e424b3
Filed Pursuant to Rule 424(b)(3)
Registration Number: 333-165277
PROSPECTUS
$365,000,000
VALEANT PHARMACEUTICALS
INTERNATIONAL
EXCHANGE OFFER FOR
8.375% SENIOR NOTES DUE
2016
We are offering, upon and subject to the terms and conditions
set forth in this prospectus and the accompanying letter of
transmittal, to exchange an aggregate principal amount of up to
$365,000,000 of our 8.375% senior notes due 2016 and the
related guarantees (collectively referred to in this prospectus
as, the exchange notes), which have been registered
under the Securities Act of 1933, for a like principal amount of
our outstanding 8.375% senior notes due 2016 and related
guarantees (collectively referred to in this prospectus as, the
old notes), which were previously issued without
registration under the Securities Act. We are conducting the
exchange offer in order to satisfy our obligations under the
exchange and registration rights agreement entered into in
connection with the private placement of the old notes (referred
to in this prospectus as, the exchange and registration
rights agreement).
The
Exchange Offer
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We will exchange a like principal amount of exchange notes for
all old notes that are validly tendered and not validly
withdrawn.
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You may withdraw tenders of old notes at any time prior to the
expiration of the exchange offer.
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The exchange offer expires at 5:00 p.m., New York City
time, on April 28, 2010, unless extended.
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We will not receive any proceeds from the exchange offer.
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We believe the exchange of old notes for exchange notes in the
exchange offer generally will not be a taxable event for
U.S. federal income tax purposes, but you should read
Certain Material United States Federal Income Tax
Considerations on page 74 of this prospectus for more
information.
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The
Exchange Notes
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The form and terms of the exchange notes will be substantially
identical to the form and terms of the old notes, except that:
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the offer and sale of the exchange notes will have been
registered under the Securities Act of 1933, and therefore, the
exchange notes generally will not be subject to the restrictions
on transfer applicable to the old notes or bear legends
restricting their transfer; and
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specified rights under the exchange and registration rights
agreement, including the provisions providing for registration
rights and the right to earn additional interest under
circumstances relating to our registration obligations
thereunder, will be limited or eliminated.
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The old notes are not listed on any national securities exchange
and we do not intend to list the exchange notes on any national
securities exchange.
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See Risk Factors
beginning on page 15 of this prospectus for a discussion of
certain risks you should consider before deciding whether to
participate in the exchange offer.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus is March 30, 2010
TABLE OF
CONTENTS
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iii
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iii
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iv
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iv
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1
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15
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28
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28
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29
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38
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74
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75
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76
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76
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In this prospectus, unless otherwise stated or the context
otherwise requires:
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we, us, our, the
Company and Valeant refer to Valeant
Pharmaceuticals International and (unless the context otherwise
requires) its subsidiaries on a consolidated basis;
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subsidiary guarantors refers to those subsidiaries
of Valeant Pharmaceuticals International that guarantee the
obligations of Valeant Pharmaceuticals International under the
old notes and the exchange notes;
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old notes refers to the $365,000,000 aggregate
principal amount of 8.375% senior notes due 2016 of Valeant
Pharmaceuticals International and (unless the context otherwise
requires) the guarantees thereof made by the subsidiary
guarantors, which were previously issued without registration
under the Securities Act;
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exchange notes refers to $365,000,000 aggregate
principal amount of 8.375% senior notes due 2016 of Valeant
Pharmaceuticals International and (unless the context otherwise
requires) the guarantees thereof made by the subsidiary
guarantors, which have been registered under the Securities Act
and which we are offering in exchange for the old notes pursuant
to this prospectus and the accompanying letter of
transmittal; and
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notes refers collectively to the old notes and the
exchange notes.
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This prospectus incorporates important business and financial
information about the Company that is not included in or
delivered with this document. You may obtain this information,
without charge, if you call or write us at the address or
telephone number set forth in this prospectus under the heading
Documents Incorporated by Reference. To obtain this
information in a timely fashion, you must make your request no
later than April 21, 2010. In the event that we extend the
exchange offer, you must submit your request at least five
business days before the expiration of the exchange offer, as
extended.
You should rely only on the information contained in or
incorporated by reference into this prospectus. We have not
authorized anyone to provide you with different or additional
information. If anyone provides you with different or additional
information, you should not rely on it. The information
contained in or incorporated by reference into this prospectus
is accurate only as of the date on the front cover of this
prospectus or the date of the document incorporated by
reference, as applicable. Our business, condition (financial or
otherwise), results of operations and prospects may have changed
since then. We are not making an offer to sell or a solicitation
of an offer to buy these securities in any jurisdiction where
the offer or sale is not permitted.
Each broker-dealer that receives exchange notes for its own
account pursuant to the exchange offer must acknowledge that it
will deliver a prospectus in connection with any resale of such
exchange notes. The accompanying letter of transmittal relating
to the exchange offer states that by so acknowledging and by
delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an underwriter within the meaning of the
Securities Act. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer
in connection with resales of exchange notes received in
exchange for old notes where such old notes were acquired by
such broker-dealer as a result of market-making activities or
other trading activities. We have agreed that, for a period of
up to 180 days after the completion of the exchange offer,
we will make this prospectus available to any broker-dealer for
use in connection with any such resale. See Plan of
Distribution.
ii
WHERE YOU
CAN FIND MORE INFORMATION
We are subject to certain information reporting requirements of
the Securities Exchange Act of 1934, as amended (referred to in
this prospectus as, the Exchange Act), and, in
accordance with these requirements, we file annual, quarterly
and current reports, proxy statements and other information with
the SEC. You may read and copy any documents we file at the
SECs public reference room at 100 F Street,
N.E., Room 1580, Washington, D.C. 20549. Please call
the SEC at
1-800-SEC-0330
for further information on the operation of the public reference
room. Our SEC filings are also available to you at the
SECs website at
http://www.sec.gov
and our website at www.valeant.com. The reference to our
website address is intended as an inactive textual reference
only. The information contained on, or that can be accessed
through, our website is not a part of this prospectus.
We have filed a registration statement on
Form S-4
with the SEC to register the exchange notes under the Securities
Act of 1933, as amended (referred to in this prospectus as, the
Securities Act). This prospectus is part of that
registration statement. As allowed by the SECs rules, this
prospectus does not contain all of the information you can find
in the registration statement or the exhibits to the
registration statement. You should note that where we summarize
in this prospectus the terms of any contract, agreement or other
document filed as an exhibit to the registration statement, the
summary information provided in the prospectus is less complete
than the actual contract, agreement or document. You may review
and obtain a copy of the registration statement and the exhibits
that are a part of the registration statement at the SECs
public reference room in Washington, D.C., as well as
through the SECs website or our website. You can also call
or write us for a copy as described below under the heading
Documents Incorporated by Reference.
DOCUMENTS
INCORPORATED BY REFERENCE
The SEC allows us to incorporate by reference the
information we file with the SEC under the Exchange Act, which
means that we can disclose important information to you by
referring you to those documents. Information incorporated by
reference is considered to be a part of this prospectus, and
information that we file later with the SEC will automatically
update, modify and, where applicable, supersede this
information. Our file number for documents we file with the SEC
is 1-11397.
