Claim
|
|
|
3.13(b
|
)
|
Environmental Laws
|
|
|
3.13(b
|
)
|
Equity Award Exchange Ratio
|
|
|
9.03
|
|
ERISA
|
|
|
9.03
|
|
Exchange Act
|
|
|
3.05(b
|
)
|
Exchange Agent
|
|
|
2.02(a
|
)
|
Exchange Fund
|
|
|
2.02(a
|
)
|
Exchange Ratio
|
|
|
2.01(c
|
)
|
FCPA
|
|
|
3.12
|
|
FDA
|
|
|
3.17(a
|
)
|
FDCA
|
|
|
3.17(a
|
)
|
Filed Biovail Contract
|
|
|
3.14(a
|
)
|
Filed Biovail Reporting Documents
|
|
|
Article III
|
|
Filed Valeant Contract
|
|
|
4.14(a
|
)
|
Filed Valeant Reporting Documents
|
|
|
Article IV
|
|
Financing
|
|
|
6.11(a
|
)
|
Financing Sources
|
|
|
6.11(a
|
)
|
Food and Drugs Act
|
|
|
3.17(a
|
)
|
Form S-4
|
|
|
3.05(b
|
)
|
GAAP
|
|
|
3.06(b
|
)
|
Governmental Entity
|
|
|
3.05(b
|
)
|
Hazardous Materials
|
|
|
3.13(b
|
)
|
HSR Act
|
|
|
3.05(b
|
)
|
Indebtedness
|
|
|
9.03
|
|
Income Tax Act
|
|
|
3.10(e
|
)
|
Indemnitees
|
|
|
6.05(c
|
)
|
Intellectual Property
|
|
|
3.16(a
|
)
|
A-Index of Defined Terms
|
|
|
|
|
Term
|
|
Section
|
|
|
Intended Tax Treatment
|
|
|
Recitals
|
|
Issued Shares
|
|
|
2.01(a
|
)
|
Joinder Agreement
|
|
|
6.14
|
|
Joint Proxy Statement
|
|
|
6.01(a
|
)
|
Judgment
|
|
|
3.05(a
|
)
|
Knowledge
|
|
|
9.03
|
|
Law
|
|
|
3.05(a
|
)
|
Legal Restraints
|
|
|
7.01(d
|
)
|
Liens
|
|
|
3.02(a
|
)
|
Material Adverse Effect
|
|
|
9.03
|
|
material weakness
|
|
|
3.06(h
|
)
|
Merger
|
|
|
1.01
|
|
Merger Consideration
|
|
|
2.01(c
|
)
|
Merger Sub
|
|
|
Preamble
|
|
Merger Sub Common Stock
|
|
|
2.01(a
|
)
|
Name Change
|
|
|
3.04(a
|
)
|
New Independent Director
|
|
|
Exhibit A
|
|
New Merger Sub
|
|
|
6.14
|
|
No-Action Letter
|
|
|
7.01(c
|
)
|
NYSE
|
|
|
2.02(e
|
)
|
Permits
|
|
|
3.01
|
|
Person
|
|
|
9.03
|
|
PHSA
|
|
|
3.17(a
|
)
|
Post-Merger Special Dividend
|
|
|
9.03
|
|
Pre-Merger Special Dividend
|
|
|
6.17
|
|
Pre-Merger Special Dividend Adjustment Ratio
|
|
|
9.03
|
|
Pre-Merger Special Dividend Time
|
|
|
9.03
|
|
Release
|
|
|
3.13(b
|
)
|
Representatives
|
|
|
5.02(a
|
)
|
SEC
|
|
|
3.05(b
|
)
|
Section 262
|
|
|
2.01(d
|
)
|
Securities Act
|
|
|
3.05(b
|
)
|
Share Issuance
|
|
|
3.04(a
|
)
|
Single Trigger RSU
|
|
|
6.04(b
|
)
|
significant deficiency
|
|
|
3.06(h
|
)
|
SOX
|
|
|
3.06(b
|
)
|
Subsidiary
|
|
|
9.03
|
|
Superior Biovail Proposal
|
|
|
5.02(e
|
)
|
Superior Valeant Proposal
|
|
|
5.03(e
|
)
|
Surviving Company
|
|
|
1.01
|
|
Surviving Company Common Stock
|
|
|
2.01(a
|
)
|
Tax Return
|
|
|
9.03
|
|
Taxes
|
|
|
9.03
|
|
TSX
|
|
|
3.04(a
|
)
|
Valeant
|
|
|
Preamble
|
|
Valeant 3.0% Convertible Notes
|
|
|
4.03(a
|
)
|
Valeant Adverse Recommendation Change
|
|
|
5.03(b
|
)
|
Valeant Adjusted PSU
|
|
|
6.04(c
|
)
|
A-Index of Defined Terms
|
|
|
|
|
Term
|
|
Section
|
|
|
Valeant Adjusted PSU Shares
|
|
|
6.04(c
|
)
|
Valeant Benefit Agreement
|
|
|
9.03
|
|
Valeant Benefit Plan
|
|
|
9.03
|
|
Valeant Board
|
|
|
4.04(a
|
)
|
Valeant Board Nomination Agreement
|
|
|
4.03(c
|
)
|
Valeant By-laws
|
|
|
4.01
|
|
Valeant Capital Stock
|
|
|
4.03(a
|
)
|
Valeant Charter
|
|
|
4.01
|
|
Valeant Common Stock
|
|
|
2.01(b
|
)
|
Valeant Commonly Controlled Entity
|
|
|
9.03
|
|
Valeant Convertible Notes
|
|
|
4.03(a
|
)
|
Valeant Convertible Notes Indenture
|
|
|
4.03(b
|
)
|
Valeant Disclosure Letter
|
|
|
Article IV
|
|
Valeant ESPP
|
|
|
9.03
|
|
Valeant Financial Advisors
|
|
|
4.20
|
|
Valeant Indemnitees
|
|
|
6.05(c
|
)
|
Valeant Intervening Event
|
|
|
5.03(b
|
)
|
Valeant Material Adverse Effect
|
|
|
9.03
|
|
Valeant Material Contract
|
|
|
4.14(b
|
)
|
Valeant Notice of Recommendation Change
|
|
|
5.03(b
|
)
|
Valeant Performance-Based Restricted Stock Unit
|
|
|
6.04(c
|
)
|
Valeant Permits
|
|
|
4.01
|
|
Valeant Personnel
|
|
|
9.03
|
|
Valeant Preferred Stock
|
|
|
4.03(a
|
)
|
Valeant Product
|
|
|
9.03
|
|
Valeant Regulatory Agency
|
|
|
4.17(a
|
)
|
Valeant Regulatory Permits
|
|
|
4.17(a
|
)
|
Valeant Reporting Documents
|
|
|
4.06(a
|
)
|
Valeant Restricted Stock Unit
|
|
|
9.03
|
|
Valeant Stock Option
|
|
|
9.03
|
|
Valeant Stock Plan Assumption
|
|
|
6.04(e
|
)
|
Valeant Stock Plans
|
|
|
9.03
|
|
Valeant Stockholder Approval
|
|
|
4.04(a
|
)
|
Valeant Stockholders Meeting
|
|
|
4.04(a
|
)
|
Valeant Subsidiaries
|
|
|
4.01
|
|
Valeant Takeover Proposal
|
|
|
5.03(e
|
)
|
Valeant Time-Based Restricted Stock Units
|
|
|
6.04(b
|
)
|
Valeant Termination Fee
|
|
|
6.06(c
|
)
|
Valeant Voting Debt
|
|
|
4.03(c
|
)
|
Valeant Warrants
|
|
|
4.03(a
|
)
|
Valeant-selected Directors
|
|
|
Exhibit A
|
|
A-Index of Defined Terms
EXHIBIT A
Governance
Matters
(a) Biovail shall take all necessary action to cause,
effective at the Effective Time, William M. Wells to be
appointed as non-executive Chairman of the Board of the Combined
Company. If Mr. William M. Wells is not a member of the
Biovail Board immediately prior to the Effective Time, Valeant
and Biovail shall agree upon a replacement from the Biovail
Board to be appointed non-executive Chairman of the Board of the
Combined Company at the Effective Time.
(b) Biovail shall take all necessary action to cause,
effective at the Effective Time, J. Michael Pearson to be
appointed the Chief Executive Officer of the Combined Company.
If Mr. Pearson is not the Chief Executive Officer of
Valeant immediately prior to the Effective Time, Valeant and
Biovail shall agree upon a replacement to be appointed Chief
Executive Officer of the Combined Company at the Effective Time.
(c) Biovail shall take all necessary action to cause,
effective at the Effective Time, Robert A. Ingram to be
appointed as Lead Director of the Board of the Combined Company.
If Mr. Ingram is not a member of the Valeant Board
immediately prior to the Effective Time, Valeant and Biovail
shall agree upon a replacement from the Valeant Board to be
appointed Lead Director of the Board of the Combined Company at
the Effective Time.
(d) Biovail shall take all necessary action to cause,
effective at the Effective Time, Michael R. Van Every, a
resident Canadian (as defined under the Canada Business
Corporations Act), to continue as Chairman of the Audit
Committee of the Board of the Combined Company. If Mr. Van
Every is not a member of the Biovail Board immediately prior to
the Effective Time, Valeant and Biovail shall agree upon a
replacement from the Biovail Board to be appointed Chairman of
the Audit Committee of the Board of the Combined Company at the
Effective Time.
(e) Biovail shall take all necessary action to cause,
effective at the Effective Time, the Board of the Combined
Company to consist of (i) the four individuals listed
above, (ii) three directors selected by Biovail (together
with Mr. Van Every (or his replacement), the
“
Biovail-selected Directors
”), one of whom is a
resident Canadian (as defined under the Canada Business
Corporations Act), (iii) three directors selected by
Valeant (together with Mr. Ingram (or his replacement), the
‘‘
Valeant-selected Directors
”), and
(iv) one independent director who is recruited by a search
firm that is mutually retained by Biovail and Valeant, which
director (A) shall be selected by Valeant from a list of
candidates presented by such firm, (B) shall be subject to
the approval of Biovail and (C) shall be a resident
Canadian (as defined under the Canada Business Corporations Act)
(the “
New Independent Director
”).
(f) Biovail shall take all necessary action to cause,
effective at the Effective Time, the Chairman of the
Compensation Committee of the Board of the Combined Company to
be a Biovail-selected Director. Biovail shall take all necessary
action to cause, effective at the Effective Time, the Chairman
of each of the Risk and Compliance Committee and the Nominating
and Corporate Governance Committee to be a Valeant-selected
Director.
(g) Biovail shall take all necessary action to cause,
effective at the Effective Time, each committee of the Board of
the Combined Company (other than the Compensation Committee) to
have an equal number of Valeant-selected Directors and
Biovail-selected Directors as members,
provided
that such
committees may also include the New Independent Director.
(h) Biovail shall take all necessary action to cause,
effective at the Effective Time, the Compensation Committee of
the Board of the Combined Company to consist of only three
members, and Biovail shall take all necessary action to cause,
effective at the Effective Time, two of the members of the
Compensation Committee of the Board of the Combined Company to
be Valeant-selected Directors.
(i) No committee of the Board of the Combined Company other
than those identified in this Exhibit A shall be formed
prior to the first meeting of the Biovail Board following such
time as the Valeant-selected Directors are appointed to the
Board of the Combined Company without the written consent of
Valeant.
A-Exhibit A-1
EXHIBIT B
Form
of Joinder Agreement
JOINDER AGREEMENT (this “
Agreement
”), dated as
of [ • ], 2010, among Valeant Pharmaceuticals
International, a Delaware corporation
(“
Valeant
”), Biovail Corporation, a Canadian
corporation (“
Biovail
”), and [New Merger Sub],
a Delaware corporation (“
New Merger Sub
”).
WHEREAS, Section 6.14 of the Agreement and Plan of Merger
(the “
Merger Agreement”
), dated as of
June 20, 2010, between Valeant, Biovail, Biovail Americas
Corp., a Delaware corporation, and Beach Merger Corp., a
Delaware corporation (“Merger Sub”), contemplates that
New Merger Sub will become a party to the Merger
Agreement; and
WHEREAS, Valeant, Biovail and New Merger Sub have agreed that
New Merger Sub will become a party to the Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing, the parties
hereto agree as follows:
Section
1.01. Each
capitalized term used but not defined herein shall has the
meaning assigned to it in the Merger Agreement.
Section
1.02. All
references in the Merger Agreement to “Merger Sub”
shall be deemed to refer to “New Merger Sub.”
Section
1.02. Biovail
and New Merger Sub jointly and severally represent and warrant
to Valeant that the statements contained in this
Section 1.03 are true and correct:
(a) BAC is the sole stockholder of New Merger Sub. Since
its date of formation, New Merger Sub has not carried on any
business nor conducted any operations other than the execution
of this Agreement, the performance of its obligations under this
Agreement and the Merger Agreement and matters ancillary thereto.
(b) New Merger Sub has all requisite corporate power and
authority to execute and deliver this Agreement, to perform its
respective obligations under this Agreement and the Merger
Agreement and to consummate the Merger and the other
transactions contemplated by this Agreement and the Merger
Agreement, subject, in the case of the Share Issuance, to the
receipt of the Biovail Stockholder Approval and, in the case of
the Merger, for the approval of this Agreement by Biovail as the
sole stockholder of New Merger Sub. The Board of Directors of
New Merger Sub has adopted resolutions, by unanimous written
consent, (i) approving this Agreement,
(ii) determining that the terms of this Agreement are in
the best interests of New Merger Sub and Biovail, as its sole
stockholder, (iii) declaring this Agreement advisable and
(iv) recommending that Biovail, as sole stockholder of New
Merger Sub, adopt this Agreement and directing that this
Agreement be submitted to Biovail, as sole stockholder of New
Merger Sub, for adoption. Such resolutions have not been amended
or withdrawn. Except (A) solely in the case of the Share
Issuance, for the Biovail Stockholder Approval and
(B) solely in the case of the Merger, for the adoption of
the Joinder Agreement by Biovail as the sole stockholder of New
Merger Sub, no other corporate proceedings on the part of New
Merger Sub are necessary to authorize, adopt or approve, as
applicable, this Agreement or to consummate the Merger and the
other transactions contemplated by this Agreement and Merger
Agreement (except for the filing of the appropriate merger
documents as required by the DGCL). New Merger Sub has duly
executed and delivered this Agreement and, assuming the due
authorization, execution and delivery by Biovail and Valeant,
this Agreement constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms.
Section
1.03. New
Merger Sub hereby becomes a party to the Merger Agreement with
the same force and effect as if originally named as a party
therein and hereby agrees to all the terms and provisions of the
Merger Agreement applicable to it.
Section
1.04. This
Agreement shall for all purposes be deemed to be a part of the
Merger Agreement and shall be subject to all of the provisions
thereof.
[Remainder of page left intentionally blank]
A-Exhibit B-1
IN WITNESS WHEREOF, Valeant, Biovail and Merger Sub have duly
executed this Agreement, all as of the date first written above.
VALEANT PHARMACEUTICALS INTERNATIONAL,
Name:
Title:
BIOVAIL CORPORATION,
Name:
Title:
BIOVAIL AMERICAS CORP.,
Name:
Title:
BEACH MERGER CORP.,
Name:
Title:
A-Exhibit B-2
Exhibit C
|
|
|
|
|
GOLDMAN SACHS BANK USA
GOLDMAN SACHS LENDING PARTNERS LLC
200 West Street
New York, New York 10282
|
|
MORGAN STANLEY
SENIOR FUNDING, INC.
1585 Broadway
New York, New York 10036
|
|
JEFFERIES GROUP, INC.
520 Madison Avenue
New York, New York 10022
|
PERSONAL
AND CONFIDENTIAL
June 20, 2010
Valeant Pharmaceuticals International
One Enterprise
Aliso Viejo, California 92656
Attention: Peter Blott
Biovail Corporation
7150 Mississauga Road
Mississauga, Ontario
L5N 8M5
Attention: Peggy Mulligan
Commitment
Letter
Ladies and Gentlemen:
We are pleased to confirm the arrangements under which each of
Goldman Sachs Bank USA (
“GS Bank”
), Goldman
Sachs Lending Partners LLC (
“GSLP”
and,
together with GS Bank,
“Goldman Sachs”
),
Jefferies Group, Inc. (
“Jefferies”
) and Morgan
Stanley Senior Funding, Inc. (
“Morgan Stanley”
,
and together with Goldman Sachs and Jefferies, the
“Commitment Parties”
) is exclusively authorized
by Valeant Pharmaceuticals International, a Delaware corporation
(the
“Company”
) and Biovail Corporation, a
Canadian corporation (together with its subsidiaries, the
“Merger Party”
and, together with the Company,
“you”
), to act as joint lead arranger, joint
bookrunner and joint syndication agent in connection with, and
commits to provide the financing for, certain transactions
described herein, in each case on the terms and subject to the
conditions set forth in this letter and the attached
Annexes A, B and C hereto (collectively, this
“Commitment Letter”
). Capitalized terms used
but not defined herein have the respective meanings given in the
Annexes hereto.
You have informed the Commitment Parties that the Company
intends to consummate a merger transaction with the Merger
Party, pursuant to which the Company will merge (the
“Merger”
) with and into a newly-formed,
wholly-owned subsidiary of the Merger Party, with the Company as
the surviving entity. In connection with, and immediately prior
to, the Merger, the Company will (i) tender for or call for
redemption all of the Company’s 8.375% Senior Notes
due 2016 (the
“2016 Notes”
) and all of the
Company’s 7.625% Senior Notes due 2020 (the
“2020 Notes”
and, together with the 2016 Notes,
the
“Existing Notes”
) and solicit consents from
the holders of the Existing Notes to amend the indentures
pursuant to which the Existing Notes were issued (the repayment
of such Existing Notes, along with any related fees, expenses
and premiums, and the consent solicitation of the holders of the
Existing Notes, along with any related fees and expenses,
collectively, the
“Refinancing”
) upon terms and
conditions reasonably satisfactory to the Commitment Parties and
(ii) pay a cash dividend of $1,314.0 million to the
Company’s existing shareholders (the
“Dividend”
). You have also informed us that the
Refinancing, the Dividend, the Post-Merger Special Dividend (as
defined in the Merger Agreement), the Transaction Expenses and
the working capital requirements of the Company and the Merger
Party after consummation of the Merger will be financed from the
following sources:
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•
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$500.0 million under a senior secured term loan A facility
(the
“Term A Facility”
) having the terms set
forth on Annex B;
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A-Exhibit C-1
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•
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up to $2,272.0 million under a senior secured term loan B
facility (the
“Term B Facility”
and, together
with the Term A Facility, the
“Term
Facilities”
) having the terms set forth on
Annex B, which shall be available to the Company as follows:
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•
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up to $1,972.0 million shall be available on the Closing
Date to fund the Refinancing and the Dividend;
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•
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$300.0 million shall be available on or prior to the later
of (i) December 31, 2010 or (ii) 60 days
after the Closing Date, to fund the Post-Merger Special Dividend
to the shareholders of Parent after the consummation of the
Merger;
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provided
that the amount of the Term B Facility available
to the Company on the Closing Date shall be reduced on a
dollar-for-dollar
basis by (i) the net proceeds of any issuance of debt
securities (the
“Securities”
) consummated by
the Company after the date hereof and on or prior to the Closing
Date, (ii) the aggregate principal amount of Existing Notes
that remain outstanding on the Closing Date, after giving effect
to the making of the loans under the Senior Facilities and the
Refinancing and (iii) 50% of the net proceeds from the sale
of properties or assets or any interests therein that,
individually or in a series of related transactions, generate
net proceeds in excess of $25.0 million, until the
aggregate net proceeds after the date hereof equals
$400.0 million and then 100% of any additional asset sale
proceeds (except for sales of pharmaceutical products in the
ordinary course of business, which shall not be subject to this
clause (iii)); and
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•
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$250.0 million under a senior secured revolving credit
facility (the
“Revolving Facility”
; and,
together with the Term Facilities, the
“Senior
Facilities”
) having the terms set forth on Annex B.
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1.
|
Commitments:
Titles and Roles.
|
Each of GSLP, Morgan Stanley and Jefferies is pleased to confirm
its commitment to act, and you hereby appoint each of GSLP,
Morgan Stanley and Jefferies to act, as joint lead arranger,
joint bookrunner and joint syndication agent in connection with
the Senior Facilities and (i) GS Bank is pleased to advise
you of its several (but not joint) commitment to provide the
Borrower with 45% of the Senior Facilities, (ii) Morgan
Stanley is pleased to advise you of its several (but not joint)
commitment to provide the Borrower with 45% of the Senior
Facilities, and (iii) Jefferies is pleased to advise you of
its several (but not joint) commitment to provide the Borrower
with 10% of the Senior Facilities, in each case on the terms and
subject to the conditions contained in this Commitment Letter
and the Fee Letter (referred to below). In addition, you hereby
appoint GSLP to act as administrative agent (the
“Administrative Agent”
) for the Senior
Facilities. You agree that GSLP will have “left”
placement in any and all marketing materials or other
documentation used in connection with the Senior Facilities. You
further agree that no other titles will be awarded and no
compensation (other than that expressly contemplated by this
Commitment Letter and the Fee Letter referred to below) will be
paid in connection with the Senior Facilities unless you and we
shall so agree. Our fees for our commitment and for services
related to the Senior Facilities are set forth in a separate fee
letter (the
“Fee Letter”
) entered into by the
Company, the Merger Party and the Commitment Parties on the date
hereof.
Each Commitment Party’s commitment and agreements hereunder
are subject to the following condition: since January 1,
2010, there has not occurred any fact, circumstance, effect,
change, event or development that, individually or in the
aggregate, has had or would reasonably be expected to have a
Material Adverse Effect (as defined below) on either the Company
and its subsidiaries or the Merger Party. Each Commitment
Party’s commitments and agreements are also subject to the
satisfactory negotiation, execution and delivery of appropriate
definitive loan documents relating to the Senior Facilities
including, without limitation, credit agreements, guarantees,
security agreements, pledge agreements, real property security
agreements, opinions of counsel and other related definitive
documents (collectively, the
“Loan Documents”
)
to be based upon and substantially consistent with the terms set
forth in this Commitment Letter (it being agreed that the Loan
Documents shall not contain any conditions precedent to the
initial borrowing under the Senior Facilities on the Closing
Date other than the conditions precedent expressly set forth
herein and in Annexes B and C hereto, and the terms of the
Loan Documents will be such that they do not impair the
availability of the Senior Facilities on the Closing Date if
such conditions are satisfied, it being understood that, to the
extent the creation or perfection of any security interest in
A-Exhibit C-2
the collateral (as contemplated in Annex B hereto) is not
or cannot be provided or perfected on the Closing Date (other
than (i) the pledge and perfection of collateral with
respect to which a lien may be perfected solely by the filing of
financing statements under the Uniform Commercial Code,
(ii) filings with the U.S. patent and trademark office
and the U.S. copyright office with respect to intellectual
property collateral and (iii) to the extent applicable, the
delivery of certificated securities representing intercompany
debt or equity interests required to constitute collateral and
related security powers) after your use of commercially
reasonable efforts to do so, then the creation or perfection, as
the case may be, of such security interest shall not constitute
a condition precedent to the availability of the Senior
Facilities on the Closing Date, but shall instead be provided as
promptly as reasonably practicable after the Closing Date (and
in any event within 30 days after the Closing Date plus any
extensions granted by the Administrative Agent in its sole
discretion) pursuant to arrangements to be mutually agreed upon
by the Company and the Administrative Agent). Each Commitment
Party’s commitment is also subject to the Company having
entered into an engagement letter with one or more investment
banks (the
“Investment Banks”
) reasonably
acceptable to the Commitment Parties, pursuant to which the
Company engaged the Investment Banks in connection with a
potential issuance of Securities.
As used in the prior paragraph,
“Material Adverse
Effect”
means, with respect to any person, any fact,
circumstance, effect, change, event or development that
materially adversely affects the business, properties, financial
condition or results of operations of such person and its
subsidiaries, taken as a whole, excluding any effect that
results from or arises in connection with (i) changes or
conditions generally affecting the industries in which such
person and any of its subsidiaries operate, except to the extent
such effect has a materially disproportionate effect on such
person and its subsidiaries, taken as a whole, relative to
others in the industries in which such person and any of its
subsidiaries operate, (ii) general economic or regulatory,
legislative or political conditions or securities, credit,
financial or other capital markets conditions, in each case in
the United States, Canada or any foreign jurisdiction, except to
the extent such effect has a materially disproportionate effect
on such person and its subsidiaries, taken as a whole, relative
to others in the industries in which such person and any of its
subsidiaries operate, (iii) any failure, in and of itself,
by such person to meet any internal or published projections,
forecasts, estimates or predictions in respect of revenues,
earnings or other financial or operating metrics for any period
(it being understood that the facts or occurrences giving rise
to or contributing to such failure may be deemed to constitute,
or be taken into account in determining whether there has been
or will be, a Material Adverse Effect), (iv) the execution
and delivery of the Merger Agreement or the public announcement
or pendency of the Merger or any of the other transactions
contemplated by the Merger Agreement, including the impact
thereof on the relationships, contractual or otherwise, of such
person or any of its subsidiaries with employees, labor unions,
customers, suppliers or partners, (v) any change, in and of
itself, in the market price, credit rating or trading volume of
such person’s securities (it being understood that the
facts or occurrences giving rise to or contributing to such
change may be deemed to constitute, or be taken into account in
determining whether there has been or will be, a Material
Adverse Effect), (vi) any change in applicable Law (as
defined in the Merger Agreement), regulation or GAAP (or
authoritative interpretation thereof), except to the extent such
effect has a materially disproportionate effect on such person
and its subsidiaries, taken as a whole, relative to others in
the industries in which such person and any of its subsidiaries
operate, (vii) geopolitical conditions, the outbreak or
escalation of hostilities, any acts of war, sabotage or
terrorism, or any escalation or worsening of any such acts of
war, sabotage or terrorism threatened or underway as of the date
of the Merger Agreement or (viii) any hurricane, tornado,
flood, earthquake or other natural disaster.
Notwithstanding anything in this Commitment Letter, the Fee
Letter or the Loan Documents to the contrary, the only
representations relating to the Company, the Merger Party and
their respective subsidiaries the accuracy of which will be a
condition to the availability of the Senior Facilities on the
Closing Date will be (i) the representations made by or
with respect to the Company, the Merger Party and their
respective subsidiaries in the Merger Agreement (but only to the
extent that the Company or the Merger Party has the right to
terminate its obligations under the Merger Agreement or decline
to consummate the Merger as a result of a breach of such
representations and warranties in the Merger Agreement) and
(ii) the Specified Representations (as defined below).
As used herein,
“Specified Representations”
means representations relating to incorporation or formation;
organizational power and authority to enter into the
documentation relating to the Senior Facilities; due execution;
delivery and enforceability of such documentation; solvency; no
conflicts with laws; charter documents or material
A-Exhibit C-3
agreements; Federal Reserve margin regulations; the Investment
Company Act, Patriot Act; status of the Senior Facilities as
first lien senior debt; and, except as provided above, the
creation, perfection and priority of the security interests
granted in the proposed collateral.
The Arrangers intend, and reserve the right, to syndicate the
Senior Facilities to the Lenders promptly following the date
hereof, and you acknowledge and agree that the commencement of
syndication shall occur in the discretion of the Arrangers. The
Arrangers will select the Lenders after consultation with you.
The Arrangers will lead the syndication, including determining
the timing of all offers to potential Lenders, any title of
agent or similar designations or roles awarded to any Lender and
the acceptance of commitments, the amounts offered and the
compensation provided to each Lender from the amounts to be paid
to the Arrangers pursuant to the terms of this Commitment Letter
and the Fee Letter. The Arrangers will, in consultation with
you, determine the final commitment allocations and will notify
the Company of such determinations. You agree to use
commercially reasonable efforts to ensure that the
Arrangers’ syndication efforts benefit from the existing
lending relationships of the Company and the Merger Party and
their respective subsidiaries. To facilitate an orderly and
successful syndication of the Senior Facilities, you agree that,
until the earliest of (x) the termination of the
syndication as determined by the Arrangers, (y) the
consummation of a Successful Syndication (as defined in the Fee
Letter) and (z) 90 days after the Closing Date,
neither the Company nor the Merger Party (including, in each
case, their respective subsidiaries) will syndicate or issue,
attempt to syndicate or issue, announce or authorize the
announcement of the syndication or issuance of, any debt
facility or any debt or equity security of the Merger Party or
the Company or any of their respective subsidiaries or
affiliates (other than (a) the Senior Facilities and other
indebtedness contemplated hereby to remain outstanding after the
Closing Date and (b) the issuance of (i) common equity
of the Merger Party to shareholders of the Company on the
Closing Date, (ii) the Securities (if any),
(iii) equity issued in connection with the conversion of
any convertible debt securities of the Company, hedging
arrangements or warrants and (iv) equity pursuant to
employee stock plans of the Company and the Merger Party and
other similar arrangements to be mutually agreed upon by you and
the Arrangers) without the prior written consent of the
Arrangers.
You agree to cooperate with the Commitment Parties, in
connection with (i) the preparation of one or more
information packages regarding the business, operations and
financial projections of the Company and the Merger Party
(collectively, the
“Confidential Information
Memorandum”
) including, without limitation, all
information relating to the transactions contemplated hereunder
prepared by or on behalf of the Company or the Merger Party
deemed reasonably necessary by the Commitment Parties to
complete the syndication of the Senior Facilities including,
without limitation, using commercially reasonable efforts to
obtain (a) a public corporate family rating from
Moody’s Investor Services, Inc.
(
“Moody’s”
) for the Company, (b) a
public corporate credit rating from Standard &
Poor’s Ratings Group, a division of The McGraw Hill
Corporation (
“S&P”
)) for the Company and
(c) a public credit rating for the Senior Facilities from
each of Moody’s and S&P, and (ii) the
presentation of one or more information packages reasonably
acceptable in format and content to the Commitment Parties
(collectively, the
“Lender Presentation”
) in
meetings and other communications with prospective Lenders or
agents in connection with the syndication of the Senior
Facilities (including, without limitation, direct contact
between senior management and representatives, with appropriate
seniority and expertise, of the Company and the Merger Party
with prospective Lenders and participation of such persons in
meetings). You further agree that the commitments and agreements
of the Commitment Parties hereunder are conditioned upon your
satisfaction of the requirements of the foregoing provisions of
this paragraph by a date sufficient to afford the Arrangers a
period of at least 30 consecutive days following the launch of
the general syndication of the Senior Facilities to syndicate
the Senior Facilities prior to the Closing Date (as defined in
Annex B);
provided
that such period will not include
any day from and including August 23, 2010 through
September 6, 2010 or December 18, 2010 through
January 3, 2011. You will be solely responsible for the
contents of any such Confidential Information Memorandum and
Lender Presentation (other than, in each case, any information
contained therein that has been provided for inclusion therein
by the Commitment Parties solely to the extent such information
relates to the Commitment Parties) and all other information,
documentation or materials delivered to the Arrangers in
connection therewith (collectively, the
“Information”
) and you acknowledge that the
Commitment Parties will be using and relying upon the
Information without independent verification thereof. You agree
that Information regarding the Senior Facilities and
A-Exhibit C-4
Information provided by the Company and the Merger Party or
their respective representatives to the Arrangers in connection
with the Senior Facilities (including, without limitation, draft
and execution versions of the Loan Documents, the Confidential
Information Memorandum, the Lender Presentation, publicly filed
financial statements, and draft or final offering materials
relating to contemporaneous securities issuances by the Company
or the Merger Party) may be disseminated to potential Lenders
and other persons through one or more internet sites (including
an IntraLinks, SyndTrak or other electronic workspace (the
“Platform”
)) created for purposes of
syndicating the Senior Facilities or otherwise, in accordance
with the Arrangers’ standard syndication practices, and you
acknowledge that neither the Arrangers nor any of their
affiliates will be responsible or liable to you or any other
person or entity for damages arising from the use by others of
any Information or other materials obtained on the Platform,
except, in the case of damages to you but not to any other
person, to the extent such damages are found by a final judgment
of a court of competent jurisdiction to arise from the gross
negligence or willful misconduct of any Arranger or any of its
affiliates or any of their respective directors, employees,
advisors or agents.
You acknowledge that certain of the Lenders may be “public
side” Lenders (i.e. Lenders that do not wish to receive
material non-public information with respect to the Company, the
Merger Party or their respective affiliates or any of its or
their respective securities) (each, a
“Public
Lender”
). At the request of the Arrangers, you agree to
prepare an additional version of the Confidential Information
Memorandum and the Lender Presentation to be used by Public
Lenders that does not contain material non-public information
concerning the Company, the Merger Party or their respective
affiliates or securities. It is understood that in connection
with your assistance described above, at the request of the
Arrangers, you will provide, and cause all other applicable
persons to provide, authorization letters to the Arrangers
authorizing the distribution of the Information to prospective
Lenders, containing a representation to the Arrangers that the
public-side version does not include material non-public
information about the Company, the Merger Party or their
respective affiliates or its or their respective securities. In
addition, you will clearly designate as such all Information
provided to the Commitment Parties by or on behalf of the
Company or the Merger Party which is suitable to make available
to Public Lenders. You acknowledge and agree that the following
documents may be distributed to Public Lenders, unless you
advise the Arrangers in writing (including by email) within a
reasonable time prior to their intended distributions that such
material should only be distributed to prospective Lenders that
are not Public Lenders: (a) drafts and final versions of
the Loan Documents; (b) administrative materials prepared
by the Arrangers for prospective Lenders (such as a lender
meeting invitation, allocations and funding and closing
memoranda); and (c) term sheets and notification of changes
in the terms of the Senior Facilities.