We incorporate by reference into this prospectus the following
documents that we have filed with the SEC (other than such
documents or information deemed to be furnished and not filed in
accordance with SEC rules):
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Annual Report on
Form 10-K
for the year ended December 31, 2009 (including the
portions of our definitive Proxy Statement for our 2010 Annual
Meeting of Stockholders incorporated therein by
reference); and
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Current Reports on
Form 8-K
filed January 11, 2010 and March 29, 2010.
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We also incorporate by reference into this prospectus all
documents filed by us with the SEC pursuant to
Section 13(a), 13(c), 14, or 15(d) of the Exchange Act
between the date of this prospectus and the expiration of the
exchange offer (other than such documents or information deemed
to be furnished and not filed in accordance with SEC rules),
which future filings shall be deemed to be incorporated by
reference into this prospectus and to be part of this prospectus
from the date we subsequently file such documents.
Any statement contained in this prospectus or in any document
incorporated by reference into this prospectus shall be deemed
to be modified or, where applicable, superseded for the purposes
of this prospectus to the extent that a statement contained in
this prospectus or any subsequently filed document that also is
incorporated by reference into this prospectus modifies or
supersedes such prior statement. Any statement so modified or
superseded will not be deemed, except as so modified or
superseded, to constitute a part of this prospectus.
We will provide to each person, including any beneficial owner,
to whom a prospectus is delivered, upon written or oral request
and without charge, a copy of the documents referred to above
that we have incorporated by reference into this prospectus and
a copy of the registration statement of which this prospectus
iii
is a part (including the exhibits to such registration
statement). You can request copies of such documents if you call
or write us at the following address or telephone number:
Valeant Pharmaceuticals International
One Enterprise
Aliso Viejo, California 92656
Attention: Corporate Secretary
Telephone:
(949) 461-6000
Exhibits to the documents incorporated by reference will not be
sent, however, unless those exhibits have specifically been
incorporated by reference into such document. You may also
obtain copies of the documents incorporated by reference into
this prospectus, as well as the registration statement of which
this prospectus is a part, as described above under the heading
Where You Can Find More Information.
INDUSTRY
AND MARKET DATA
This prospectus and the documents incorporated by reference into
this prospectus contain information with respect to industry
conditions, market share and other statistical data from
third-party sources or based upon our estimates using such
sources when available. While we believe that such information
and estimates are reasonable and reliable, we have not
independently verified any of the data from third-party sources,
and we cannot guarantee the accuracy or completeness of the
information. Similarly, our internal research is based upon our
understanding of industry conditions, market share and other
statistical data and such information has not been verified by
any independent sources.
FORWARD-LOOKING
STATEMENTS
This prospectus and the documents incorporated by reference into
this prospectus contain forward-looking statements
that are subject to the safe harbors created under the
U.S. federal securities laws. All statements that are not
statements of historical facts are hereby identified as
forward-looking statements for these purposes and include, among
others, statements with respect to:
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our future economic performance, operating results, financial
condition, capital resources or prospects;
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projections of revenue, expenses, income and losses, earnings
(losses) per share, capital expenditures, dividends, growth
rates or other financial items;
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market or industry trends,
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legal or regulatory developments;
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future events;
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the anticipated effect of acquisitions, litigation, new (or
changes to existing) laws, regulations or accounting principles
or other matters on our business, economic performance,
operating results, financial condition, capital resources or
prospects;
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our plans, objectives and strategies for future operations or
otherwise; and
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our expectations and beliefs.
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Forward-looking statements can generally be identified by the
use of words such as anticipate, expect,
plan, could, may,
will, should, would,
intend, seem, potential,
appear, continue, future,
believe, estimate, forecast,
project, variations of such words or other words
that convey uncertainty of future events or outcome, although
not all forward-looking statements contain these identifying
words.
Our forward-looking statements are subject to known and unknown
risks and uncertainties, many of which are outside of our
control and could cause actual results to differ materially and
adversely from those expressed or implied by such statements.
For a discussion of some of these risks and uncertainties,
please read carefully the information contained under the
heading Risk Factors in this prospectus and in the
documents
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incorporated by reference into this prospectus, as well as the
other information contained herein and therein. You are
cautioned not to place undue reliance on forward-looking
statements.
Each forward-looking statement speaks only as of the date of
this prospectus or, in the case of documents incorporated by
reference, the date of the applicable document (or any earlier
date indicated in the statement), and we undertake no obligation
to update or revise any of these statements, whether as a result
of new information, future developments or otherwise, except as
required by law. We qualify all of our forward-looking
statements by these cautionary statements.
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SUMMARY
This summary highlights certain information about us, the
exchange offer and exchange notes. It does not contain all of
the information that may be important to you in deciding whether
to participate in the exchange offer. For a more complete
description of our company, the exchange offer and the exchange
notes, you should read this entire prospectus, as well as the
documents incorporated by reference into this prospectus, which
are described under Documents Incorporated by
Reference, prior to deciding whether to participate in the
exchange offer.
Valeant
Pharmaceuticals International
We are a multinational specialty pharmaceutical company that
develops, manufactures and markets a broad range of
pharmaceutical products. Our specialty pharmaceutical and
over-the-counter,
or OTC, products are marketed under brand names and are sold in
the United States, Canada, Australia and New Zealand, where we
focus most of our efforts on the dermatology and neurology
therapeutic classes. We also have 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.
Business
Strategy
Our strategy is to focus the business on core geographies and
therapeutic classes, maximize pipeline assets through strategic
partnerships with other pharmaceutical companies and deploy cash
with an appropriate mix of selective acquisitions, share
buybacks and debt repurchases. We believe this strategy will
allow us to improve both our growth rates and profitability.
Our leveraged research and development model is a key element to
our business strategy. It allows us to progress development
programs to drive future commercial growth, while minimizing our
research and development expense. This is achieved in 4 ways:
(1) we structure partnerships and collaborations so that
our partner partially funds development work, e.g.,
collaboration on retigabine with Glaxo Group Limited (referred
to in this prospectus as GSK), a wholly-owned
subsidiary of GlaxoSmithKline plc, (2) we bring products
already developed for other markets to our territories, e.g.,
our joint venture relationship in Canada with Meda AB, an
international specialty pharmaceutical company located in
Stockholm, Sweden, (3) we acquire dossiers and
registrations for branded generic products, which require
limited and low risk manufacturing
start-up and
development activities and (4) we have a dermatology
service business that works with external customers as well as
progresses our internal development programs. This service
business model allows higher utilization and infrastructure cost
absorption.
In March 2008, we announced a company-wide restructuring effort,
designed to streamline our business, align our infrastructure to
the scale of our operations, maximize our pipeline assets and
deploy our cash assets to maximize shareholder value, while
highlighting key opportunities for growth. Specifically, we
reduced our focus to two therapeutic classes
dermatology and neurology, and to five geographic
areas U.S., Canada, Australia/New Zealand,
Mexico/Brazil and Central Europe, and we adjusted our business
infrastructure to support our strategy.