You represent and covenant that (i) all written Information
(other than financial projections and information of a general
economic or industry specific nature) provided directly or
indirectly by the Merger Party or the Company to the Commitment
Parties or the Lenders in connection with the transactions
contemplated hereunder is and will be, when furnished and when
taken as a whole and giving effect to all supplements thereto,
complete and correct in all material respects and does not and
will not contain any untrue statement of a material fact or omit
to state a material fact necessary to make the statements
contained therein, in light of the circumstances under which
they were made, not materially misleading and (ii) the
financial projections that have been or will be made available
to the Arrangers or the Lenders in connection with the
transactions contemplated hereunder by or on behalf of the
Company or the Merger Party have been and will be prepared in
good faith based upon assumptions that are believed by the
preparer thereof to be reasonable at the time such financial
projections are furnished to the Commitment Parties or the
Lenders, it being understood and agreed that financial
projections are not a guarantee of financial performance and
actual results may differ from financial projections and such
differences may be material. You agree that if at any time prior
to the Successful Syndication of the Senior Facilities as
determined by the Arrangers, any of the representations in the
preceding sentence would be incorrect in any material respect if
the Information and financial projections were being furnished,
and such representations were being made, at such time, then you
will promptly supplement, or cause to be supplemented, the
Information and financial projections so that such
representations will be correct in all material respects under
those circumstances.
A-Exhibit C-5
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5.
|
Indemnification
and Related Matters.
|
In connection with arrangements such as this, it is the
Commitment Parties’ policy to receive indemnification. You
agree to the provisions with respect to our indemnity and other
matters set forth in Annex A, which is incorporated by
reference into this Commitment Letter.
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6.
|
Assignments;
Amendments.
|
This Commitment Letter may not be assigned by you without the
prior written consent of the Commitment Parties (and any
purported assignment without such consent will be null and
void), is intended to be solely for the benefit of the
Commitment Parties and the other parties hereto and, except as
set forth in Annex A hereto, is not intended to confer any
benefits upon, or create any rights in favor of, any person
other than the parties hereto. Each of the Commitment Parties
may assign its commitments and agreements hereunder, in whole or
in part, to any of its affiliates (provided that such affiliates
agree to abide by the confidentiality provisions of
Section 7 of this Commitment Letter) and, as provided
above, to any Lender prior to the Closing Date;
provided
that any assignment by a Commitment Party to any potential
Lender made prior to the Closing Date shall not relieve such
Commitment Party of its obligations set forth herein to fund
that portion of the commitments so assigned. Neither this
Commitment Letter nor the Fee Letter may be amended or any term
or provision hereof or thereof waived or otherwise modified
except by an instrument in writing signed by each of the parties
hereto or thereto, as applicable, and any term or provision
hereof or thereof may be amended or waived only by a written
agreement executed and delivered by all parties hereto or
thereto.
Please note that this Commitment Letter, the Fee Letter and any
written communications provided by, or oral discussions with,
the Commitment Parties in connection with this arrangement are
exclusively for the information of the Company and the Merger
Party and may not be disclosed to any third party or circulated
or referred to publicly without our prior written consent
except, after providing written notice to the Commitment
Parties, pursuant to a subpoena or order issued by a court of
competent jurisdiction or by a judicial, administrative or
legislative body or committee;
provided
that we hereby
consent to your disclosure of (i) this Commitment Letter,
the Fee Letter and such communications and discussions to the
Company’s and the Merger Party’s respective directors,
employees, agents and advisors who are directly involved in the
consideration of the Senior Facilities and who have been
informed by you of the confidential nature of such advice and
the Commitment Letter and Fee Letter and who have agreed to
treat such information confidentially, (ii) this Commitment
Letter, the Fee Letter and such communications and discussions
as required by applicable law, rule or regulation or compulsory
legal process (in which case you agree to inform us promptly
thereof to the extent not prohibited by law), (iii) the
terms of this Commitment Letter (but not the Fee Letter or the
terms thereof, other than the aggregate amount of financing fees
payable to the Commitment Parties) and related communications or
discussions in connection with the preparation, filing and
distribution of the
Form S-4
and Joint Proxy Statement and any amendments or supplements
thereto contemplated by the Merger Agreement and (iv) the
information contained in Annex B to Moody’s and
S&P;
provided
that such information is supplied only
on a confidential basis after consultation with the Commitment
Parties.
Each Commitment Party agrees that it will treat as confidential
all information provided to it hereunder by or on behalf of you
or any of your respective subsidiaries or affiliates; provided,
however, that nothing herein will prevent any Commitment Party
from disclosing any such information (a) pursuant to the
order of any court or administrative agency or in any pending
legal or administrative proceeding, or otherwise as required by
applicable law or compulsory legal process (in which case such
person agrees to inform you promptly thereof to the extent not
prohibited by law), (b) upon the request or demand of any
regulatory authority having jurisdiction over such person or any
of its affiliates, (c) to the extent that such information
is publicly available or becomes publicly available other than
by reason of improper disclosure by such person, (d) to
such person’s affiliates and their respective officers,
directors, partners, employees, legal counsel, independent
auditors and other experts or agents who need to know such
information and on a confidential basis, (e) to potential
and prospective Lenders, participants and any direct or indirect
contractual counterparties to any swap or derivative transaction
relating to the borrower and its obligations under the Senior
Facilities, in each case, who are advised of the confidential
nature of such information,
A-Exhibit C-6
(f) to Moody’s and S&P; provided that such
information is limited to Annex B and is supplied only on a
confidential basis after consultation with you or (g) for
purposes of establishing a “due diligence” defense.
Each Commitment Party’s obligation under this provision
shall remain in effect until the earlier of (i) one year
from the date hereof and (ii) the date the definitive Loan
Documents are entered into by the Commitment Parties, at which
time any confidentiality undertaking in the definitive Loan
Documents shall supersede this provision.
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8.
|
Absence
of Fiduciary Relationship; Affiliates; Etc.
|
As you know, each Commitment Party, together with its respective
affiliates (each collectively, a
“Commitment Party
Group”
), is a full service financial services firm
engaged, either directly or through affiliates, in various
activities, including securities trading, investment banking and
financial advisory, investment management, principal investment,
hedging, financing and brokerage activities and financial
planning and benefits counseling for both companies and
individuals. In the ordinary course of these activities, each
Commitment Party Group may make or hold a broad array of
investments and actively trade debt and equity securities (or
related derivative securities)
and/or
financial instruments (including bank loans) for their own
account and for the accounts of their customers and may at any
time hold long and short positions in such securities
and/or
instruments. Such investment and other activities may involve
securities and instruments of the Company or the Merger Party,
as well as of other entities and persons and their affiliates
which may (i) be involved in transactions arising from or
relating to the engagement contemplated by this Commitment
Letter, (ii) be customers or competitors of the Company or
the Merger Party, or (iii) have other relationships with
either of you. In addition, each Commitment Party Group may
provide investment banking, underwriting and financial advisory
services to such other entities and persons. Each Commitment
Party Group may also co-invest with, make direct investments in,
and invest or co-invest client monies in or with funds or other
investment vehicles managed by other parties, and such funds or
other investment vehicles may trade or make investments in
securities of the Company, the Merger Party or such other
entities. The transactions contemplated by this Commitment
Letter may have a direct or indirect impact on the investments,
securities or instruments referred to in this paragraph.
Although each Commitment Party Group in the course of such other
activities and relationships may acquire information about the
transaction contemplated by this Commitment Letter or other
entities and persons which may be the subject of the
transactions contemplated by this Commitment Letter, no
Commitment Party Group shall have any obligation to disclose
such information, or the fact that such Commitment Party Group
is in possession of such information, to the Company or the
Merger Party or to use such information on the Company’s or
the Merger Party’s behalf.
Consistent with their respective policies to hold in confidence
the affairs of its customers, no Commitment Party Group will
furnish confidential information obtained from you by virtue of
the transactions contemplated by this Commitment Letter to any
of its other customers. Furthermore, you acknowledge that no
Commitment Party Group and none of their respective affiliates
has an obligation to use in connection with the transactions
contemplated by this Commitment Letter, or to furnish to you,
confidential information obtained or that may be obtained by
them from any other person.
Each Commitment Party Group may have economic interests that
conflict with yours, or your respective equity holders
and/or
affiliates. You agree that each Commitment Party Group will act
under this Commitment Letter as an independent contractor and
that nothing in this Commitment Letter or the Fee Letter or
otherwise will be deemed to create an advisory, fiduciary or
agency relationship or fiduciary or other implied duty between
any Commitment Party Group and the Company or the Merger Party
or your respective equity holders or affiliates. You acknowledge
and agree that the transactions contemplated by this Commitment
Letter and the Fee Letter (including the exercise of rights and
remedies hereunder and thereunder) are arm’s-length
commercial transactions between the Commitment Party Groups, on
the one hand, and the Company, on the other, and in connection
therewith and with the process leading thereto, (i) no
Commitment Party Group has assumed (A) an advisory or
fiduciary responsibility in favor of the Company or the Merger
Party or your respective equity holders or affiliates with
Company or the Merger Party or your respective equity holders or
affiliates with respect to the financing transactions
contemplated hereby, or in each case, the exercise of rights or
remedies with respect thereto or the process leading thereto
(irrespective of whether such Commitment Party has advised, is
currently advising or will advise the Company, its equity
holders or its affiliates on other matters) or any other
obligation to the Company or the Merger Party except the
obligations expressly set forth in this Commitment Letter and
the Fee Letter and (ii) each Commitment Party
A-Exhibit C-7
Group is acting solely as a principal and not as the agent or
fiduciary of the Company, its management, equity holders,
affiliates, creditors or any other person. Each of you
acknowledge and agree that you have consulted your own legal and
financial advisors to the extent you deemed appropriate and that
you are responsible for making your own independent judgment
with respect to such transactions and the process leading
thereto. You each agree that you will not claim that any
Commitment Party Group has rendered advisory services of any
nature or respect, or owes a fiduciary or similar duty to the
Company or the Merger Party, in connection with such
transactions or the process leading thereto.
Without limiting any other provision of this Section 8, the
Company and the Merger Party (i) expressly agree that this
Commitment Letter and the Fee Letter are being addressed to each
of you solely at your mutual request, (ii) acknowledge that
circumstances may arise where the interests of the Company and
the Merger Party hereunder
and/or
under
the Fee Letter are adverse to one another and (iii) agree
not to assert any claim that you might allege based on any
actual or potential conflict arising from the fact that both of
you are parties to this Commitment Letter and the Fee Letter
including, but not limited to, any such claim arising or
resulting from the separate retention by either of the Company
or the Merger Party of any Commitment Party or any affiliate
thereof as an advisor in connection with the Merger and such
Commitment Party’s or such affiliate’s commitments,
agreements and acts under this Commitment Letter.
In addition, each Commitment Party may employ the services of
its affiliates in providing services
and/or
performing their obligations hereunder and may exchange with
such affiliates information concerning the Company, the Merger
Party and other companies that may be the subject of this
arrangement, and such affiliates will be entitled to the
benefits afforded to the Commitment Parties hereunder.
In addition, please note that the Commitment Parties do not
provide accounting, tax or legal advice. Notwithstanding
anything herein to the contrary, each of the Company and the
Merger Party (and each employee, representative or other agent
of the Company and the Merger Party) may disclose to any and all
persons, without limitation of any kind, the tax treatment and
tax structure of the Senior Facilities and all materials of any
kind (including opinions or other tax analyses) that are
provided to you relating to such tax treatment and tax
structure. However, any information relating to the tax
treatment or tax structure will remain subject to the
confidentiality provisions hereof (and the foregoing sentence
will not apply) to the extent reasonably necessary to enable the
parties hereto, their respective affiliates, and their and their
respective affiliates’ directors and employees to comply
with applicable securities laws. For this purpose, “tax
treatment” means U.S. federal or state income tax
treatment, and “tax structure” is limited to any facts
relevant to the U.S. federal income tax treatment of the
transactions contemplated by this Commitment Letter but does not
include information relating to the identity of the parties
hereto or any of their respective affiliates.
Each Commitment Party’s commitments and agreements
hereunder will terminate upon the first to occur of (i) the
consummation of the Merger, (ii) the abandonment or
termination of the definitive documentation for the Merger
(including the exhibits, schedules and all related documents)
(the
“Merger Agreement”
), (iii) a material
breach by the Company or the Merger Party under this Commitment
Letter or the Fee Letter and (iv) February 28, 2011,
unless the closing of the Senior Facilities, on the terms and
subject to the conditions contained herein, has been consummated
on or before such date.
The provisions set forth under Sections 3, 4, 5 (including
Annex A) and 7 hereof and this Section 9 hereof
will remain in full force and effect regardless of whether
definitive Loan Documents are executed and delivered. The
provisions set forth under Sections 5 (including
Annex A) and 7 hereof and this Section 9 will
remain in full force and effect notwithstanding the expiration
or termination of this Commitment Letter or the Commitment
Parties’ commitments and agreements hereunder.
The Company and the Merger Party each agrees for itself and
its affiliates that any suit or proceeding arising in respect to
this Commitment Letter or the Commitment Parties’
commitments or agreements hereunder or the Fee Letter will be
tried exclusively in the U.S. District Court for the
Southern District of New York or, if that court does not have
subject matter jurisdiction, in any state court located in the
Borough of Manhattan in the City of New York, and the Company
and the Merger Party each agree to submit to the
A-Exhibit C-8
exclusive jurisdiction of, and to venue in, such court. Any
right to trial by jury with respect to any action or proceeding
arising in connection with or as a result of either the
Commitment Parties’ commitments or agreements or any matter
referred to in this Commitment Letter or the Fee Letter is
hereby waived by the parties hereto. This Commitment Letter and
the Fee Letter will be governed by and construed in accordance
with the laws of the State of New York without regard to
principles of conflicts of laws. The Merger Party shall provide
evidence that it has appointed CT Corporation, as its agent for
service of process for purpose of the submission to jurisdiction
set forth above.
The Commitment Parties hereby notify the Company and the Merger
Party that pursuant to the requirements of the USA PATRIOT Act
(Title III of Pub. L.
107-56
(signed into law October 26, 2001)) (the
“Patriot
Act”
) the Commitment Parties and each Lender may be
required to obtain, verify and record information that
identifies the Borrower and each of the Guarantors, which
information includes the name and address of the Borrower and
each of the Guarantors and other information that will allow the
Commitment Parties and each Lender to identify the Borrower and
each of the Guarantors in accordance with the Patriot Act. This
notice is given in accordance with the requirements of the
Patriot Act and is effective for the Commitment Parties and each
Lender.
This Commitment Letter may be executed in any number of
counterparts, each of which when executed will be an original,
and all of which, when taken together, will constitute one
agreement. Delivery of an executed counterpart of a signature
page of this Commitment Letter by facsimile transmission or
electronic transmission (in pdf or tif format) will be effective
as delivery of a manually executed counterpart hereof. This
Commitment Letter and the Fee Letter are the only agreements
that have been entered into among the parties hereto with
respect to the Senior Facilities and set forth the entire
understanding of the parties with respect thereto and supersede
any prior written or oral agreements among the parties hereto
with respect to the Senior Facilities.
[Remainder
of page intentionally left blank]
A-Exhibit C-9
Please confirm that the foregoing is in accordance with your
understanding by signing and returning to the Commitment Parties
the enclosed copy of this Commitment Letter, together, if not
previously executed and delivered, with the Fee Letter on or
before the close of business on June 21, 2010, whereupon
this Commitment Letter and the Fee Letter will become binding
agreements between us. If the Commitment Letter and Fee Letter
have not been signed and returned as described in the preceding
sentence by such date, this offer will terminate on such date.
We look forward to working with you on this transaction.
Very truly yours,
GOLDMAN SACHS BANK USA
GOLDMAN SACHS LENDING PARTNERS LLC,
Authorized Signatory
JEFFERIES GROUP, INC.,
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by
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/s/ Charles
J. Hendrickson
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Name: Charles J. Hendrickson
Title: Managing Director
MORGAN STANLEY SENIOR FUNDING, INC.,
Name: Christy Silvester
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Title:
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Executive Director
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A-Exhibit C-10
ACCEPTED
AND AGREED AS OF THE DATE FIRST WRITTEN ABOVE:
VALEANT PHARMACEUTICALS
INTERNATIONAL,
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by
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/s/ J.
Michael Pearson
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Name: J. Michael Pearson
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Title:
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Chief Executive Officer
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BIOVAIL CORPORATION,
Name: MJ Mulligan
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Title:
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Chief Financial Officer
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A-Exhibit C-11
Annex A
In the event that any Commitment Party becomes involved in
any capacity in any action, proceeding or investigation brought
by or against any person, including shareholders, partners,
members or other equity holders of the Company or the Merger
Party in connection with or as a result of either this
arrangement or any matter referred to in this Commitment Letter
or the Fee Letter (together, the “Letters”), the
Company and the Merger Party each agree to periodically
reimburse each Commitment Party for its reasonable legal and
other expenses (including the cost of any investigation and
preparation) incurred in connection therewith. The Company and
the Merger Party each also agrees to indemnify and hold each
Commitment Party harmless against any and all losses, claims,
damages or liabilities to any such person in connection with or
as a result of either this arrangement or any matter referred to
in the Letters (whether or not such investigation, litigation,
claim or proceeding is brought by you, your equity holders or
creditors or an indemnified person and whether or not any such
indemnified person is otherwise a party thereto), except to the
extent that such loss, claim, damage or liability has been found
by a final, non-appealable judgment of a court of competent
jurisdiction to have resulted from the gross negligence or
willful misconduct of such Commitment Party in performing the
services that are the subject of the Letters. If for any reason
the foregoing indemnification is unavailable to any Commitment
Party or insufficient to hold it harmless, then the Company and
the Merger Party will contribute to the amount paid or payable
by the Commitment Party as a result of such loss, claim, damage
or liability in such proportion as is appropriate to reflect the
relative economic interests of (i) the Company and the
Merger Party and their respective affiliates, shareholders,
partners, members or other equity holders on the one hand and
(ii) the Commitment Parties on the other hand in the
matters contemplated by the Letters as well as the relative
fault of (i) the Company and the Merger Party and their
respective affiliates, shareholders, partners, members or other
equity holders and (ii) the Commitment Parties with respect
to such loss, claim, damage or liability and any other relevant
equitable considerations. The reimbursement, indemnity and
contribution obligations of the Company and the Merger Party
under this paragraph will be in addition to any liability which
the Company or the Merger Party may otherwise have, will extend
upon the same terms and conditions to any affiliate of a
Commitment Party and the partners, members, directors, agents,
employees and controlling persons (if any), as the case may be,
of such Commitment Party and any such affiliate, and will be
binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Company and
the Merger Party, each Commitment Party, any such affiliate and
any such person. The Company and the Merger Party each also
agrees that neither any indemnified party nor any of such
affiliates, partners, members, directors, agents, employees or
controlling persons will have any liability to the Company or
the Merger Party or any person asserting claims on behalf of or
in right of the Company or the Merger Party or any other person
in connection with or as a result of either this arrangement or
any matter referred to in the Letters, except to the extent that
any losses, claims, damages, liabilities or expenses incurred by
the Company, the Merger Party or their respective affiliates,
shareholders, partners or other equity holders have been found
by a final, non-appealable judgment of a court of competent
jurisdiction to have resulted from the gross negligence or
willful misconduct of such indemnified party in performing the
services that are the subject of the Letters;
provided
,
however
, that in no event will such indemnified party or
such other parties have any liability for any indirect,
consequential, special or punitive damages in connection with or
as a result of such indemnified party’s or such other
parties’ activities related to the Letters.
Each of the
Company and the Merger Party agree that, notwithstanding
anything in this Commitment Letter to the contrary and without
limiting the Commitment Parties rights, remedies and defenses
thereunder, in no event shall the Commitment Parties or their
partners, members, directors, agents, employees, controlling
persons or affiliates be liable (in the aggregate) to the
Company or the Merger Party (or their respective shareholders,
partners, members or other equity holders) for damages under
this Commitment Letter or the Fee Letter or related to the
financing contemplated thereby in an amount in excess of
$100.0 million.
Neither the Company nor the Merger Party will be required to
indemnify any Commitment Parties for any amount paid or payable
by such Commitment Party in the settlement of any action,
proceeding or investigation without such party’s consent,
which consent will not be unreasonably withheld or delayed;
provided
that the foregoing indemnity will apply
to any such settlement in the event that the Company or the
Merger Party, as applicable, were offered the ability to assume
the defense of the action that was the subject matter of such
settlement and elected not to so assume.
The provisions of
this Annex A will survive any termination or completion of
the arrangement provided by the Letters.
A-Annex A to Exhibit C-1
Annex B
Summary
of the Senior Facilities
This Summary outlines certain terms of the Senior Facilities
referred to in the Commitment Letter, of which this Annex B
is a part. Certain capitalized terms used herein are defined in
the Commitment Letter.
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Borrower:
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Valeant Pharmaceuticals International (the
“Borrower”
).
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Guarantors:
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Biovail Corporation (the
“Parent”
) and, subject
to exclusions to be mutually agreed upon by the Borrower and the
Administrative Agent, each of the Parent’s existing and
subsequently acquired or organized subsidiaries (other than
foreign subsidiaries of the Borrower) (collectively, the
“Guarantors”
) will guarantee (the
“Guarantee”
) all obligations under the Senior
Facilities;
provided
that Parent and its existing
subsidiaries immediately prior to the Merger shall only be
Guarantors upon and after the consummation of the Merger.
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Purpose/Use of Proceeds:
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The proceeds of the Term Facilities will be used to fund the
Refinancing, the Dividend, the Post-Merger Special Dividend and
all fees and expenses in connection with the Merger (such fees
and expenses, the
“Transaction Expenses”
).
Amounts available under the Revolving Facility will be used to
finance transaction expenses related to the Merger, for
permitted capital expenditures and permitted acquisitions
(subject to customary conditions and pro forma financial tests
to be agreed), to provide for the ongoing working capital
requirements of Parent and its subsidiaries following the Merger
and for general corporate purposes.
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Joint Lead Arrangers, Joint Bookrunners and
Syndication Agents:
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Goldman Sachs Lending Partners LLC (
“GSLP”
),
Jefferies Group, Inc. (
“Jefferies”
) and Morgan
Stanley Senior Funding, Inc. (
“Morgan Stanley”
and together with GSLP and Jefferies, in their capacities as
Joint Lead Arrangers, Joint Bookrunners and Syndication Agents,
the
“Arrangers”
).
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Administrative Agent:
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Goldman Sachs Lending Partners LLC (in such capacity, the
“Administrative Agent”
).
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Lenders:
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Goldman Sachs Bank USA, Morgan Stanley and Jefferies and/or
other financial institutions selected by the Arrangers (each, a
“Lender”
and, collectively, the
“Lenders”
).
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Amount of Senior Facilities:
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Up to $3,022.0 million of senior secured bank financing
(the
“Senior Facilities”
) to include:
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(i) $500.0 million of a senior secured term loan A
(the
“Term A Facility”
) which will be available
on the Closing Date to fund the Refinancing;
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(ii) up to $2,272.0 million of senior secured term loan B
(the
“Term B
Facility”
and, together
with the Term A Facility, the
“Term
Facilities”
): (i) up to $1,972.0 million of
which will be available on the Closing Date to fund, in part,
the Refinancing and to fund the Dividend and (ii) $300.0
million of which shall be available on a delayed-draw basis,
each as set forth below under “Availability”; and
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A-Annex B to Exhibit C-1
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(ii) a $250.0 million senior secured revolving credit
facility (the
“Revolving
Facility”
and,
together with the Term Facilities, the Senior Facilities). The
Revolving Facility (including any Letters of Credit issued
thereunder) shall be made available in U.S. dollars.
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The amount of the Initial Draw under the Term B Facility (as
defined below) shall be reduced
dollar-for-dollar
by (i) the net proceeds of any Securities issued after the
date hereof and prior to the Closing Date, (ii) the
aggregate principal amount of the Existing Notes that will
remain outstanding on and after the Closing Date, after giving
effect to the making of the loans under the Senior Facilities
and the Refinancing and (iii) 50% of the net proceeds from
the sale of properties or assets or any interests therein that,
individually or in a series of related transactions, generate
net proceeds in excess of $25.0 million, until the
aggregate net proceeds after the date hereof equals
$400.0 million and then 100% of any additional asset sale
proceeds (except for sales of pharmaceutical products in the
ordinary course of business, which shall not be subject to this
clause (iii)).
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Incremental Facility:
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On or before the final maturity date of each the Senior
Facilities, the Borrower will have the right, but not the
obligation, to increase the amount of the Term B Facility by
incurring an incremental term loan facility (the
“Incremental Facility”
) in an aggregate
principal amount not to exceed $250.0 million;
provided
that (i) no event of default or default exists or would
exist after giving effect thereto, (ii) all financial
covenants would be satisfied on a pro forma basis on the date of
incurrence and for the most recent determination period, after
giving effect to such Incremental Facility and (iii)
(a) the yield applicable to the Incremental Facility will
not be more than 0.25% higher than the corresponding interest
rate for the existing Term B Facility, unless the interest rate
margins with respect to the Term B Facility is increased by an
amount equal to the difference between the yield with respect to
the Incremental Facility and the corresponding interest rate on
the Term B Facility,
minus
0.25%, (b) the maturity
date applicable to the Incremental Facility will not be earlier
than the maturity date of the Term B Facility, (c) the
weighted average life to maturity of the Incremental Facility
will not be shorter than the then remaining weighted average
life to maturity of the Term B Facility and (d) all other
terms (other than pricing and amortization) of the Incremental
Facility, if not consistent with the terms of the existing Term
B Facility (except as permitted by subclauses (a), (b) and
(c) of this clause (iii), must be reasonably acceptable to
the Administrative Agent. Such increased amounts will be
provided by existing Lenders or other persons who become Lenders
in connection therewith;
provided
that no existing Lender
will be obligated to provide any such increased portion of the
Senior Facilities.
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Availability:
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Term A Facility
:
The entire
$500.0 million of the Term A Facility will be available on
the Closing Date to fund, in part, the Refinancing, the Dividend
and the Transaction Expenses, upon satisfaction of the Initial
Draw Conditions (as defined in Annex C to the Commitment
Letter).
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A-Annex B to Exhibit C-2
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Term B Facility
:
Two drawings may be
made under the Term B Facility. The first drawing under the Term
Facility (the
“Initial Draw”
) may be made on
the Closing Date to fund, in part, the Refinancing, the Dividend
and the Transaction Expenses, upon satisfaction of the Initial
Draw Conditions. The second drawing under the Term B Facility
(the
“Second Draw”
) may be made on the Closing
Date to fund the Dividend, upon satisfaction of the Second Draw
Conditions (as defined in Annex C to the Commitment Letter).
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Delayed-Draw Term B
Facility
:
$300.0 million of the Term B
Facility (the
“Delayed-Draw Tranche”
) will be
available to the Borrower on a delayed-draw basis to fund the
Post-Merger Special Dividend on or prior to the later of
(i) December 31, 2010 or (ii) 60 days after
the Closing Date.
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Revolving Facility
:
Amounts available
under the Revolving Facility may be borrowed, repaid and
reborrowed on and after the Closing Date until the maturity date
thereof, including on the Closing Date to fund any original
issue discount or upfront fees resulting from the Commitment
Party’s exercise of rights under the “Market
Flex” provisions of the Fee Letter;
provided
that
after giving effect to all such borrowings on the Closing Date
there remains at least $100.0 million of undrawn
availability under the Revolving Facility.
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Maturities:
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Term A Facility
:
5 year
anniversary of the Closing Date.
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Term B Facility
:
6 year
anniversary of the Closing Date
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Revolving Facility
:
4.5 year
anniversary of the Closing Date.
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Closing Date:
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The date on or before February 28, 2011 on which the
initial borrowings under the Term Facilities are made, upon
satisfaction of the Initial Draw Conditions (the
“Closing Date”
).
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Amortization:
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Term A Facility
:
The outstanding
principal amount of the Term A Facility will be payable as
follows: 10% in years 1 and 2, 20% in years 3 and 4, with the
remaining balance due at the maturity of the Term A Facility.
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Term B Facility
:
The outstanding
principal amount of the Term B Facility will be payable in equal
quarterly amounts of 1%
per annum
, with the remaining
balance due at the maturity of the Term B Facility.
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Revolving Facility
:
None.
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Swing Line Loans:
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At the option of the Lender providing such swing line loans, a
portion of the Revolving Facility to be agreed upon may be made
available as swing line loans.
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Letters of Credit:
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At the option of the issuing bank providing such Letter of
Credit, a portion of the Revolving Facility to be agreed upon
may be made available for the issuance of letters of credit by
an issuing bank to be agreed (
“Letters of
Credit”
).
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Interest Rate:
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All amounts outstanding under the Senior Facilities will bear
interest, at the Borrower’s option, as follows:
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A-Annex B to Exhibit C-3
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With respect to loans made under the Term A Facility and the
Revolving Facility:
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(i) at the Base Rate plus 3.50%
per annum
; or
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(ii) at the reserve adjusted Eurodollar Rate plus 4.50%
per annum;
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With respect to loans made under the Term B Facility:
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(i) at the Base Rate plus 3.75%
per annum
; or
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(ii) at the reserve adjusted Eurodollar Rate plus 4.75%
per annum
;
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provided
, that the interest rate margins for the Senior
Facilities set forth in clauses (i) and (ii) above
with respect to each of the Term A Facility, the Term B Facility
and the Revolving Facility shall be (x) decreased by 0.25%
if the credit ratings for the Senior Facilities are at least Ba3
(stable) from Moody’s and BB- (stable) from S&P prior
to the Closing Date and (y) increased by 0.75% if the
credit rating for the Senior Facilities is B2 (stable) or lower
from Moody’s or B (stable) or lower from S&P prior to
the Closing Date.
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As used herein, the terms
“Base Rate”
and
“reserve adjusted Eurodollar Rate”
will have
meanings customary and appropriate for financings of this type,
and the basis for calculating accrued interest and the interest
periods for loans bearing interest at the reserve adjusted
Eurodollar Rate will be customary and appropriate for financings
of this type subject, in the case of the Term B Facility only,
to a reserve adjusted Eurodollar Rate “floor” of 1.75%
and a Base Rate “floor” of 2.75%. In no event shall
the Base Rate be less than the sum of (i) the one-month
reserve adjusted Eurodollar Rate (after giving effect to any
reserve adjusted Eurodollar Rate “floor”) plus
(ii) the difference between the applicable stated margin
for reserve adjusted Eurodollar Rate loans and the applicable
stated margin for Base Rate loans. After the occurrence and
during the continuance of an Event of Default, interest on all
amounts then outstanding will accrue at a rate equal to the rate
on loans bearing interest at the rate determined by reference to
the Base Rate plus an additional two percentage points (2.00%)
per annum
and will be payable on demand.
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Interest Payments:
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Quarterly for loans bearing interest by reference to the Base
Rate; except as set forth below, on the last day of selected
interest periods (which will be one, two, three and six months
and any other period mutually agreed upon by the Borrower and
the Lenders under the Revolving Facility) for loans bearing
interest by reference to the Eurodollar Rate (and at the end of
every three months, in the case of interest periods of longer
than three months); and upon prepayment, in each case payable in
arrears and computed on the basis of a
360-day
year
(365/366 day year with respect to loans bearing interest by
reference to the Base Rate)
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Interest Rate Protection:
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Within 90 days after the Closing Date, the Borrower will
obtain from a counterparty satisfactory to the Administrative
Agent interest rate protection through interest rate swaps, caps
or other agreements satisfactory to the Administrative Agent
against increases in the interest rates with respect to a
notional amount of indebtedness such
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A-Annex B to Exhibit C-4
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that not less than 35% of the total funded indebtedness of the
Parent and its subsidiaries outstanding as of the Closing Date
will be either (i) subject to such interest rate protection
agreements or (ii) fixed rate indebtedness, in each case
for a period of not less than three years.
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Funding Protection:
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Customary for transactions of this type, including breakage
costs,
gross-up
for
withholding, compensation for increased costs and compliance
with capital adequacy and other regulatory restrictions. The
Loan Documents will contain customary Lender mitigation and
replacement provisions.
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Commitment Fees:
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Commitment fees equal to 0.75%
per annum
times the daily
average undrawn portion of the Revolving Facility (reduced by
the amount of Letters of Credit issued and outstanding) will
accrue from the Closing Date and will be payable quarterly in
arrears.
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Delayed Draw Fee:
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Commitment fees equal to 0.75%
per annum
times the
undrawn amount of commitments under the Delayed-Draw Tranche
will accrue from the Closing Date and will be payable quarterly
in arrears.
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Letters of Credit Fees:
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A fee equal to (i) the applicable margin then in effect for
loans bearing interest at the reserve adjusted Eurodollar Rate
made under the Revolving Facility, times (ii) the average
daily maximum aggregate amount available to be drawn under all
Letters of Credit, will be payable quarterly in arrears to the
Lenders under the Revolving Facility. In addition, a fronting
fee, to be agreed upon between the issuer of each Letter of
Credit and the Borrower, will be payable to such issuer, as well
as certain customary fees assessed thereby.
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Voluntary Prepayments:
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The Senior Facilities may be prepaid in whole or in part without
premium or penalty;
provided
that loans bearing interest
with reference to the reserve adjusted Eurodollar Rate will be
prepayable only on the last day of the related interest period
unless the Borrower pays any related breakage costs. Voluntary
prepayments of the Term Facilities will be applied to scheduled
amortization payments as directed by the Borrower.
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Mandatory Prepayments:
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The following mandatory prepayments will be required (subject to
certain customary basket amounts to be negotiated in the
definitive Loan Documents):
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1.