Segment
Information
Our current product portfolio comprises approximately 380
products, with approximately 2,000 stock keeping units, with no
individual product comprising 10% or more of our consolidated
revenues in 2009. Our products are sold through the following
three segments:
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Specialty Pharmaceuticals The
Specialty Pharmaceuticals segment generates product revenues
from pharmaceutical and OTC products primarily from the United
States, Canada, Australia and New Zealand. Within the Specialty
Pharmaceuticals segment, we have a broad range of pharmaceutical
products including dermatology, neurology and prescription
products in other therapeutic areas. These pharmaceutical
products are marketed and sold primarily through wholesalers and
to a lesser extent through retail and
direct-to-physician
channels. Additionally, within the Specialty Pharmaceuticals
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segment, we generate alliance revenue and service revenue from
the licensing of dermatological products and from contract
services in the areas of dermatology and topical medication.
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Branded Generics Europe
The Branded Generics Europe segment generates
revenues from branded generic pharmaceutical products primarily
in Poland, Hungary, the Czech Republic and Slovakia. Our Branded
Generics Europe segment develops, manufactures and
markets products that are the therapeutic equivalent to their
brand name counterparts, which are developed when patents or
other regulatory exclusivity no longer protect an
originators brand product. Our branded generics strategy
is to develop a commercialization strategy to differentiate
these products through innovative marketing tactics. Our
products in this region are sold under the ICN Polfa brand name
and we market our portfolio of generic branded products to
doctors and pharmacists through approximately 300 sales
professionals. Our branded generics in this segment cover a
broad range of treatments including antibiotics, antifungal
medications and diabetic therapies among many others.
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Branded Generics Latin
America The Branded Generics
Latin America segment generates revenues from branded generic
pharmaceutical products and OTC products in Mexico, Brazil and
exports out of Mexico to other Latin American markets. Our
branded generic and generic products are developed when patents
or other regulatory exclusivity no longer protect an
originators brand product. Our products in this region are
primarily marketed to physicians and pharmacies through
approximately 300 sales professionals under the Grossman brand.
Our generic portfolio is primarily sold through the Government
Health Care System, which awards its business through a tender
process. Our portfolio in this segment covers a broad range of
therapeutic classes including antibacterials, vitamin deficiency
and dermatology.
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Marketing
We currently promote our pharmaceutical products to physicians,
hospitals, pharmacies and wholesalers through our own sales
force and sell through wholesalers. In some limited markets, we
additionally sell directly to physicians, hospitals and large
drug store chains and we sell through distributors in countries
where we do not have our own sales staff. As part of our
marketing program for pharmaceuticals, we use direct mailings,
advertise in trade and medical periodicals, exhibit products at
medical conventions and sponsor medical education symposia.
Manufacturing
We currently operate ten manufacturing plants. We also
subcontract the manufacturing of certain of our products,
including products manufactured under the rights acquired from
other pharmaceutical companies. Generally, acquired products
continue to be produced for a specific period of time by the
selling company. During that time, we integrate the products
into our own manufacturing facilities or initiate toll
manufacturing agreements with third parties. We estimate that
products representing approximately 60% of our product sales are
produced by third party manufacturers under toll manufacturing
arrangements.
Products
in Development
We currently have a number of compounds in clinical development
including, but not limited to:
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Retigabine Retigabine is being
developed by us in collaboration with GSK as an adjunctive
treatment for partial-onset seizures in patients with epilepsy.
On October 30, 2009, the New Drug Application, or NDA, was
filed for retigabine for the treatment of refractory partial
onset seizures. The U.S. Food and Drug Administration, or
FDA, accepted the NDA for review on December 29, 2009 and
established a Prescription Drug User Fee Act date of
August 30, 2010. In addition, the European Medicines
Evaluation Agency confirmed on November 17, 2009 that the
Marketing Authorization Application, or MAA, was successfully
validated, thus enabling the MAA review to commence.
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Taribavirin Taribavirin (formerly
referred to as viramidine) was in development in oral form for
the treatment of hepatitis C. During 2009, we ceased
further independent development work on taribavirin and we are
seeking potential partners for the taribavirin program.
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Dermatology Products We have a number
of dermatology product candidates in development including, but
not limited to:
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IDP-107 is an oral treatment for moderate to severe acne
vulgaris.
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IDP-108 is an antifungal targeted to treat onychomycosis, a
fungal infection of the fingernails and toenails primarily in
older adults.
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IDP-113 is a topical therapy for the treatment of tinea capitis,
which is a fungal infection of the scalp characterized by
redness, scaling and bald patches, particularly in children.
IDP-113 has the same active pharmaceutical ingredient as IDP-108.
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IDP-115 combines an established anti-rosacea active ingredient
with sunscreen agents to provide sun protection in the same
topical treatment for rosacea patients.
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Other
Information
We are incorporated under the laws of Delaware. Our principal
executive offices are located at One Enterprise, Aliso Viejo,
California 92656, our telephone number at that address is
(949) 461-6000
and our website address is www.valeant.com. The reference to our
website address is intended as an inactive textual reference
only. The information contained on, or that can be accessed
through, our website is not a part of this prospectus.
For more information regarding us and our business you should
read our Annual Report on
Form 10-K
for the year ended December 31, 2009 and the other
documents incorporated by reference into this prospectus. See
Documents Incorporated by Reference.
Recent
Developments
On February 28, 2010, we entered into an agreement with
Spear Pharmaceuticals, Inc. and Spear Dermatology Products, Inc.
(collectively Spear) for rights to commercialize
Refissa
®,
a prescription-based topical tretinoin cream used to diminish
fine wrinkles and fade irregular pigmentation due to sun damage.
We paid Spear a $12.0 million upfront payment and will
share profits with Spear from our sales of Refissa
®
which we will record. We will use our dermatology sales force to
promote Refissa
®
to dermatologists nationwide.
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The
Exchange Offer
On June 9, 2009 we completed a private placement of our
outstanding unregistered old notes. In connection with that
private placement, we entered into an exchange and registration
rights agreement with the initial purchasers of the old notes
(referred to in this prospectus as, the exchange and
registration rights agreement) in which we agreed to,
among other things, complete an exchange offer for the old
notes. The following is a brief summary of certain terms and
conditions of the exchange offer. For a more complete
description of the exchange offer, you should read the section
of this prospectus entitled The Exchange Offer.
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The Exchange Offer |
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We are offering to exchange the exchange notes for a like
principal amount of the old notes. Old notes may be tendered
only in denominations of $2,000 and any integral multiples of
$1,000 in excess thereof. We are making this exchange offer to
satisfy our obligations under the exchange and registration
rights agreement. After the exchange offer is complete, except
as set forth below, you will no longer be entitled to any
exchange or registration rights with respect to the notes. |
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The exchange and registration rights agreement requires us to
file a registration statement for a continuous offering in
accordance with Rule 415 under the Securities Act for your
benefit if you notify us prior to the 20th business day
following the completion of the exchange offer that you would
not receive freely tradable exchange notes in the exchange offer
or you are ineligible to participate in the exchange offer. See
The Exchange Offer Purpose and Effect. |
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Exchange Notes |
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Up to $365 million aggregate principal amount of
8.375% Senior Notes due 2016. The form and terms of the
exchange notes will be substantially identical to the form and
terms of the old notes, except that: |
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the offer and sale of the exchange notes will have
been registered under the Securities Act, and therefore, the
exchange notes generally will not be subject to the restrictions
on transfer applicable to the old notes or bear legends
restricting their transfer; and
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specified rights under the exchange and registration
rights agreement, including the provisions providing for
registration rights and the right to earn additional interest
under circumstances relating to our registration obligations
thereunder, will be limited or eliminated.