Asset Sales
:
Prepayments in an
amount equal to 100% of the net cash proceeds of the sale or
other disposition of any property or assets of Parent or its
subsidiaries (in excess of certain thresholds and subject to
certain exceptions to be determined), other than net cash
proceeds of sales or other dispositions of inventory in the
ordinary course of business and net cash proceeds that are
reinvested in other assets useful in the business of the Parent
and its subsidiaries within one year of receipt thereof.
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2.
Insurance Proceeds
:
Prepayments
in an amount equal to 100% of the net cash proceeds of insurance
paid on account of any loss of any property or assets of the
Parent or its subsidiaries, other than net cash proceeds that
are reinvested in other assets useful in the business of Parent
and its subsidiaries (or used to replace damaged or destroyed
assets) within one year of receipt thereof.
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A-Annex B to Exhibit C-5
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3.
Incurrence of
Indebtedness
:
Prepayments in an amount equal
to 100% of the net cash proceeds received from the incurrence of
indebtedness by the Parent or its subsidiaries (other than
indebtedness otherwise permitted under the Loan Documents and
other exceptions to be agreed), payable no later than the first
business day following the date of receipt.
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4.
Equity Offerings
:
Prepayments
in an amount equal to 50% (subject to reductions to a lower
percentage upon achievement of certain financial performance
measures to be determined) of the net cash proceeds received
from the issuance of equity securities of Parent, the Borrower
or their respective subsidiaries (other than issuances pursuant
to employee stock plans and other exceptions to be mutually
agreed upon by the Borrower and the Administrative Agent).
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5.
Excess Cash Flow
:
Prepayments
in an amount equal to 50% (subject to reductions to a lower
percentage upon achievement of certain financial performance
measures to be determined) of “excess cash flow” (to
be defined in the applicable Loan Document), payable within
90 days of fiscal year-end (commencing for the fiscal year
ended December 31, 2011);
provided
that voluntary
prepayments of loans under the Revolving Facility (to the extent
accompanied by a permanent commitment reduction in like amount)
or the Term Facilities (other than, in each case, prepayments
funded with the proceeds of incurrences of indebtedness, equity
issuances or contributions or asset dispositions) shall be
credited against excess cash flow prepayment obligations on a
dollar-for-dollar
basis.
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All mandatory prepayments will be applied without penalty or
premium (except for breakage costs, if any) and will be applied
first
pro rata to the Term Facilities (and applied pro
rata to remaining scheduled amortization payments and the
payments at final maturity);
provided
that, at the
election of holders of loans under the Term B Facility, the
portion of proceeds otherwise allocable thereto may be allocated
to repay the loans under Term A Facility in full prior to
prepayment of the loans under the Term B Facility held by such
holders; and,
second
, to outstanding loans under the
Revolving Facility.
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Security:
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The Senior Facilities, each Guarantee and any interest rate and
currency hedging obligations of the Borrower or any Guarantor
owed to the Administrative Agent, the Arrangers, any Lender or
any affiliate of the Administrative Agent, the Arrangers or any
Lender (the
“Hedging Obligations”
) will be
secured by first priority security interests in substantially
all assets, including, without limitation, substantially all
personal, material and owned real and mixed property of the
Borrower and the Guarantors (except as otherwise agreed to by
the Arrangers or set forth below). In addition, the Senior
Facilities will be secured by a first priority security interest
in 100% of the capital stock of the Borrower and each domestic
subsidiary of the Borrower, 65% of the capital stock of each
foreign subsidiary of the Borrower, and 100% of the capital
stock of each subsidiary of the Parent that is not also a
subsidiary of the Borrower, and all intercompany debt. All
security arrangements relating to the Senior Facilities and the
Hedging
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A-Annex B to Exhibit C-6
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Obligations will be in form and substance reasonably
satisfactory to the Administrative Agent and the Arrangers and,
subject to the limitations set forth in the Commitment Letter,
will be perfected on the Closing Date;
provided
, that
with respect to guarantees and collateral documentation
regarding the Merger Party, such documentation shall be been
delivered in escrow to counsel to the Arrangers pursuant to
instructions providing for the release and effectiveness of such
documentation concurrently with the effectiveness of the Merger
as set forth in the Merger Certificate (as defined in
Annex C to the Commitment Letter).
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Notwithstanding the foregoing, the collateral shall not include:
(a) motor vehicles and other assets subject to certificates
of title, (b) letter of credit rights (other than letter of
credit rights that are supporting obligations), (c) deposit
accounts the funds in which are used solely for the payment of
salaries and wages, workers’ compensation and similar
expenses, (d) equity interests in any person that is not a
direct or indirect wholly owned subsidiary of the Parent (with
subsidiaries the minority interest in which is held by
management, directors or employees of the Parent or its
subsidiaries or consists of rolled-over equity to be treated as
wholly owned for purposes of the foregoing) if the
organizational or governance documents of such person prohibit
the grant of a security interest therein without the consent of
any third party, (e) any license, contract or agreement if
the grant of a security interest therein would result in a
breach thereof (other than to the extent that any such provision
would be rendered ineffective pursuant to applicable provisions
of the UCC), (f) any equipment owned by the Borrower or any
Guarantor that is subject to a purchase money security interest
if the agreement pursuant to which such purchase money security
interest has been granted prohibits a grant of a security
interest therein without the consent of any third party,
(g) leasehold interests and (f) other assets
(including owned real property and commercial tort claims) if
the Administrative Agent, in consultation with the Borrower,
determines that the cost or burden of creating or perfecting a
security interest therein shall be excessive in view of the
benefits to be obtained by the Lenders therefrom.
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Representations and Warranties:
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The credit agreement for the Senior Facilities will contain
representations and warranties by the Borrower (with respect to
the Parent, the Borrower and their respective subsidiaries) as
to the following matters: due organization; requisite power and
authority; qualification; equity interests and ownership; due
authorization, execution, delivery and enforceability of the
Loan Documents; creation, perfection and priority of security
interests; no conflicts; governmental consents; historical and
projected financial condition; no material adverse change; no
restricted junior payments; absence of material litigation;
payment of taxes; title to properties; environmental matters; no
defaults under material agreements; Investment Company Act and
margin stock matters; ERISA and other employee matters; solvency
of the Parent, Borrower and each of the Guarantors, subject to
customary assumptions regarding credit support; compliance with
laws; full disclosure; and Patriot Act and other related matters.
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A-Annex B to Exhibit C-7
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Covenants:
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The definitive Loan Documents for the Senior Facilities will
contain financial, affirmative and negative covenants by each of
the Parent and the Borrower (with respect to Parent and the
Borrower and their subsidiaries) that consist of the following:
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— financial covenants:
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maximum total leverage ratio, minimum total interest coverage,
maximum capital expenditures, with financial definitions and
covenant levels to be mutually agreed upon by the Borrower and
the Arrangers, and
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— affirmative covenants:
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delivery of financial statements and other reports (including
the identification of information as suitable for distribution
to Public Lenders); maintenance of existence; payment of taxes
and claims; maintenance of properties; maintenance of insurance;
cooperation with syndication efforts; books and records;
inspections; annual lender meetings; compliance with laws;
environmental matters; additional collateral and guarantors;
maintenance of corporate level and facility level ratings; and
further assurances, including, in each case, exceptions and
baskets to be mutually agreed upon by the Borrower and the
Arrangers, and
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— negative covenants:
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limitations with respect to other indebtedness; liens; negative
pledges; restricted junior payments (e.g., no dividends,
redemptions or voluntary payments on certain debt); restrictions
on subsidiary distributions; investments, mergers and
acquisitions; sales of assets (including subsidiary interests);
sales and lease-backs; transactions with affiliates; conduct of
business; amendments and waivers of organizational documents,
junior indebtedness and other material agreements; and changes
to fiscal year, including, in each case, exceptions and baskets
to be mutually agreed upon by the Borrower and the Arrangers
(including, without limitation, to the limitation on restricted
junior payments to permit the Dividend and the Post-Merger
Special Dividend).
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Events of Default:
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The definitive Loan Documents for the Senior Facilities will
include events of default (and usual and customary grace
periods) that consist of the following: failure to make payments
when due, cross-default under material indebtedness,
noncompliance with covenants, breaches of representations and
warranties, bankruptcy, judgments in excess of specified
amounts, ERISA, invalidity of security interests in collateral,
invalidity of guarantees and “change of control” (to
be defined in a manner to be mutually agreed upon by the
Borrower and the Arrangers).
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Conditions Precedent to the Initial Draw and the Second
Draw:
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The several obligations of the Lenders to make loans to the
Borrower in respect of the Initial Draw and the Second Draw will
be subject to the conditions precedent referred to in the
Commitment Letter and listed on Annex C attached to the
Commitment Letter.
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Conditions to All Borrowings:
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The making of each extension of credit under the Senior
Facilities will be subject to (a) prior written notice of
borrowing, (b) the accuracy of representations and
warranties that are qualified by materiality and the accuracy in
all material respects of the representations and warranties not
so qualified (subject to the limitations set forth in the
Commitment
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A-Annex B to Exhibit C-8
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Letter) and (c) after the Closing Date, the absence of any
default or event of default.
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N
otwithstanding the foregoing, any fact or matter that
would cause a default or event of default on the Closing Date
had clause (c) been applicable on the Closing Date shall
not result in a failed condition to borrowing on the Closing
Date, but, unless cured or waived in accordance with the terms
of the Loan Documents, shall constitute a default or event of
default, as applicable, immediately thereafter.
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In addition, as conditions to the funding of the Delayed-Draw
Tranche, (i) the Merger shall have been consummated and
become effective and (ii) the Parent shall have declared
the Post-Merger Special Dividend to its shareholders.
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Assignments and Participations:
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The Lenders may assign all or, in an amount of not less than
(x) $2.5 million with respect to each of the Term A
Facility and the Revolving Facility and
(y) $1.0 million with respect to the Term B Facility,
any part of, their respective shares of the Senior Facilities to
their affiliates (other than natural persons) or one or more
banks, financial institutions or other entities that are
eligible assignees (to be defined in the Loan Documents) which,
in the case of assignments with respect to the Term A Facility
and the Revolving Facility (except in the case of assignments
made by or to Goldman Sachs), are reasonably acceptable to the
Administrative Agent and (except during the existence of an
Event of Default) the Borrower, each such consent not to be
unreasonably withheld or delayed. Upon such assignment, such
affiliate, bank, financial institution or entity will become a
Lender for all purposes under the Loan Documents;
provided,
that assignments made to affiliates and other Lenders will
not be subject to the above described consent or minimum
assignment amount requirements. A $3,500 processing fee will be
required in connection with any such assignment. The Lenders
will also have the right to sell participations, subject to
customary limitations on voting rights, in their respective
shares of the Senior Facilities.
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Requisite Lenders:
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Amendments and waivers will require the approval of Lenders
holding more than 50% of total commitments or exposure under the
Senior Facilities, except that (x) any amendment that would
disproportionately affect the obligation of the Borrower to make
payment of the loans under either the Revolving Facility or the
Term Facilities will not be effective without the approval of
holders of more than 50% of such class of loans and
(y) with respect to matters relating to the interest rates,
maturity, amortization, certain collateral issues and the
definition of Requisite Lenders, consent of each Lender directly
and adversely affected thereby shall be required.
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Taxes:
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The Senior Facilities will provide that all payments are to be
made free and clear of any taxes (other than franchise taxes,
taxes on overall net income), imposts, assessments, withholdings
or other deductions whatsoever not in existence on the date on
which the applicable institution became a Lender. Lenders will
furnish to the Administrative Agent appropriate certificates or
other evidence of exemption from U.S. federal tax withholding.
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A-Annex B to Exhibit C-9
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Indemnity:
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The Senior Facilities will provide customary and appropriate
provisions relating to indemnity and related matters in a form
reasonably satisfactory to the Borrower, the Arrangers, the
Administrative Agent and the Lenders.
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Governing Law and Jurisdiction:
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The Senior Facilities will provide that the Borrower will submit
to the exclusive jurisdiction and venue of the federal and state
courts of the State of New York (except to the extent the
Collateral Agent requires submission to any other jurisdiction
in connection with the exercise of any rights under any security
document or the enforcement of any judgment) and will waive any
right to trial by jury. New York law will govern the Loan
Documents, except with respect to certain security documents
where applicable local law is necessary for enforceability or
perfection.
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Counsel to the Arrangers and Administrative Agent:
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Cahill Gordon & Reindel
llp
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The foregoing is intended to summarize certain basic terms of
the Senior Facilities. It is not intended to be a definitive
list of all of the requirements of the Lenders in connection
with the Senior Facilities. Any terms to be set forth in the
Loan Documents that are not otherwise set forth in this Summary
of Senior Facilities shall be reasonably acceptable to each of
the Borrower and the Administrative Agent.
A-Annex B to Exhibit C-10
Annex C
Summary
of Conditions Precedent to the Senior Facilities
This Summary of Conditions Precedent outlines the conditions
precedent to the Senior Facilities referred to in the Commitment
Letter, of which this Annex C is a part. Certain
capitalized terms used herein are defined in the Commitment
Letter.
A.
Initial Draw
Conditions
:
The conditions to the Initial
Draw (the
“Initial Draw Conditions”
) shall
consist of the following (together with any other conditions to
funding expressly set forth in the Commitment Letter and in
Annex B thereto):
1.
Acquisition
:
The terms of
the Merger Agreement (including the exhibits, schedules,
disclosure letters and all related documents) will be reasonably
satisfactory to the Arrangers;
provided
that the
Arrangers acknowledge that the Merger Agreement draft dated as
of June 20, 2010 is reasonably acceptable to the Arrangers.
All conditions precedent to the consummation of the Merger in
the Merger Agreement dated as of June 20, 2010 shall have
been satisfied or waived, without giving effect to any
amendments thereto or any waivers or consents that are
materially adverse to the Arrangers or the Lenders in their
capacities as Lenders, in each case without the consent of the
Arrangers (
provided
that any (i) change in the form
of Merger consideration, (ii) any increase in the Merger
consideration or (iii) any decrease in the Merger
consideration that is not accompanied by a corresponding
dollar-for-dollar
reduction in the Dividend and the amount of the Term B Facility,
shall be deemed to be materially adverse and require the consent
of the Arrangers).
2.
Existing Indebtedness of the
Company
:
There will not exist (pro forma for
the Merger and the financing thereof) any default or event of
default under the Company’s 3.0% Convertible
Subordinated Notes due 2010 or 4.0% Convertible
Subordinated Notes due 2013 (together, the
“Convertible
Notes”
). Concurrently with the consummation of the
Merger and after giving effect to the financing thereof, the
Company shall not have any material indebtedness outstanding
other than (i) under the Senior Facilities, as contemplated
by the Commitment Letter, (ii) the Securities, if issued,
and (iii) the Company’s 3.0% Convertible
Subordinated Notes due 2010 and 4.0% Convertible
Subordinated Notes due 2013. On or prior to the Closing Date,
the Company shall have:
a. either (i) issued an irrevocable call notice with
respect to all of the Existing Notes in accordance with the
terms of the indentures governing the Existing Notes and on
terms reasonably acceptable to the Commitment Parties or (ii)
(A) consummated a tender offer (the
“Tender
Offer”
) with respect to each of the Existing Notes and
solicited consents to amendments to the indentures (the
“Supplemental Indentures”
) related thereto that
will eliminate substantially all the covenants contained therein
on terms reasonably acceptable to the Commitment Parties,
(B) accepted for purchase at least 50.1% of each of the
2016 Notes and the 2020 Notes and (C) entered into the
Supplemental Indentures related to each of the 2016 Notes and
the 2020 Notes on terms reasonably acceptable to the Commitment
Parties; and
b. repaid in full, terminated and released all liens
relating to the Company’s credit and guaranty agreement,
dated as of May 26, 2010, between the Company, the
guarantors party thereto, GSLP as sole lead arranger and GS
Bank, as administrative agent and collateral agent (the
“Existing GSLP Facility”
).
3.
Financial Statements
.
The
Arrangers shall have received (i) at least 30 days
prior to the Closing Date, audited financial statements of the
Company and the Merger Party for each of the three fiscal years
immediately preceding the Merger ended more than 90 days
prior to the Closing Date; (ii) as soon as internal
financial statements are available, and in any event at least
5 days prior to the Closing Date, unaudited financial
statements for any fiscal quarter of the Company and the Merger
Party ended after the date of the most recent audited financial
statements of such person and more than 45 days prior to
the Closing Date; and (iii) customary pro forma financial
statements, giving effect to the Merger, the Refinancing, the
Dividend, the Senior Facilities
and/or
Securities and any borrowings thereunder.
4.
Performance of
Obligations
.
All costs, fees, expenses
(including, without limitation, legal fees and expenses, title
premiums, survey charges and recording taxes and fees) and other
compensation contemplated by the Commitment Letter and the Fee
Letter payable to the Commitment Parties, the Arrangers, the
A-Annex C to Exhibit C-1
Administrative Agent or the Lenders on the Closing Date shall
have been paid to the extent due and the Company and the Merger
Party shall have complied in all material respects with all of
their respective obligations under the Commitment Letter and the
Fee Letter.