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Resales of the Exchange Notes |
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Based on interpretative letters of the SEC staff to third
parties, we believe that the exchange notes may be offered for
resale, resold and otherwise transferred by you without
compliance with the registration and prospectus delivery
provisions of the Securities Act if you meet all of the
following conditions: |
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you are acquiring the exchange notes in the ordinary
course of your business;
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you have not engaged in, do not intend to engage in,
and have no arrangement or understanding with any person to
participate in a distribution of the exchange notes;
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you are not an affiliate of ours, as the term
affiliate is defined in Rule 405 under the
Securities Act; and
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you are not acting on behalf of any person or entity
that could not truthfully make these representations.
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If you do not meet all of the above conditions, you must comply
with the registration and prospectus delivery requirements of
the Securities Act in connection with a resale of the exchange
notes. |
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Each broker-dealer that receives exchange notes for its own
account in the exchange offer for old notes that it acquired as
a result of market-making activities or other trading activities
must deliver a prospectus in connection with any resale of the
exchange notes and acknowledge this obligation in the letter of
transmittal. See Plan of Distribution. |
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Our belief that transfers of exchange notes would be permitted
without registration or prospectus delivery under the conditions
described above is based on SEC interpretations given to other,
unrelated issuers in similar exchange offers. We cannot assure
you that the SEC would make a similar interpretation with
respect to our exchange offer. We will not be responsible for or
indemnify you against any liability you may incur under the
Securities Act. You should consult your own legal adviser with
respect to such matters. |
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Consequences of Failure to Exchange |
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If you do not participate or properly tender your old notes in
the exchange offer: |
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you will retain old notes that are not registered
under the Securities Act and that will continue to be subject to
restrictions on transfer that are described in the legend on the
old notes;
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you will not be able to require us to register your
old notes under the Securities Act, except in the very limited
circumstances described above under The Exchange
Offer;
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you will not be able to offer to resell or transfer
your old notes unless they are registered under the Securities
Act or unless you offer to resell or transfer them pursuant to
an exemption under the Securities Act; and
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the trading market for your old notes may become
more limited to the extent that other holders of old notes
participate in the exchange offer.
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Acceptance of Old Notes and Delivery of Exchange Notes |
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Except under the circumstances summarized below under
Conditions to the Exchange Offer, we will accept for
exchange any and all old notes validly tendered and not validly
withdrawn prior to 5:00 p.m., New York City time, on the
expiration date of the exchange offer. The exchange notes to be
issued to you in the exchange offer will be delivered promptly
following the expiration of the exchange offer. See The
Exchange Offer Terms of the Exchange Offer. |
5
|
|
|
Expiration Date |
|
The exchange offer will expire at 5:00 p.m., New York City
time, on April 28, 2010, unless we decide to extend the
exchange offer. We do not intend to extend the exchange offer,
although we reserve the right to do so. |
|
Procedures for Tendering Old Notes |
|
The old notes were issued as global securities in fully
registered form without coupons. Beneficial interests in the old
notes that are held by direct or indirect participants in The
Depository Trust Company (referred to in this prospectus
as, DTC) through certificateless depositary
interests that are shown on, and transfers of the old notes can
be made only through, records maintained in book-entry form by
DTC with respect to its participants. |
|
|
|
If you are a holder of an old note held in the form of a
book-entry interest and you wish to exchange your old note for
an exchange note pursuant to the exchange offer, you must
transmit to The Bank of New York Mellon Trust Company,
N.A., as exchange agent, on or prior to the expiration of the
exchange offer a computer-generated message transmitted by means
of DTCs Automated Tender Offer Program (referred to in
this prospectus as, ATOP) system and forming a part
of a confirmation of book-entry transfer in which you
acknowledge and agree to be bound by the terms of the letter of
transmittal. |
|
|
|
The exchange agent must also receive on or prior to the
expiration of the exchange offer either: |
|
|
|
a timely confirmation of book-entry transfer of your
old notes into the exchange agents account at DTC, in
accordance with the procedure for book-entry transfers described
in this prospectus under the heading The Exchange
Offer Procedures for Tendering Old Notes
Book-Entry Transfer; or
|
|
|
|
the documents necessary for compliance with the
guaranteed delivery procedures described below.
|
|
|
|
A letter of transmittal accompanies this prospectus. By
delivering a computer-generated message through DTCs ATOP
system, you will represent to us, among other things, that: |
|
|
|
you are acquiring the exchange notes in the exchange
offer in the ordinary course of your business;
|
|
|
|
you have not engaged in, do not intend to engage in,
and have no arrangement or understanding with any person to
participate in a distribution of the exchange notes;
|
|
|
|
you are not an affiliate of ours, as the term
affiliate is defined in Rule 405 under the
Securities Act; and
|
|
|
|
you are not acting on behalf of any person or entity
that could not truthfully make these representations.
|
|
Special Procedures for Beneficial Owners |
|
If you are the beneficial owner of old notes that are
registered in the name of a broker, dealer, commercial bank,
trust company or other nominee and you wish to tender your old
notes, you should promptly contact the person in whose name your
old notes are |
6
|
|
|
|
|
registered and instruct that person to tender on your behalf.
See The Exchange Offer Procedures for
Tendering Old Notes. |
|
Guaranteed Delivery Procedures |
|
If you wish to tender your old notes and you cannot get the
required documents to the exchange agent before the expiration
date of the exchange offer, or the procedure for book-entry
transfer cannot be completed on a timely basis, you may tender
your old notes in accordance with the guaranteed delivery
procedures set forth in The Exchange Offer
Procedures for Tendering Old Notes Guaranteed
Delivery Procedures. |
|
Withdrawal |
|
You may withdraw any tender of your old notes at any time prior
to the expiration of the exchange offer. |
|
Conditions to the Exchange Offer |
|
We reserve the right in our sole discretion to terminate the
exchange offer at any time before the acceptance of any old
notes for exchange. As set forth in the exchange and
registration rights agreement, we will complete the exchange
offer only if it will not violate applicable law or any
applicable interpretation of the staff of the Commission and no
injunction, order or decree has been issued that would prohibit,
prevent or otherwise materially impair our ability to proceed
with the exchange offer. See The Exchange
Offer Conditions. |
|
Exchange Agent |
|
The Bank of New York Mellon Trust Company, N.A. is serving
as the exchange agent in connection with the exchange offer. The
address, facsimile number and telephone number of the exchange
agent are set forth under The Exchange Offer
Exchange Agent. |
|
Federal Income Tax Consequences |
|
We believe your exchange of old notes for exchange notes in the
exchange offer generally will not be a taxable event for U.S.
federal income tax purposes. See Certain Material United
States Federal Income Tax Considerations. |
|
No Appraisal Rights |
|
You do not have any appraisal or dissenters rights under
the Delaware General Corporation Law in connection with the
exchange offer. |
|
Accounting Treatment |
|
We will not recognize any gain or loss for accounting purposes
upon the completion of the exchange offer. The expenses of the
exchange offer that we pay will increase our deferred financing
costs in accordance with generally accepted accounting
principles and such costs will be amortized over the term of the
exchange notes under generally accepted accounting principles. |
|
Use of Proceeds |
|
We will not receive any cash proceeds from the issuance of the
exchange notes in connection with the exchange offer. See
Use of Proceeds. |
7
The
Exchange Notes
The form and terms of the exchange notes will be substantially
identical to the form and terms of the old notes, except that:
|
|
|
|
|
the offer and sale of the exchange notes will have been
registered under the Securities Act of 1933, and therefore, the
exchange notes generally will not be subject to the restrictions
on transfer applicable to the old notes or bear legends
restricting their transfer; and
|
|
|
|
specified rights under the exchange and registration rights
agreement, including the provisions providing for registration
rights and the right to earn additional interest under
circumstances relating to our registration obligations
thereunder, will be limited or eliminated.
|
The exchange notes will evidence the same debt as the old notes
and will rank equally with the old notes. The same indenture
will govern both the old notes and the exchange notes.
The following is a brief summary of certain terms of the
exchange notes. When we refer to the notes below and
elsewhere in this prospectus, we are referring to both the old
notes and the exchange notes. Some of the terms described below
are subject to important limitations and exceptions. For a more
complete description of the terms of the exchange notes, you
should read the section of this prospectus entitled
Description of the Exchange Notes. For purposes of
this summary, references to we, us,
our, the Company and Valeant
are to Valeant Pharmaceuticals International (parent company
only) and not to any of its subsidiaries.
|
|
|
Issuer |
|
Valeant Pharmaceuticals International. |
|
Exchange Notes Offered |
|
$365,000,000 aggregate principal amount of 8.375% senior
notes due 2016. |
|
Maturity Date |
|
June 15, 2016. |
|
Interest |
|
Interest on the exchange notes will accrue at the rate of 8.375%
per annum and will be payable semi-annually in arrears on June
15 and December 15. Interest on the exchange notes will
accrue from December 15, 2009 (the date interest was most
recently paid on the old notes). In order to avoid duplicative
payment of interest, all interest accrued on old notes that are
accepted for exchange before June 15, 2010 will be
superseded by the interest that is deemed to have accrued on the
exchange notes from December 15, 2009 through the date of
the exchange. Interest will be computed on the basis of a
360-day year
comprised of twelve
30-day
months. Valeant will make each interest payment to the Holders
of record on the immediately preceding June 1 and
December 1. |
|
Original Issue Discount |
|
As in the case of the old notes, the exchange notes will be
treated as having been issued with original issue discount for
United States federal income tax purposes (but based on the
issue date of the old notes). Thus, in addition to stated
interest on the notes, U.S. holders (as defined in Certain
Material United States Federal Income Tax Considerations)
will be required to include any amounts representing the
original issue discount in gross income on a constant yield
basis for United States federal income tax purposes in advance
of the receipt of cash payments to which such income is
attributable. Each holder should consult its own tax adviser as
to the particular tax consequences that would bear on its
exchange of old notes for exchange notes, and the holding of
exchange notes, including the applicability and effect of any
state, local or foreign tax laws and of any proposed changes in
applicable laws. |
8
|
|
|
Guarantees |
|
The exchange notes will be jointly and severally guaranteed by
certain of our subsidiaries (referred to in this prospectus as,
subsidiary guarantors). Additional subsidiaries may
be required to guarantee the notes, and the guarantee of any
subsidiary may be released, in each case, in the circumstances
set forth under Description of the Exchange
Notes Subsidiary Guarantees. |
|
|
|
As of December 31, 2009, the non-guarantor subsidiaries
held $667.1 million, or 51% , of our total consolidated
assets. The non-guarantor subsidiaries generated
$422.4 million, or 51%, of our total consolidated revenue
and $122.2 million, 52%, of our total consolidated income
from operations for the year ended December 31, 2009. |
|
Ranking |
|
The exchange notes will be senior unsecured obligations of ours.
Accordingly, they will rank: |
|
|
|
equal in right of payment to all of our existing and
future unsecured and unsubordinated indebtedness;
|
|
|
|
senior in right of payment to all of our existing
and future indebtedness that expressly provides for
subordination to the notes; and
|
|
|
|
effectively junior in right of payment to all of our
existing and future secured indebtedness to the extent of the
value of the collateral securing such indebtedness. As of
December 31, 2009, we had $2.0 million of secured
indebtedness outstanding.
|
|
|
|
The guarantees will be the senior unsecured obligation of the
applicable subsidiary guarantor. Accordingly they will rank: |
|
|
|
equal in right of payment to all of the applicable
subsidiary guarantors existing and future unsecured and
unsubordinated indebtedness;
|
|
|
|
senior in right of payment to all of the applicable
subsidiary guarantors existing and future indebtedness
that expressly provides for subordination to the notes; and
|
|
|
|
effectively junior in right of payment to all of the
applicable subsidiary guarantors existing and future
secured indebtedness to the extent of the value of the
collateral securing such indebtedness. As of December 31,
2009, the subsidiary guarantors had no secured indebtedness
outstanding.
|
|
|
|
In addition, the notes will be effectively junior in right of
payment to all liabilities of our non-guarantor subsidiaries. As
of December 31, 2009, the non-guarantor subsidiaries had an
aggregate of $344.1 million of liabilities. |
|
Optional Redemption |
|
At any time prior to June 15, 2012, we may redeem the notes, in
whole or in part, at a redemption price equal to the principal
amount of the notes, plus the premium described under the
heading Description of the Exchange Notes
Optional Redemption. |
9
|
|
|
|
|
In addition, at any time prior to June 15, 2012, we may on any
one or more occasions redeem up to 35% of the aggregate
principal amount of notes with the proceeds from certain equity
offerings at a redemption price equal to 108.375% of the
principal amount thereof, plus accrued and unpaid interest and
liquidated damages, if any, to the redemption date. |
|
|
|
On or after June 15, 2012, we may redeem all or a part of the
notes at the redemption prices listed under the heading
Description of the Exchange Notes Optional
Redemption, plus accrued and unpaid interest and
liquidated damages, if any, to the applicable redemption date. |
|
Change of Control |
|
If we experience a change of control, you will have the right to
require us to repurchase all or part of your notes at 101% of
the aggregate principal amount of the notes repurchased, plus
accrued and unpaid interest and liquidated damages, if any, to
the date of purchase. See Description of the Exchange
Notes Repurchase at the Option of Holders. |
|
Certain Covenants |
|
The indenture governing the exchange notes contains covenants
that, among other things, will limit our ability and the ability
of our restricted subsidiaries to: |
|
|
|
incur or guarantee additional debt or issue
disqualified stock;
|
|
|
|
pay dividends, or make redemptions, repurchases or
distributions, with respect to ordinary shares or capital stock;
|
|
|
|
create or incur certain liens;
|
|
|
|
make certain loans or investments;
|
|
|
|
engage in mergers, acquisitions, amalgamations,
asset sales and sale and leaseback transactions; and
|
|
|
|
engage in transactions with affiliates.
|
|
|
|
These covenants are subject to a number of important limitations
and exceptions (including the suspension of covenants under
certain circumstances). See Description of the Exchange
Notes Certain Covenants. |
|
Form and Denominations |
|
The exchange notes will be issued in minimum denominations of
$2,000 and any integral multiple of $1,000 in excess thereof.