5.
Customary Closing
Documents
.
The Arrangers shall be satisfied
that the Company and the Merger Party have complied with the
following closing conditions and delivered the following
customary documentation relating to the Borrower and all of the
Guarantors (including the Merger Party): (i) the delivery
of customary legal opinions, corporate records and documents
from public officials, lien searches and officer’s
certificates as to the Borrower and each of the Guarantors;
(ii) absence of pending or ongoing litigation seeking to
enjoin the Merger that could reasonably be expected to result in
an injunction of the Merger after the funding of the Senior
Facilities; (iii) obtaining material third party and
governmental consents necessary in connection with the Merger or
the financings thereof; (iv) evidence of authority;
(v) subject to the limitations set forth in the Commitment
Letter, perfection of liens, pledges, and mortgages on the
collateral securing the Senior Facilities; (vi) delivery of
satisfactory commitments for title insurance;
(vii) evidence of customary insurance; and
(viii) delivery of a solvency certificate from the chief
financial officer of the Borrower in form and substance, and
with supporting documentation, reasonably satisfactory to the
Administrative Agent, as to the Borrower, Parent and each
Guarantor. The Arrangers will have received at least
10 days prior to the Closing Date all documentation and
other information required by bank regulatory authorities under
applicable “know-your-customer” and anti-money
laundering rules and regulations, including the Patriot Act, to
the extent requested at least 15 days prior to the Closing
Date;
provided
, that with respect to guarantees and
collateral documentation regarding Parent and each of the
Guarantors that is not a subsidiary of the Borrower, such
documentation shall be been delivered in escrow to counsel to
the Arrangers pursuant to instructions providing for the release
and effectiveness of such documentation concurrently with the
effectiveness of the Merger as set forth in the Merger
Certificate (as defined below).
6.
Maximum Leverage
Ratio
.
At the time of funding, the total
amount of indebtedness will be limited such that the ratio of
(i) total indebtedness for Parent and its subsidiaries as
of the Closing Date (assuming the consummation of the Merger) to
(ii) pro forma consolidated adjusted EBITDA (calculated in
accordance with
Regulation S-X
together with such additional adjustments as the Arrangers agree
are appropriate, but not including any synergies relating to the
Merger) for the latest four-quarter period for which financial
statements are then publicly available will not be greater than
3.75:1.00.
B.
Second Draw
Conditions
:
In addition to the continued
satisfaction of the Initial Draw Conditions, the Second Draw
shall be subject to the following additional conditions
(collectively with the Initial Draw Conditions, the
“Second Draw Conditions”
):
1.
Merger Certificate
.
The
certificate relating to the Merger (the
“Merger
Certificate”
) shall be filed with the Delaware
Secretary of State substantially concurrently with the funding
of the Second Draw. The Merger Certificate shall provide that
the Merger shall become automatically effective at
12:01 a.m. (Eastern time) on the date following the filing
of the Merger Certificate (without any additional conditions to
effectiveness).
2.
Existing Indebtedness of the Merger
Party
:
There will not exist (pro forma for
the Merger and the financing thereof) any default or event of
default under any material indebtedness of the Parent or its
subsidiaries. Pro forma for the consummation of the Merger, all
material pre-existing indebtedness of the Merger Party (other
than indebtedness outstanding under the Senior Facilities, any
Securities, the Convertible Notes and the Parent’s
5.375% Convertible Notes due 2014) shall have been
repaid or repurchased in full, all commitments relating thereto
shall have been terminated, and all liens or security interests
related thereto shall have been terminated or released, in each
case on terms satisfactory to the Arrangers and subject to
exceptions to be mutually agreed upon.
A-Annex C to Exhibit C-2
Annex B
June 20,
2010
Board of Directors
Biovail Corporation
7150 Mississauga Road
Mississauga, Ontario
CANADA, L5N 8M5
Members of the Board:
We understand that Valeant Pharmaceuticals International
(“Valeant”), Biovail Corporation (“Biovail”)
and Beach Merger Corp. (“Merger Sub”), an indirect
wholly owned subsidiary of Biovail and a direct wholly owned
subsidiary of Biovail Americas Corp., propose to enter into an
Agreement and Plan of Merger, substantially in the form of the
draft dated June 20, 2010 (the “Merger
Agreement”), which provides, among other things,
(i) for the merger (the “Merger”) of Merger Sub
with and into Valeant; (ii) for the payment by Valeant of a
special dividend in an amount equal to $16.77 per share of
common stock, par value $0.01, of Valeant (the “Valeant
Common Stock”) to the shareholders of Valeant one business
day prior to the closing date of the Merger (the
“Pre-Merger Special Dividend”); and (iii) subject
to the discretion of the Board of Directors of the combined
company following the Merger, the payment of a special dividend
in the amount of $1.00 per common share of Biovail common stock
(the “Biovail Common Stock”), payable by
December 31, 2010. Pursuant to the Merger, Valeant will
become an indirect wholly owned subsidiary of Biovail, and each
issued and outstanding share of Valeant Common Stock, other than
shares held in treasury or held by Biovail or as to which
dissenters’ rights have been perfected, will be converted
into the right to receive 1.7809 shares (the “Exchange
Ratio”) of Biovail Common Stock, subject to adjustment in
certain circumstances. The terms and conditions of the Merger
are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio
pursuant to the Merger Agreement is fair from a financial point
of view to Biovail.
For purposes of the opinion set forth herein, we have:
1) Reviewed certain publicly available financial statements
and other business and financial information of Biovail and
Valeant, respectively;
2) Reviewed certain internal financial statements and other
financial and operating data concerning Biovail and Valeant,
respectively;
3) Reviewed certain financial projections prepared by the
managements of Biovail and Valeant, respectively;
4) Reviewed information relating to certain strategic,
financial and operational benefits anticipated from the Merger,
prepared by the managements of Biovail and Valeant, respectively;
5) Discussed the past and current operations and financial
condition and the prospects of Biovail, including information
relating to certain strategic, financial and operational
benefits anticipated from the Merger, with senior executives of
Biovail;
6) Discussed the past and current operations and financial
condition and the prospects of Valeant, including information
relating to certain strategic, financial and operational
benefits anticipated from the Merger, with senior executives of
Valeant;
7) Reviewed the pro forma impact of the Merger on
Biovail’s earnings per share, cash flow, consolidated
capitalization and financial ratios;
8) Reviewed the reported prices and trading activity for
the Biovail Common Stock and Valeant Common Stock;
B-1
9) Compared the financial performance of Biovail and
Valeant and the prices and trading activity of the Biovail
Common Stock and the Valeant Common Stock with that of certain
other publicly-traded companies comparable with Biovail and
Valeant, respectively, and their securities;
10) Reviewed the financial terms, to the extent publicly
available, of certain comparable acquisition transactions;
11) Participated in certain discussions and negotiations
among representatives of Biovail and Valeant and certain parties
and their financial and legal advisors;
12) Reviewed the Merger Agreement, the draft commitment
letter for Valeant from certain lenders substantially in the
form of the draft dated June 20, 2010 (the “Commitment
Letter”) and certain related documents; and
13) Performed such other analyses, reviewed such other
information and considered such other factors as we have deemed
appropriate.
We have assumed and relied upon, without independent
verification, the accuracy and completeness of the information
that was publicly available or supplied or otherwise made
available to us by Biovail and Valeant, and formed a substantial
basis for this opinion. With respect to the financial
projections, including information relating to certain
strategic, financial and operational benefits anticipated from
the Merger, we have assumed that they have been reasonably
prepared on bases reflecting the best currently available
estimates and judgments of the respective managements of the
Biovail and Valeant of the future financial performance of
Biovail and Valeant. In addition, we have assumed that
(i) the Merger will be consummated in accordance with the
terms set forth in the Merger Agreement without any waiver,
amendment or delay of any terms or conditions, including, among
other things, that the Merger will be treated as a tax-free
reorganization pursuant to the Internal Revenue Code of 1986, as
amended; (ii) the required financings will be obtained in
accordance with the terms set forth in the Commitment Letter;
(iii) the Pre-Merger Special Dividend will be paid to the
holders of the Valeant Common Stock and (iv) that there
will be no adjustment to the Exchange Ratio. Morgan Stanley has
assumed that in connection with the receipt of all the necessary
governmental, regulatory or other approvals and consents
required for the proposed Merger, no delays, limitations,
conditions or restrictions will be imposed that would have a
material adverse effect on the contemplated benefits expected to
be derived in the proposed Merger. We have relied upon, without
independent verification, the assessment by the managements of
Biovail and Valeant of: (i) the strategic, financial and
other benefits expected to result from the Merger; (ii) the
timing and risks associated with the integration of Biovail and
Valeant; (iii) their ability to retain key employees of
Biovail and Valeant, respectively; and (iv) the validity
of, and risks associated with, Biovail and Valeant’s
existing and future technologies, intellectual property,
products, services and business models. We are not legal, tax,
or regulatory advisors. We are financial advisors only and have
relied upon, without independent verification, the assessment of
Biovail and Valeant and their legal, tax, and regulatory
advisors with respect to legal, tax, and regulatory matters. We
express no opinion with respect to the fairness of the amount or
nature of the compensation to any of Valeant’s officers,
directors or employees, or any class of such persons, relative
to the Exchange Ratio to be paid to the holders of shares of the
Valeant Common Stock in the transaction. We have not made any
independent valuation or appraisal of the assets or liabilities
of Biovail or Valeant, nor have we been furnished with any such
appraisals. Our opinion is necessarily based on financial,
economic, market and other conditions as in effect on, and the
information made available to us as of, the date hereof. Events
occurring after the date hereof may affect this opinion and the
assumptions used in preparing it, and we do not assume any
obligation to update, revise or reaffirm this opinion.
B-2
1585 Broadway
New York, NY 10036
In arriving at our opinion, we were not authorized to solicit,
and did not solicit, interest from any party with respect to the
merger, business combination or other extraordinary transaction,
involving Biovail, nor did we negotiate with any parties, other
than Valeant, with respect to such potential transaction.
We have acted as financial advisor to the Board of Directors of
Biovail in connection with this transaction and will receive a
fee for our services, a significant portion of which is
contingent upon the closing of the Merger. In addition, Morgan
Stanley or one of its affiliates is providing a portion of the
commitments under the Commitment Letter and will receive fees in
connection with such commitment. In the two years prior to the
date hereof, we have provided financial advisory and financing
services for Biovail and Valeant and have received fees in
connection with such services. Morgan Stanley may also seek to
provide such services to Biovail in the future and expects to
receive fees for the rendering of these services.
Please note that Morgan Stanley is a global financial services
firm engaged in the securities, investment management and
individual wealth management businesses. Our securities business
is engaged in securities underwriting, trading and brokerage
activities, foreign exchange, commodities and derivatives
trading, prime brokerage, as well as providing investment
banking, financing and financial advisory services. Morgan
Stanley, its affiliates, directors and officers may at any time
invest on a principal basis or manage funds that invest, hold
long or short positions, finance positions, and may trade or
otherwise structure and effect transactions, for their own
account or the accounts of its customers, in debt or equity
securities or loans of Biovail, Valeant, or any other company,
or any currency or commodity, that may be involved in this
transaction, or any related derivative instrument.
This opinion has been approved by a committee of Morgan Stanley
investment banking and other professionals in accordance with
our customary practice. This opinion is for the information of
the Board of Directors of Biovail and may not be used for any
other purpose without our prior written consent, except that a
copy of this opinion may be included in its entirety in any
filing Biovail is required to make with the Securities and
Exchange Commission in connection with this transaction if such
inclusion is required by applicable law. In addition, this
opinion does not in any manner address the prices at which the
Biovail Common Stock will trade following consummation of the
Merger and Morgan Stanley expresses no opinion or recommendation
as to how the shareholders of Biovail and Valeant should vote at
the shareholders’ meetings to be held in connection with
the Merger.
Based on and subject to the foregoing, we are of the opinion on
the date hereof that the Exchange Ratio pursuant to the Merger
Agreement is fair from a financial point of view to Biovail.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
Michael Boublik
Managing Director
B-3
Annex C
200 West Street | New York, New York 10282
Tel: 212-902-1000 | Fax: 212-902-3000
Goldman
Sachs
PERSONAL
AND CONFIDENTIAL
June 20, 2010
Board of Directors
Valeant Pharmaceuticals International
One Enterprise
Aliso Viejo, CA 92656
Ladies and Gentlemen:
You have requested our opinion as to the fairness from a
financial point of view to the holders (other than Biovail
Corporation (“Biovail”) and its affiliates) of the
outstanding shares of common stock, par value $0.01 per share
(the “Company Shares”), of Valeant Pharmaceuticals
International (the “Company”) of the Exchange Ratio
(as defined below), together with the Pre- Merger Special
Dividend (as defined below) to be paid to such holders, pursuant
to the Agreement and Plan of Merger, dated as of June 20,
2010 (the “Agreement”), by and among the Company,
Biovail, Biovail Americas Corp. and Beach Merger Corp.
(“Merger Sub”). The Agreement provides that Merger Sub
will be merged with and into the Company and each outstanding
Company Share will be converted into 1.7809 common shares, no
par value (the “Biovail Shares”), of Biovail (the
“Exchange Ratio”) following payment of a pre-merger
special dividend to the holders of Company Shares in the amount
of $16.77 per Company Share (the “Pre-Merger Special
Dividend”) pursuant to Section 6.17 of the Agreement.
Goldman, Sachs & Co. and its affiliates are engaged in
investment banking and financial advisory services, commercial
banking, securities trading, investment management, principal
investment, financial planning, benefits counseling, risk
management, hedging, financing, brokerage activities and other
financial and non-financial activities and services for various
persons and entities. In the ordinary course of these activities
and services, Goldman, Sachs & Co. and its affiliates
may at any time make or hold long or short positions and
investments, as well as actively trade or effect transactions,
in the equity, debt and other securities (or related derivative
securities) and financial instruments (including bank loans and
other obligations) of third parties, the Company, Biovail and
any of their respective affiliates or any currency or commodity
that may be involved in the transaction contemplated by the
Agreement (the “Transaction”) for their own account
and for the accounts of their customers. We have acted as
financial advisor to the Company in connection with, and have
participated in certain of the negotiations leading to, the
Transaction. We expect to receive fees for our services in
connection with the Transaction, all of which are contingent
upon consummation of the Transaction, and the Company has agreed
to reimburse our expenses arising, and indemnify us against
certain liabilities that may arise, out of our engagement. At
your request, an affiliate of Goldman, Sachs & Co. has
entered into financing commitments with the Company and Biovail
to provide the Company with senior secured credit facilities,
including a revolver and a term loan, in connection with the
consummation of the Transaction, subject to the terms of such
commitments, and pursuant to which one or more affiliates of
Goldman, Sachs & Co. will receive customary fees. In
addition, we have provided certain investment banking and other
financial services to the Company and its affiliates from time
to time for which our investment banking division has received,
and may receive, compensation, including having acted as the
Company’s financial advisor in connection with the sale of
its Western Europe, Eastern Europe, Middle East and Africa
businesses in September 2008; as a joint bookrunning manager
with respect to the Company’s 8.375% Senior Unsecured
Notes due June 2016 (aggregate principal amount $365,000,000) in
June 2009; as a joint bookrunning manager with respect to the
Company’s 7.625% Senior Unsecured Notes due March 2020
(aggregate principal amount
Securities and Investment Services Provided by Goldman, Sachs
& Co.
C-1
Board of Directors
Valeant Pharmaceuticals International
June 20, 2010
Page 2
$400,000,000) in April 2010; and as sole arranger,
administrative agent, collateral agent and lender with respect
to the Company’s senior secured term loan due December 2010
(aggregate principal amount $30,000,000) in May 2010. We also
may provide investment banking and other financial services to
the Company and Biovail and their respective affiliates in the
future for which our investment banking division may receive
compensation. We further note that concurrent with the issuance
of the Valeant Convertible Notes (as defined in the Agreement)
in November 2003, the Company entered into convertible note
hedge and written call options transactions with respect to
shares of the Company’s common stock (the “Hedging
Transactions”) with an affiliate of Goldman Sachs and
another counterparty consisting of the purchase and sale by the
Company of call options on 12,653,440 shares of the
Company’s common stock, which is the number of shares
underlying the conversion of the Valeant Convertible Notes.
Certain of the Hedging Transactions remain in place as of the
date hereof.