The exchange notes will be represented by one or more notes
registered in global form, without interest coupons attached.
Upon the consummation of the exchange offer, these global notes
will be deposited with The Depository Trust Company
(referred to in this prospectus as DTC) in New York,
New York, or remain in the custody of the trustee and registered
in the name of DTC or its nominee, in each case for credit to
the account of a direct or indirect participant in DTC.
Transfers of beneficial interests in the global notes will be
subject to the applicable rules and procedures of DTC and its
direct or indirect participants. Beneficial interests may |
10
|
|
|
|
|
not be exchanged for notes in certificated form, except in
limited circumstances. |
|
Governing Law |
|
The exchange notes and the indenture governing the exchange
notes will be governed by New York law. |
|
Trustee |
|
The Bank of New York Mellon Trust Company, N.A. |
|
Absence of Public Market for the Exchange Notes |
|
The exchange notes are new securities for which there is no
established trading market and we do not intend to list the
exchange notes on any national securities exchange. The absence
of an active trading market for the exchange notes could have an
adverse on the liquidity and value of the exchange notes. |
11
Selected
Consolidated Financial Data
The following table sets forth certain of our historical
consolidated financial data. The financial data for the years
ended December 31, 2009, 2008 and 2007 and as of
December 31, 2009 and 2008 is derived from our audited
consolidated financial statements that are incorporated by
reference into this prospectus. The financial data for the years
ended December 31, 2006 and 2005 and as of
December 31, 2007, 2006 and 2005 is derived from our
audited consolidated financial statements that are not
incorporated by reference nor included elsewhere in this
prospectus.
The following information should be read in conjunction with,
and is qualified by reference to, our financial statements
(including the related notes to those financial statements) and
the information under the caption Managements
Discussion and Analysis of Financial Condition and Results of
Operations and Business in our Annual Report
on
Form 10-K
for the year ended December 31, 2009, which is incorporated
by reference into this prospectus.
Our historical financial information may not be indicative of
our results of operations or financial position to be expected
in the future.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2009(1)
|
|
|
2008(1)
|
|
|
2007
|
|
|
2006
|
|
|
2005(1)
|
|
|
|
(In thousands except per share data)
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product sales
|
|
$
|
710,761
|
|
|
$
|
593,165
|
|
|
$
|
603,051
|
|
|
$
|
603,810
|
|
|
$
|
546,429
|
|
Service revenue
|
|
|
22,389
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Alliance revenue
|
|
|
97,311
|
|
|
|
63,812
|
|
|
|
86,452
|
|
|
|
81,242
|
|
|
|
91,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
830,461
|
|
|
|
656,977
|
|
|
|
689,503
|
|
|
|
685,052
|
|
|
|
638,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations before income taxes
|
|
|
199,349
|
|
|
|
(172,680
|
)
|
|
|
20,145
|
|
|
|
3,522
|
|
|
|
(92,838
|
)
|
Provision (benefit) for income taxes(2)
|
|
|
(58,270
|
)
|
|
|
34,688
|
|
|
|
13,535
|
|
|
|
36,577
|
|
|
|
67,034
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations
|
|
|
257,619
|
|
|
|
(207,368
|
)
|
|
|
6,610
|
|
|
|
(33,055
|
)
|
|
|
(159,872
|
)
|
Income (loss) from discontinued operations, net of tax(3)
|
|
|
6,125
|
|
|
|
166,548
|
|
|
|
(26,796
|
)
|
|
|
(37,332
|
)
|
|
|
(40,468
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
|
263,744
|
|
|
|
(40,820
|
)
|
|
|
(20,186
|
)
|
|
|
(70,387
|
)
|
|
|
(200,340
|
)
|
Less: Net income attributable to noncontrolling interest
|
|
|
3
|
|
|
|
7
|
|
|
|
2
|
|
|
|
3
|
|
|
|
287
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Valeant
|
|
$
|
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
|
|
$
|
3.15
|
|
|
$
|
(2.37
|
)
|
|
$
|
0.07
|
|
|
$
|
(0.35
|
)
|
|
$
|
(1.74
|
)
|
Income (loss) from discontinued operations attributable to
Valeant
|
|
|
0.07
|
|
|
|
1.90
|
|
|
|
(0.29
|
)
|
|
|
(0.40
|
)
|
|
|
(0.45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share attributable to Valeant
|
|
$
|
3.22
|
|
|
$
|
(0.47
|
)
|
|
$
|
(0.22
|
)
|
|
$
|
(0.75
|
)
|
|
$
|
(2.19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted income (loss) per share attributable to Valeant:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing operations attributable to Valeant
|
|
$
|
3.07
|
|
|
$
|
(2.37
|
)
|
|
$
|
0.07
|
|
|
$
|
(0.35
|
)
|
|
$
|
(1.74
|
)
|
Income (loss) from discontinued operations attributable to
Valeant
|
|
|
0.07
|
|
|
|
1.90
|
|
|
|
(0.28
|
)
|
|
|
(0.40
|
)
|
|
|
(0.45
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share attributable to Valeant
|
|
$
|
3.14
|
|
|
$
|
(0.47
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.75
|
)
|
|
$
|
(2.19
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per share of common stock
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
0.24
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31,
|
|
|
2009
|
|
2008
|
|
2007
|
|
2006
|
|
2005
|
|
|
(In thousands)
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
68,080
|
|
|
$
|
199,582
|
|
|
$
|
287,728
|
|
|
$
|
311,012
|
|
|
$
|
208,397
|
|
Working capital(4)
|
|
|
125,079
|
|
|
|
175,450
|
|
|
|
412,272
|
|
|
|
348,402
|
|
|
|
220,447
|
|
Net assets of discontinued operations(3)
|
|
|
|
|
|
|
|
|
|
|
272,047
|
|
|
|
282,251
|
|
|
|
307,096
|
|
Total assets
|
|
|
1,305,479
|
|
|
|
1,185,932
|
|
|
|
1,492,321
|
|
|
|
1,503,386
|
|
|
|
1,512,740
|
|
Total debt(5)
|
|
|
600,589
|
|
|
|
398,802
|
|
|
|
716,821
|
|
|
|
698,502
|
|
|
|
681,606
|
|
Stockholders equity
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371,179
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251,748
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479,571
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509,857
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527,843
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Notes to Selected Consolidated Financial Data:
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(1) |
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The results of operations of Coria Laboratories Ltd.