In connection with this opinion, we have reviewed, among other
things, the Agreement; annual reports to stockholders and annual
reports on
Form 10-K
of the Company for the five fiscal years ended December 31,
2009; annual reports on
Form 10-K
or
Form 20-F
of Biovail for the five fiscal years ended December 31,
2009; certain interim reports to stockholders and Quarterly
Reports on
Form 10-Q
of the Company and Biovail; certain other communications from
the Company and Biovail to their respective stockholders;
certain publicly available research analyst reports for the
Company and Biovail; and certain internal financial analyses and
forecasts for the Company prepared by its management and for
Biovail prepared by its management, in each case as approved for
our use by the Company (the “Forecasts”) and certain
cost savings and operating synergies projected by the management
of the Company to result from the Transaction, as approved for
our use by the Company (the “Synergies”). We have also
held discussions with members of the senior managements of the
Company and Biovail regarding their assessment of the strategic
rationale for, and the potential benefits of, the Transaction
and the past and current business operations, financial
condition and future prospects of their respective companies;
reviewed the reported price and trading activity for the Company
Shares and Biovail Shares; compared certain financial and stock
market information for the Company and Biovail with similar
information for certain other companies the securities of which
are publicly traded; reviewed the financial terms of certain
recent business combinations in the specialty pharmaceuticals
industry specifically and in other industries generally; and
performed such other studies and analyses, and considered such
other factors, as we deemed appropriate.
For purposes of rendering this opinion, we have relied upon and
assumed, without assuming any responsibility for independent
verification, the accuracy and completeness of all of the
financial, legal, regulatory, tax, accounting and other
information provided to, discussed with or reviewed by us, and
we do not assume any responsibility for any such information. In
that regard, we have assumed with your consent that the
Forecasts and the Synergies have been reasonably prepared on a
basis reflecting the best currently available estimates and
judgments of the management of the Company. We have not made an
independent evaluation or appraisal of the assets and
liabilities (including any contingent, derivative or other
off-balance-sheet assets and liabilities) of the Company or
Biovail or any of their respective subsidiaries and we have not
been furnished with any such evaluation or appraisal. We have
assumed that all 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 Biovail
or on the expected benefits of the Transaction in any way
meaningful to our analysis. We also have assumed that the
Pre-Merger Special Dividend will be paid to the holders of
Company Shares on the terms set forth in the Agreement and that
the Transaction will be consummated on the terms set forth in
the Agreement, without the waiver or modification of any term or
condition the effect of which would be in any way meaningful to
our analysis.
Our opinion does not address the underlying business decision of
the Company to engage in the Transaction, or the relative merits
of the Transaction as compared to any strategic alternatives
that may be available to the Company; nor does it address any
legal, regulatory, tax or accounting matters. This opinion
addresses only the fairness from a financial point of view, as
of the date hereof, of the Exchange Ratio, together with the
Pre-Merger Special Dividend to be paid to the holders of Company
Shares (other than Biovail and its affiliates), pursuant to the
C-2
Board of Directors
Valeant Pharmaceuticals International
June 20, 2010
Page 3
Agreement. We do not express any view on, and our opinion does
not address, any other term or aspect of the Agreement or
Transaction or any term or aspect of any other agreement or
instrument contemplated by the Agreement or entered into or
amended in connection with the Transaction, including, without
limitation, the fairness of the Transaction to, or any
consideration received in connection therewith by, the holders
of any other class of securities, creditors, or other
constituencies of the Company; nor as to the fairness of the
amount or nature of any compensation to be paid or payable to
any of the officers, directors or employees of the Company or
class of such persons, in connection with the Transaction,
whether relative to the Exchange Ratio, together with the
Pre-Merger Special Dividend to be paid to the holders of Company
Shares (other than Biovail and its affiliates), pursuant to the
Agreement or otherwise. We are not expressing any opinion as to
the prices at which Biovail Shares will trade at any time or as
to the impact of the Transaction on the solvency or viability of
the Company or Biovail or the ability of the Company or Biovail
to pay its obligations when they come due. Our opinion is
necessarily based on economic, monetary, market and other
conditions as in effect on, and the information made available
to us as of, the date hereof and we assume no responsibility for
updating, revising or reaffirming this opinion based on
circumstances, developments or events occurring after the date
hereof. Our advisory services and the opinion expressed herein
are provided for the information and assistance of the Board of
Directors of the Company in connection with its consideration of
the Transaction and such opinion does not constitute a
recommendation as to how any holder of Company Shares should
vote with respect to such Transaction or any other matter. This
opinion has been approved by a fairness committee of Goldman,
Sachs & Co.
Based upon and subject to the foregoing, it is our opinion that,
as of the date hereof, the Exchange Ratio, together with the
Pre-Merger Special Dividend to be paid to the holders (other
than Biovail and its affiliates) of Company Shares, pursuant to
the Agreement is fair from a financial point of view to such
holders.
Very truly yours,
(GOLDMAN, SACHS & CO.)
C-3
Annex D
Jefferies & Company, Inc.
520 Madison Avenue
New York, NY 10022
tel
212.284.2300
fax
917.421.1935
www.jefferies.com
June 20, 2010
Board of Directors
Valeant Pharmaceuticals International
One Enterprise
Aliso Viejo, California 92656
Members of the Board:
We understand that Valeant Pharmaceuticals International (the
“Company”), Biovail Corporation (the “Merger
Partner”), Biovail Americas Corp. and Beach Merger Corp.,
an indirect wholly-owned subsidiary of the Merger Partner
(“Merger Sub”), propose to enter into an Agreement and
Plan of Merger (the “Merger Agreement”), pursuant to
which Merger Sub will merge with and into the Company (the
“Merger”) in a transaction in which each outstanding
share of common stock, par value $0.01 per share, of the Company
(the “Company Common Stock”), other than shares of
Company Common Stock held in the treasury of the Company or
owned by the Merger Partner or Merger Sub, all of which shares
will be canceled, or as to which dissenters rights have been
properly exercised, will be converted into the right to receive
1.7809 (the “Exchange Ratio”) common shares in the
capital of the Merger Partner (the “Merger Partner Common
Stock”). The Merger Agreement further provides that the
Board of Directors of the Company intends to declare and pay a
one-time special cash dividend in an amount equal to $16.77 per
share of the Company Common Stock one business day prior to the
closing of the Merger (the “Pre-Merger Special
Dividend”). The terms and conditions of the Merger are more
fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the Exchange Ratio,
together with the Pre-Merger Special Dividend to be paid to the
holders of shares of the Company Common Stock, is fair, from a
financial point of view, to such holders.
In arriving at our opinion, we have, among other things:
(i) reviewed a draft dated June 19, 2010 of the Merger
Agreement;
(ii) reviewed certain publicly available financial and
other information about the Company and the Merger Partner;
(iii) reviewed certain information furnished to us by the
managements of the Company and the Merger Partner, including
financial forecasts and analyses, relating to the business,
operations and prospects of the Company and the Merger Partner,
and estimates as to the amount and timing of certain cost
savings and related expenses jointly anticipated by the
managements of the Company and the Merger Partner to result from
the Merger (“Synergies”);
(iv) held discussions with members of senior managements of
the Company and the Merger Partner concerning the matters
described in clauses (ii) and (iii) above;
(v) reviewed the share trading price history and valuation
multiples for the Company Common Stock and the Merger Partner
Common Stock and compared them with those of certain publicly
traded companies that we deemed relevant;
D-1
(vi) compared the proposed financial terms of the Merger
with the financial terms of certain other transactions that we
deemed relevant;
(vii) reviewed the relative financial contributions of the
Company and the Merger Partner to the future financial
performance of the combined company on a pro forma basis;
(viii) considered the potential pro forma impact of the
Merger; and
(ix) conducted such other financial studies, analyses and
investigations as we deemed appropriate.
In our review and analysis and in rendering this opinion, we
have assumed and relied upon, but have not assumed any
responsibility to independently investigate or verify, the
accuracy and completeness of all financial and other information
that was supplied or otherwise made available by the Company and
the Merger Partner to us or that was publicly available
(including, without limitation, the information described
above), or that was otherwise reviewed by us. We have relied on
assurances of the managements of the Company and the Merger
Partner that they are not aware of any facts or circumstances
that would make such information inaccurate or misleading. In
our review, we did not obtain any independent evaluation or
appraisal of any of the assets or liabilities of, nor did we
conduct a physical inspection of any of the properties or
facilities of, the Company or the Merger Partner, nor have we
been furnished with any such evaluations or appraisals of such
physical inspections, nor do we assume any responsibility to
obtain any such evaluations or appraisals.
With respect to the financial forecasts provided to and examined
by us, we note that projecting future results of any company is
inherently subject to uncertainty. The Company and the Merger
Partner have informed us, however, and we have assumed, that
such financial forecasts were reasonably prepared on bases
reflecting the best currently available estimates and good faith
judgments of the managements of the Company and the Merger
Partner as to the future financial performance of the Company
and the Merger Partner, respectively. In addition, the Company
and the Merger Partner have informed us, and we have assumed,
that the Synergies were reasonably prepared on bases reflecting
the best currently available estimates and good faith judgments
of the managements of the Company and the Merger Partner as to
the amount and timing of certain cost savings and related
expenses anticipated by the managements of the Company and the
Merger Partner to result from the Merger, and we have relied
upon the assessment of the managements of the Company and the
Merger Partner as to the ability of the combined company to
achieve the Synergies in the amounts and at the times projected.
We express no opinion as to the financial forecasts or the
Synergies provided to us by the Company and the Merger Partner,
or the assumptions on which they are made.
Our opinion is based on economic, monetary, regulatory, market
and other conditions existing and which can be evaluated as of
the date hereof. We expressly disclaim any undertaking or
obligation to advise any person of any change in any fact or
matter affecting our opinion of which we become aware after the
date hereof.
We have made no independent investigation of any legal or
accounting matters affecting the Company or the Merger Partner,
and we have assumed the correctness in all respects material to
our analysis of all legal and accounting advice given to the
Company and its Board of Directors, including, without
limitation, advice as to the legal, accounting and tax
consequences of the terms of, and transactions contemplated by,
the Merger Agreement to the Company and its stockholders. In
addition, in preparing this opinion, we have not taken into
account any tax consequences of the Merger to any holder of
Company Common Stock. In our review and analysis and in
rendering this opinion, we have assumed that the Pre-Merger
Special Dividend will be declared and paid. In addition, we have
assumed that the final form of the Merger Agreement will be
substantially similar to the last draft reviewed by us. We have
also assumed that in the course of obtaining the necessary
regulatory or third party approvals, consents and releases for
the Merger, no delay, limitation, restriction or condition will
be imposed that would have an adverse effect on the Company, the
Merger Partner or the contemplated benefits of the Merger.
It is understood that our opinion is for the use and benefit of
the Board of Directors of the Company in its consideration of
the Merger, and our opinion does not address the relative merits
of the transactions contemplated by the Merger Agreement as
compared to any alternative transaction or opportunity that
might be available to the
D-2
Company, nor does it address the underlying business decision by
the Company to engage in the Merger or the terms of the Merger
Agreement or the documents referred to therein. Our opinion does
not constitute a recommendation as to how any holder of shares
of Company Common Stock should vote on the Merger or any matter
related thereto. In addition, you have not asked us to address,
and this opinion does not address, the fairness to, or any other
consideration of, the holders of any class of securities,
creditors or other constituencies of the Company, other than the
holders of shares of Company Common Stock. We express no opinion
as to the price at which shares of the Company Common Stock or
the Merger Partner Common Stock will trade at any time.
Furthermore, we do not express any view or opinion as to the
fairness, financial or otherwise, of the amount or nature of any
compensation payable or to be received by any of the
Company’s officers, directors or employees, or any class of
such persons, in connection with the Merger relative to the
Exchange Ratio. Our opinion has been authorized by the Fairness
Committee of Jefferies & Company, Inc.
We have been engaged by the Company to act as financial advisor
to the Company in connection with the Merger and will receive a
fee for our services, a portion of which is payable upon
delivery of this opinion and a significant portion of which is
payable contingent upon consummation of the Merger. We will also
be reimbursed for expenses incurred. The Company has agreed to
indemnify us against liabilities arising out of or in connection
with the services rendered and to be rendered by us under such
engagement. We have, in the past, provided financial advisory
and financing services to the Company and may continue to do so
and have received, and may receive, fees for the rendering of
such services. We maintain a market in the securities of the
Company and the Merger Partner, and in the ordinary course of
our business, we and our affiliates may trade or hold securities
of the Company or the Merger Partner
and/or
their
respective affiliates for our own account and for the accounts
of our customers and, accordingly, may at any time hold long or
short positions in those securities. In addition, we may seek
to, in the future, provide financial advisory and financing
services to the Company, the Merger Partner or entities that are
affiliated with the Company or the Merger Partner, for which we
would expect to receive compensation. We anticipate that we and
our affiliates may arrange
and/or
provide a portion of the financing to the Company in connection
with the Pre-Merger Special Dividend for customary compensation.
Except as otherwise expressly provided in our engagement letter
with the Company, our opinion may not be used or referred to by
the Company, or quoted or disclosed to any person in any manner,
without our prior written consent.
Based upon and subject to the foregoing, we are of the opinion
that, as of the date hereof, the Exchange Ratio, together with
the Pre-Merger Special Dividend to be paid to the holders of
shares of Company Common Stock, is fair, from a financial point
of view, to such holders.
Very truly yours,
/s/ Jefferies &
Company, Inc.
JEFFERIES & COMPANY, INC.
D-3
Annex E
BE IT
RESOLVED AS A SPECIAL RESOLUTION THAT:
1. the articles of continuance (the
“
Articles
”) of Biovail Corporation (the
“
Corporation
”) be amended to provide that the
name of the Corporation be changed from “Biovail
Corporation” to “Valeant Pharmaceuticals
International, Inc.” or such other name that may be
approved by the board of directors of the Corporation and the
applicable regulatory authorities;
2. notwithstanding that this special resolution has been
duly passed by the holders of common shares of the Corporation,
the board of directors of the Corporation are hereby authorized
and empowered, in their sole discretion, and without further
notice to or approval by the shareholders of the Corporation, to
revoke this special resolution at any time prior to the filing
of the articles of amendment (the “
Articles of
Amendment
”) to effect such name change and elect not to
act on or carry out this special resolution; and
3. any director or officer of the Corporation is hereby
authorized for and on behalf of the Corporation and directed to
do and perform all such acts and things and to execute and
deliver or cause to be executed and delivered, for, in the name
of and on behalf of the Corporation (whether under the seal of
the Corporation or otherwise) all such agreements, instruments
and other documents as in such individual’s opinion may be
necessary or desirable to perform the terms of this special
resolution.
E-1
Annex F
§ 262. Appraisal rights
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to
such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to § 228 of this
title shall be entitled to an appraisal by the Court of Chancery
of the fair value of the stockholder’s shares of stock
under the circumstances described in subsections (b) and
(c) of this section. As used in this section, the word
“stockholder” means a holder of record of stock in a
stock corporation and also a member of record of a nonstock
corporation; the words “stock” and “share”
mean and include what is ordinarily meant by those words and
also membership or membership interest of a member of a nonstock
corporation; and the words “depository receipt” mean a
receipt or other instrument issued by a depository representing
an interest in one or more shares, or fractions thereof, solely
of stock of a corporation, which stock is deposited with the
depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to
§ 251(g) of this title), § 252,
§ 254, § 257, § 258,
§ 263 or § 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of the meeting of stockholders to act
upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or
(ii) held of record by more than 2,000 holders; and further
provided that no appraisal rights shall be available for any
shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote
of the stockholders of the surviving corporation as provided in
§ 251(f) of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to
§§ 251, 252, 254, 257, 258, 263 and 264 of this
title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. 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 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 253 of
this title is not owned by the parent corporation immediately
prior to the merger, appraisal rights shall be available for the
shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as
a result of an amendment to its certificate of incorporation,
any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all
of the assets of the corporation. If the certificate of
incorporation contains such a provision, the procedures of this
section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is
practicable.
F-1
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record
date for notice of such meeting with respect to shares for which
appraisal rights are available pursuant to subsection (b)
or (c) hereof of this section that appraisal rights are
available for any or all of the shares of the constituent
corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of
such stockholder’s shares shall deliver to the corporation,
before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholder’s shares.
Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such
stockholder’s shares. 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 subsection
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
(2) If the merger or consolidation was approved pursuant to
§ 228 or § 253 of this title, then either a
constituent corporation before the effective date of the merger
or consolidation or the surviving or resulting corporation
within 10 days thereafter shall notify each of the holders
of any class or series of stock of such constituent corporation
who are entitled to appraisal rights of the approval of the
merger or consolidation and that appraisal rights are available
for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy
of this section. Such notice may, and, if given on or after the
effective date of the merger or consolidation, shall, also
notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may,
within 20 days after the date of mailing of such notice,
demand in writing from the surviving or resulting corporation
the appraisal of such holder’s shares. Such demand will be
sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends
thereby to demand the appraisal of such holder’s shares. If
such notice did not notify stockholders of the effective date of
the merger or consolidation, either (i) each such
constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of
the holders of any class or series of stock of such constituent
corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the
surviving or resulting corporation shall send such a second
notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is
sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder
who is entitled to appraisal rights and who has demanded
appraisal of such holder’s shares in 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 of 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 record date shall be the
close of business on the day next preceding the day on which the
notice is given.