(Coria), DermaTech Pty Ltd. (DermaTech),
Dow Pharmaceutical Sciences, Inc. (Dow),
EMO-FARM sp. z o.o. (Emo-Farm), Tecnofarma S.A. de
C.V. (Tecnofarma), Private Formula Holdings
International Pty Limited (PFI) and Laboratoire
Dr. Renaud (Dr. Renaud) 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 and
December 15, 2009. In connection with our 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, we recorded $185.8 million
and $0.5 million of IPR&D expense related to the
acquisitions of Dow and Coria, respectively. In 2005, we
acquired Xcel for approximately $280.0 million of which
$126.4 million was allocated to IPR&D costs and
charged to expense. |
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(2) |
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The tax provision in 2005 included a net charge of
$27.4 million associated with an Internal Revenue Service
examination of our 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, we recorded valuation allowance increases of
$58.6 million, $33.1 million and $44.5 million,
respectively, against our deferred tax asset to recognize the
uncertainty of realizing the benefits of our 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 our business
operations located in Western and Eastern Europe, Middle East
and Africa (the WEEMEA business) and reversal of our
intent to indefinitely reinvest foreign earnings, we 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 our valuation allowance in the U.S. as we
determined that it is more likely than not that we would utilize
our deferred tax assets with the exception of state capital
losses and foreign net operating losses. See Note 11 of
notes to consolidated financial statements in Item 8 of our
Annual Report on
Form 10-K
for the year ended December 31, 2009 for additional
information. Such Annual Report is incorporated by reference
into this prospectus. See Documents Incorporated by
Reference. |
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(3) |
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In September 2008 and September 2007, we reclassified our WEEMEA
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 our environmental
liability related to our former biomedical facility. In December
2005, we acquired the U.S. and Canadian rights to
Infergen®
from InterMune. In this transaction, we charged
$47.2 million to acquired IPR&D. As a result of the
reclassification of the |
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Infergen®
operations to discontinued operations, this charge was
classified as an expense within discontinued operations. |
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(4) |
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Working capital in 2007 and 2006 excludes $325.9 million
and $236.6 million, respectively, of assets held for sale. |
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(5) |
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In June 2009, we issued $365.0 million aggregate principal
amount of the old notes. In 2009, we repurchased
$173.5 million aggregate principal amount of our
3.0% Convertible Subordinated Notes due 2010 (the
3.0% Notes) and 4.0% Convertible
Subordinated Notes due 2013 (the 4.0% Notes).
In 2008, we repurchased $32.6 million aggregate principal
amount of our 3.0% Notes. In July 2008, we redeemed
$300.0 million aggregate principal amount of
7.0% Senior Notes due 2011 (the 7.0% Senior
Notes). |
Ratio of
Earnings to Fixed Charges
The following table presents our ratio of earnings to fixed
charges for the periods indicated:
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Years Ended December 31,
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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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Ratio of Earnings to Fixed Charges
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5.2
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x
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1.3
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x
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1.1
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x
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The ratio of earnings to fixed charges is computed by dividing
earnings to fixed charges. For purposes of calculating the ratio
of earnings to fixed charges, earnings represents pre-tax income
from continuing operations before adjustment for noncontrolling
interests in consolidated subsidiaries. Fixed charges include:
interest expense, including amortization of debt issuance cost
and amortization of debt discount; and the portion of rental
expense that we believe is representative of the interest
component of rental expense. For the years ended
December 31, 2008 and 2005, earnings were insufficient to
cover fixed charges by approximately $172.7 million and
$92.8 million, respectively. The Company accounts for
interest and penalties related to uncertain tax positions as
part of its (benefit) provision for income taxes, and therefore,
these charges are not included as a component of interest
expense within fixed charges.
Risk
Factors
See Risk Factors beginning on page 15 of this
prospectus and the other information included or incorporated by
reference in this prospectus for a discussion of certain risks
you should consider before deciding whether to participate in
the exchange offer.
14
RISK
FACTORS
You should carefully consider the risks described below as
well as the other information contained in or incorporated by
reference into this prospectus before deciding whether to
participate in the exchange offer. These risks are not the only
ones facing us or relevant to the exchange offer or your
investment in the notes. There may be additional risks and
uncertainties not presently known to us or that we currently
believe are immaterial. The occurrence of any one or more of
these known or unknown risks could materially and adversely
affect our business, condition (financial or otherwise),
operating results, prospects, ability to satisfy our payment
obligations under the notes and the value of the notes. In such
case, you could lose all or part of your investment in, and
expected return on, the notes.
Risks
Relating to the Exchange Offer and the Notes
If you
fail to exchange your old notes, they will continue to be
restricted securities and may become less liquid.
Old notes which you do not tender or we do not accept will,
following the exchange offer, continue to be restricted
securities. You may not offer or sell untendered old notes
except pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities
laws. We will issue exchange notes in exchange for the old notes
pursuant to the exchange offer only following the satisfaction
of procedures and conditions described in The Exchange
Offer Procedures for Tendering Old Notes.
These procedures and conditions include timely receipt by the
exchange agent of the old notes and of a properly completed and
duly executed letter of transmittal.
If most of the old notes are tendered in this exchange offer,
the liquidity of the market for any old notes remaining after
the completion of the exchange offer may be substantially
limited. Any old note tendered and exchanged in the exchange
offer will reduce the aggregate principal amount of the old
notes outstanding. Following the exchange offer, if you did not
tender your old notes you generally will not have any further
registration rights and your old notes will continue to be
subject to transfer restrictions. Accordingly, the liquidity of
the market for any old notes could be adversely affected.
You
may not receive exchange notes in the exchange offer if the
exchange offer procedure is not followed.
We will issue the exchange notes in exchange for your old notes
only if you properly tender your old notes before expiration of
the exchange offer. Neither the exchange agent nor we are under
any duty to give notification of defects or irregularities with
respect to tenders of old notes for exchange. If you are the
beneficial holder of old notes that are held through your
broker, dealer, commercial bank, trust company or other nominee,
and you wish to tender in the exchange offer, you should
promptly contact the person through whom your old notes are held
and instruct that person to tender on your behalf.
There
is no established trading market for the exchange notes. If an
actual trading market does not develop for the exchange notes,
you may not be able to resell them quickly, for the price that
you paid, or at all.
The exchange notes are new securities for which there is no
established trading market and we do not intend to list the
exchange notes on any national securities exchange. As a result,
no assurance can be given:
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as to the development or continuation of any market for the
exchange notes;
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as to the liquidity of any market that does develop; or
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as to your ability to sell your exchange notes or the price at
which you will be able to sell your exchange notes.
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15
The absence of an active trading market for the exchange notes
could have an adverse effect on the liquidity and value of the
exchange notes. Even if a trading market develops, the market
price of the notes will depend on many factors, including, among
others, the following:
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prevailing interest rates;
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our business, results of operations, condition (financial and
otherwise) and prospects;
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ratings, if any, assigned to the exchange notes by rating
agencies; and
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the market for similar securities.
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Historically, the market for debt securities similar to the
exchange notes has been subject to disruptions that have caused
volatility in prices of securities similar to the exchange
notes. We cannot assure you that the market, if any, for the
exchange notes will be free from similar disruptions. Any such
disruptions may have an adverse effect on the price at which you
are able to sell your exchange notes, regardless of our
business, results of operations, condition (financial or
otherwise) and prospects.
Broker-dealers
may need to comply with the registration and prospectus delivery
requirements of the Securities Act.
Any broker-dealer that (1) exchanges its old notes in the
exchange offer for the purpose of participating in a
distribution of the exchange notes or (2) resells exchange
notes that were received by it for its own account in the
exchange offer may be required to comply with the registration
and prospectus delivery requirements of the Securities Act in
connection with any resale transaction by that broker-dealer.
Any profit on the resale of the exchange notes and any
commission or concessions received by a broker-dealer may be
deemed to be underwriting compensation under the Securities Act.