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting corporation
or any stockholder who has complied with subsections (a)
and (d) of this section hereof and who is otherwise
entitled to appraisal rights, may commence an appraisal
proceeding by filing a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within
60 days after the effective date of the merger or
consolidation, any stockholder who has not commenced an
appraisal proceeding or joined that proceeding as a named party
shall have the right to withdraw such stockholder’s demand
for appraisal and to accept the terms offered upon the merger or
consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied
with the requirements of subsections (a) and (d) of
this section hereof, upon written request, shall be entitled to
receive from
F-2
the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation and
with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written
statement shall be mailed to the stockholder within 10 days
after such stockholder’s written request for such a
statement is received by the surviving or resulting corporation
or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) of
this section hereof, whichever is later. Notwithstanding
subsection (a) of this section, a person who is the
beneficial owner of shares of such stock held either in a voting
trust or by a nominee on behalf of such person may, in such
person’s own name, file a petition or request from the
corporation the statement described in this subsection.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. 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.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. 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.
(h) After the Court determines the stockholders entitled to
an appraisal, the appraisal proceeding shall be conducted in
accordance with the rules of the Court of Chancery, including
any rules specifically governing appraisal proceedings. Through
such proceeding the Court shall determine the fair value of the
shares 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,
the Court shall take into account all relevant factors. Unless
the Court in its discretion determines otherwise for good cause
shown, interest from the effective date of the merger through
the date of payment of the judgment shall be compounded
quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time
to time during the period between the effective date of the
merger and the date of payment of the judgment. Upon application
by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court
may, in its discretion, proceed to trial upon the appraisal
prior to the final determination of the stockholders entitled to
an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted such
stockholder’s certificates of stock to the Register in
Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder
is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
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.
The Court’s decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation,
F-3
reasonable attorney’s fees and the fees and expenses of
experts, to be charged pro rata against the value of all the
shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholder’s demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just;
provided, however that this provision shall not affect the right
of any stockholder who has not commenced an appraisal proceeding
or joined that proceeding as a named party to withdraw such
stockholder’s demand for appraisal and to accept the terms
offered upon the merger or consolidation within 60 days
after the effective date of the merger or consolidation, as set
forth in subsection (e) of this section.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
(8 Del. C. 1953, § 262; 56 Del. Laws, c. 50; 56
Del. Laws, c. 186, § 24; 57 Del. Laws, c. 148,
§§ 27-29;
59 Del. Laws, c. 106, § 12; 60 Del. Laws, c. 371,
§§ 3-12; 63 Del. Laws, c. 25, § 14; 63
Del. Laws, c. 152, §§ 1, 2; 64 Del. Laws, c. 112,
§§ 46-54;
66 Del. Laws, c. 136,
§§ 30-32;
66 Del. Laws, c. 352, § 9; 67 Del. Laws, c. 376,
§§ 19, 20; 68 Del. Laws, c. 337,
§§ 3, 4; 69 Del. Laws, c. 61, § 10; 69
Del. Laws, c. 262, §§ 1-9; 70 Del. Laws, c. 79,
§ 16; 70 Del. Laws, c. 186, § 1; 70 Del.
Laws, c. 299, §§ 2, 3; 70 Del. Laws, c. 349,
§ 22; 71 Del. Laws, c. 120, § 15; 71 Del.
Laws, c. 339,
§§ 49-52;
73 Del. Laws, c. 82, § 21; 76 Del. Laws, c. 145,
§§ 11-16;
77 Del. Laws, c. 14, §§ 12, 13.)
F-4
PART II
INFORMATION
NOT REQUIRED IN PROSPECTUS; UNDERTAKINGS
Item 20.
Indemnification of Directors and Officers
Under Section 124(1) of the Canada Business Corporations
Act (the “CBCA”), Biovail may indemnify a director or
officer of Biovail, a former director or officer of Biovail or
another individual who acts or acted at Biovail’s request
as a director or officer, or an individual acting in a similar
capacity, of another entity, against all costs, charges and
expenses, including an amount paid to settle an action or
satisfy a judgment, reasonably incurred by the individual in
respect of any civil, criminal, administrative, investigative or
other proceeding in which the individual is involved because of
that association with Biovail or the other entity on condition
that (i) the individual acted honestly and in good faith
with a view to the best interests of Biovail or, as the case may
be, to the best interests of the other entity for which the
individual acted as a director or officer or in a similar
capacity at Biovail’s request, and (ii) in the case of
a criminal or administrative action or proceeding that is
enforced by a monetary penalty, the individual had reasonable
grounds for believing that his or her conduct was lawful. The
CBCA also provides, under Section 124(2), that Biovail may
also advance moneys to a director, officer or other individual
for costs, charges and expenses reasonably incurred in
connection with such a proceeding; however, the individual shall
repay the moneys if the individual does not fulfill condition
(i) and where applicable, condition (ii), above.
Furthermore, under Section 124(4) of the CBCA, Biovail may,
with court approval, indemnify an individual described above or
advance moneys as described above in respect of an action by or
on behalf of Biovail or another entity to obtain a judgment in
its favor, to which the individual is made a party by reason of
the individual’s association with Biovail or such other
entity described above, against all costs, charges and expenses
reasonably incurred by the individual in connection with such
action if the individual fulfils condition (i) and where
applicable, condition (ii), above. An individual referred to
above is entitled to indemnification from Biovail as a matter of
right if he or she was not judged by a court or other competent
authority to have committed any fault or omitted to do anything
he or she ought to have done and fulfils the conditions
(i) and (ii) above.
Biovail’s bylaws provide for the indemnification of a
director or officer of Biovail, a former director or officer of
Biovail or another individual who acts or acted at
Biovail’s request as a director or officer, or an
individual acting in a similar capacity, of another entity,
against all costs, charges and expenses, including an amount
paid to settle an action or satisfy a judgment, reasonably
incurred by the individual in respect of any civil, criminal,
administrative, investigative or other proceeding in which the
individual is involved because of that association with Biovail
or the other entity on condition that such individual fulfills
conditions (i) and (ii) above. Biovail’s bylaws
also authorize it to enter into agreements evidencing
Biovail’s indemnity in favor of the foregoing persons to
the full extent permitted by law.
Biovail has entered into indemnification agreements with its
officers and directors in respect of any legal claims or actions
initiated against them in their capacity as officers and
directors of Biovail or Biovail’s subsidiaries in
accordance with applicable law. These agreements include bearing
the reasonable cost of legal representation in any legal or
regulatory action in which they may become involved in their
capacity as Biovail’s officers and directors. Pursuant to
such indemnities, Biovail bears the cost of the representation
of certain officers and directors.
Biovail maintains insurance for certain liabilities incurred by
its directors and officers in their capacity with Biovail or its
subsidiaries.
Item 21.
Exhibits
See “Exhibit Index” below.
The agreements included as exhibits to this registration
statement contain representations and warranties by each of the
parties to the applicable agreement. These representations and
warranties were made solely for the benefit of the other parties
to the applicable agreement and (i) were not intended to be
treated as categorical statements of fact, but rather as a way
of allocating the risk to one of the parties if those statements
prove to be inaccurate; (ii) may have been qualified in
such agreement by disclosures that were made to the other party
in connection with the negotiation of the applicable agreement;
(iii) may apply contract standards of
“materiality” that
II-1
are different from “materiality” under the applicable
securities laws; and (iv) were made only as of the date of
the applicable agreement or such other date or dates as may be
specified in the agreement.
The registrant 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 registration statement
not misleading.
Item 22.
Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration
statement: (i) to include any prospectus required by
Section 10(a)(3) of the Securities Act; (ii) to
reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement (notwithstanding the
foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would
not exceed that which was registered) and any deviation from the
low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Securities
and Exchange Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set
forth in the “Calculation of Registration Fee” table
in the effective registration statement; and (iii) to
include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective amendment
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a
post-effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(4) That, for the purpose of determining liability under
the Securities Act of 1933 to any purchaser, each prospectus
filed pursuant to Rule 424(b) as part of a registration
statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses
filed in reliance on Rule 430A, shall be deemed to be part
of and included in the registration statement as of the date it
is first used after effectiveness.
Provided
,
however
, that no statement made in a registration
statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed
incorporated by reference into the registration statement or
prospectus that is part of the registration statement will, as
to a purchaser with a time of contract of sale prior to such
first use, supersede or modify any statement that was made in
the registration statement or prospectus that was part of the
registration statement or made in any such document immediately
prior to such date of first use.
(5) That, for the purpose of determining liability of the
registrant under the Securities Act of 1933 to any purchaser in
the initial distribution of the securities, in a primary
offering of securities of the undersigned registrant pursuant to
this registration statement, regardless of the underwriting
method used to sell the securities to the purchaser, if the
securities are offered or sold to such purchaser by means of any
of the following communications, the undersigned registrant will
be a seller to the purchaser and will be considered to offer or
sell such securities to such purchaser: (i) any preliminary
prospectus or prospectus of the undersigned registrant relating
to the offering required to be filed pursuant to Rule 424;
(ii) any free writing prospectus relating to the offering
prepared by or on behalf of the undersigned registrant or used
or referred to by the undersigned registrant; (iii) the
portion of any other free writing prospectus relating to the
offering containing material information about the undersigned
registrant or its securities provided by or on behalf of the
undersigned registrant; and (iv) any other communication
that is an offer in the offering made by the undersigned
registrant to the purchaser.
(6) That, for purposes of determining any liability under
the Securities Act, each filing of the registrant’s annual
report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934, as amended (and, where applicable, each
filing of an employee benefit plan’s annual report pursuant
to Section 15(d) of the Securities Exchange Act of 1934, as
amended) that is incorporated by reference in this registration
statement shall be deemed
II-2
to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
(7) That prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part
of this registration statement by any person or party who is
deemed to be an underwriter within the meaning of
Rule 145(c), the registrant undertakes that such reoffering
prospectus will contain the information called for by the
applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(8) That every prospectus (i) that is filed pursuant
to paragraph (7) above, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act and
is used in connection with an offering of securities subject to
Rule 415, will be filed as a part of an amendment to this
registration statement and will not be used until such amendment
has become effective, and that, for the purpose of determining
liabilities under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(9) Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers
and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer, or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
(10) To respond to requests for information that is
incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business
day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means.
This includes information contained in documents filed
subsequent to the effective date of the registration statement
through the date of responding to the request.
(11) To supply by means of a post-effective amendment all
information concerning a transaction, and the company being
acquired involved therein, that was not the subject of and
included in this registration statement when it became effective.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly
authorized, in Mississauga, Ontario, on August 18, 2010.
BIOVAIL CORPORATION,
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by
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/s/ Gregory
Gubitz
Name: Gregory
Gubitz
Title: Senior Vice President, Corporate
Development & General Counsel
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Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons
in the capacities and dates indicated below.
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Signature
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Title
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Date
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*
William
M. Wells
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Chief Executive Officer and Director
(Principal Executive Officer)
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August 18, 2010
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*
Margaret
Mulligan
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Senior Vice President and Chief Financial Officer (Principal
Financial Officer and Principal Accounting Officer)
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August 18, 2010
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*
Dr. Douglas
J.P. Squires
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Chairman of the Board of Directors
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August 18, 2010
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*
Dr. Laurence
E. Paul
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Director
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August 18, 2010
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*
Michael
Van Every
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Director
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August 18, 2010
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*
Lloyd
Segal
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Director
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August 18, 2010
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*
Mark
Parrish
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Director
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August 18, 2010
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*
J.
Spencer Lanthier
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Director
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August 18, 2010
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*
David
H. Laidley
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Director
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August 18, 2010
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*
Robert
N. Power
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Director
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August 18, 2010
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*
Serge
Gouin
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Director
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August 18, 2010
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*
Frank
Potter
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Director
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August 18, 2010
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II-4
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Signature
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Title
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Date
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*
Sir
Louis Tull
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Director
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August 18, 2010
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*By
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/s/ Gregory
Gubitz
Gregory
Gubitz
Attorney-in-Fact
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II-5
AUTHORIZED
REPRESENTATIVE
Pursuant to the requirements of Section 6(a) of the
Securities Act, this Registration Statement has been signed on
behalf of the Registrant by the undersigned, solely in her
capacity as the duly authorized representative of Biovail
Corporation in the United States, in the City of New York, State
of New York, on August 18, 2010.
CT Corporation
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By:
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/s/ Florence
Merceron
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Name: Florence Merceron
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Title:
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Assistant Secretary
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II-6
EXHIBIT INDEX
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Exhibit No.
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Document
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2
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.1
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Agreement and Plan of Merger, dated as of June 20, 2010,
among Valeant Pharmaceuticals International, Biovail
Corporation, Biovail Americas Corp. and Beach Merger Corp.
(included as Annex A to the joint proxy
statement/prospectus forming a part of this Registration
Statement and incorporated herein by reference).*
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3
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.1
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Articles of Continuance of Biovail Corporation (filed as
Exhibit 3.1 to Biovail Corporation’s Annual Report on
Form 10-K
for the year ended December 31, 2009).*
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3
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.2
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By-Law No. 1 of Biovail Corporation (filed as
Exhibit 3.2 to Biovail Corporation’s Annual Report on
Form 10-K
for the year ended December 31, 2009).*
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3
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.3
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By-Law No. 2 of Biovail Corporation (filed as
Exhibit 3.3 to Biovail Corporation’s Annual Report on
Form 10-K
for the year ended December 31, 2009).*
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5
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.1
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Opinion of Blake, Cassels & Graydon LLP.**
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8
|
.1
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Opinion of Cravath, Swaine & Moore LLP as to certain
tax matters.**
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8
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.2
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Opinion of Skadden, Arps, Slate, Meagher & Flom LLP as
to certain tax matters.**
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10
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.1
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Commitment Letter, dated as of June 20, 2010, among Valeant
Pharmaceuticals International, Biovail Corporation, Goldman
Sachs Lending Partners LLC, Goldman Sachs Bank USA, Jefferies
Group, Inc. and Morgan Stanley Senior Funding, Inc. (filed as
Exhibit 10.1 to Biovail Corporation’s Current Report
on
Form 8-K
dated June 23, 2010).*
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10
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.2
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Voting Agreement, dated as of June 20, 2010, among Valeant
Pharmaceuticals International, Biovail Corporation and ValueAct
Capital Master Fund, L.P. (filed as Exhibit 10.2 to Biovail
Corporation’s Current Report on
Form 8-K
dated June 23, 2010).*
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10
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.3
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Employment Agreement, entered into as of June 20, 2010, by
and between Biovail Corporation, Biovail Laboratories
International SRL and J. Michael Pearson (filed as
Exhibit 10.3 to Biovail Corporation’s Current Report
on
Form 8-K
dated June 23, 2010).*
|
|
10
|
.4
|
|
Biovail Corporation Non-Executive Chairman and Biovail
Laboratories International SRL President Agreement, dated as of
June 20, 2010, by and between Biovail Corporation, Biovail
Laboratories International SRL and William M. Wells (filed as
Exhibit 10.4 to Biovail Corporation’s Current Report
on
Form 8-K
dated June 23, 2010).*
|
|
15
|
.1
|
|
Awareness Letter of PricewaterhouseCoopers LLP.**
|
|
23
|
.1
|
|
Consent of Blake, Cassels & Graydon LLP (to be
included in the opinion filed as Exhibit 5.1 to this
Registration Statement).**
|
|
23
|
.2
|
|
Consent of Cravath, Swaine & Moore LLP (to be included
in the opinion filed as Exhibit 8.1 hereto).**
|
|
23
|
.3
|
|
Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(to be included in the opinion filed as Exhibit 8.2
hereto).**
|
|
23
|
.4
|
|
Consent of Ernst & Young LLP, independent auditors for
Biovail Corporation.**
|
|
23
|
.5
|
|
Consent of PricewaterhouseCoopers LLP, independent registered
public accounting firm for Valeant Pharmaceuticals
International.**
|
|
24
|
|
|
Powers of Attorney of Directors and Officers of Biovail
Corporation (included on the signature page to the initial
filing of this Registration Statement).
|
|
99
|
.1
|
|
Consent of Morgan Stanley & Co. Incorporated**
|
|
99
|
.2
|
|
Consent of Goldman, Sachs & Co.**
|
|
99
|
.3
|
|
Consent of Jefferies & Company, Inc.**
|
|
99
|
.4
|
|
Form of Proxy of Valeant Pharmaceuticals International.**
|
|
99
|
.5
|
|
Form of Proxy of Biovail Corporation.**
|
|
99
|
.6
|
|
Consent of Robert A. Ingram to be named as a director.**
|
|
99
|
.7
|
|
Consent of Theo Melas-Kyriazi to be named as a director.**
|
|
99
|
.8
|
|
Consent of G. Mason Morfit to be named as a director.**
|
|
99
|
.9
|
|
Consent of J. Michael Pearson to be named as a director.**
|
|
99
|
.10
|
|
Consent of Norma A. Provencio to be named as a director.**
|
|
|
|
*
|
|
Incorporated by reference.
|
|
**
|
|
Filed herewith.
|
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