Our
substantial level of debt could materially and adversely affect
our ability to fulfill our obligations under the notes, our
ability to react to changes in our business and our ability to
incur additional debt to fund future needs.
We have a substantial amount of debt. For more detail regarding
our debt, see Selected Consolidated Financial Data.
Our debt could have important consequences for holders of the
notes. For example, it could:
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make it more difficult for us to satisfy our obligations with
respect to the notes;
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require us to dedicate a substantial portion of our cash flow
from operations to payments on our debt, thereby reducing funds
available for working capital, capital expenditures,
acquisitions, research and development and other purposes;
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increase our vulnerability to adverse economic and industry
conditions;
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limit our flexibility in planning for, or reacting to, changes
in our business and the industries in which we operate;
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limit our noteholders rights to receive payments under the
notes if secured creditors have not been paid;
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place us at a competitive disadvantage compared to our
competitors that have relatively less debt;
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limit our ability to borrow additional funds, or to dispose of
assets to raise funds, if needed, for working capital, capital
expenditures, acquisitions, research and development and other
purposes; and
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prevent us from raising the funds necessary to repurchase all
notes tendered to us upon the occurrence of certain changes of
control, which would constitute a default under the indenture
governing the notes.
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In addition, restrictions imposed by the indenture governing the
notes and our other outstanding indebtedness may limit our
ability to operate our business and to finance our future
operations or capital needs or to engage in other business
activities.
16
To
service our third-party debt, we will require a significant
amount of cash. Our ability to generate cash depends on many
factors beyond our control, and any failure to meet our
third-party debt service obligations could harm our business,
financial condition and results of operations.
Our ability to pay interest on and principal of the notes and
our ability to satisfy our other debt obligations will depend
principally upon our future operating performance. As a result,
prevailing economic conditions and financial, business and other
factors, many of which are beyond our control, will affect our
ability to make payments on our debt. If we do not generate
sufficient cash flow from operations to satisfy our debt service
obligations, including payments on the notes, we may have to
undertake alternative financing plans, such as refinancing or
restructuring our debt, selling assets, reducing or delaying
capital investments or seeking to raise additional capital. Our
ability to restructure or refinance our debt will depend on the
capital markets and our financial condition at such time. Any
refinancing of our debt could be at higher interest rates and
may require us to comply with more onerous covenants, which
could further restrict our business operations. Our inability to
generate sufficient cash flow to satisfy our debt service
obligations, including the inability to service the notes
offered hereby, or to refinance our obligations on commercially
reasonable terms, would have an adverse effect, which could be
material, on our business, financial position, results of
operations and cash flows, as well as on our ability to satisfy
our obligations in respect of the notes.
Our subsidiaries own our assets and conduct our operations.
Accordingly, repayment of our indebtedness, including the notes,
is dependent on the generation of cash flow by our subsidiaries
and their ability to make such cash available to us, by
dividend, debt repayment or otherwise. Unless they are
guarantors of the notes, our subsidiaries do not have any
obligation to pay amounts due on the notes or to make funds
available for that purpose. Our subsidiaries may not be able to,
or may not be permitted to, make distributions to enable us to
make payments in respect of our indebtedness, including each
series of notes. Each subsidiary is a distinct legal entity and,
under certain circumstances, legal and contractual restrictions
may limit our ability to obtain cash from our subsidiaries. Our
non-guarantor subsidiaries include foreign subsidiaries and they
may be prohibited by law or other regulations from distributing
funds to us
and/or we
may be subject to payment of repatriation taxes and
withholdings. While the indenture governing the notes will limit
the ability of some of our subsidiaries to incur consensual
restrictions on their ability to pay dividends or make other
intercompany payments to us, these limitations are subject to
certain qualifications and exceptions. In the event that we do
not receive distributions from our subsidiaries or receive cash
via cash repatriation strategies for services rendered and
intellectual property, we may be unable to make required
principal and interest payments on our indebtedness, including
the notes.
The
terms of the indenture governing the notes may restrict our
current and future operations, particularly our ability to
respond to changes in our business or to take certain
actions.
The indenture governing the notes offered hereby will contain,
and any future indebtedness of ours would likely contain, a
number of restrictive covenants imposing significant operating
and financial restrictions on us and our subsidiaries, including
restrictions that may limit our ability to engage in acts that
may be in our long-term best interests and may adversely affect
our ability to finance future operations or capital needs or to
engage in other business activities.
The indenture governing the notes includes covenants
restricting, among other things, our ability to:
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incur or guarantee additional debt or issue disqualified stock;
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pay dividends, or make redemptions, repurchases or
distributions, with respect to ordinary shares or capital stock;
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create or incur certain liens;
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make certain loans or investments;
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engage in mergers, acquisitions, amalgamations, asset sales and
sale and leaseback transactions; and
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engage in transactions with affiliates.
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These covenants and other restrictive covenants are subject to a
number of qualifications and exceptions.
17
The
assets of our subsidiaries that are not guarantors will be
subject to prior claims by creditors of those
subsidiaries.
You will not have a claim as a creditor against our subsidiaries
that are not guarantors of the notes. Not all of our
subsidiaries will guarantee the notes and our subsidiaries that
do guarantee the notes may obtain releases of their guarantees
as set forth in the indenture. See Description of the
Exchange Notes Subsidiary Guarantees.
Therefore, the assets of our non-guarantor subsidiaries will be
subject to prior claims by creditors of those subsidiaries,
whether secured or unsecured. Unrestricted subsidiaries under
the indenture are also not subject to the covenants in the
indenture. For the year ended December 31, 2009, our
non-guarantor subsidiaries generated $422.4 million, or
51%, of our total consolidated revenue and $122.2 million,
or 52%, of our total consolidated income from operations. In
addition, as of December 31, 2009, our non-guarantor
subsidiaries held $667.1 million, or 51%, of our total
consolidated assets and had $344.1 million, or 37%, of our
total consolidated liabilities (including trade payables), to
which the notes are structurally subordinated.
We and
our subsidiaries may be able to incur substantially more debt,
including secured debt.
Subject to the restrictions in the indenture governing the notes
and our other outstanding indebtedness, we and our subsidiaries
may incur significant additional debt, including secured debt,
that would be effectively senior to the notes. Although the
terms of these facilities and the indenture governing the notes
contain restrictions on the incurrence of additional debt,
including secured debt, these restrictions are subject to a
number of important exceptions, including our ability to enter
into a senior secured credit facility that is secured by all of
our and our subsidiaries assets, and debt incurred in
compliance with these restrictions could be substantial. If we
and our restricted subsidiaries incur significant additional
debt, the related risks that we face could intensify.
Federal
and state fraudulent transfer laws may permit a court to void
the guarantees and, if that occurs, you may not receive any
payments on the notes.
Federal and state fraudulent transfer and conveyance statutes
may apply to the issuance of the notes and the incurrence of the
guarantees. Under federal bankruptcy law and comparable
provisions of state fraudulent transfer or conveyance laws,
which may vary from state to state, the notes or guarantees
could be voided as a fraudulent transfer or conveyance if
(1) we or any of the subsidiary guarantors, as applicable,
issued the notes or incurred the guarantees with the intent of
hindering, delaying or defrauding creditors or (2) we or
any of the subsidiary guarantors, as applicable, received less
than reasonably equivalent value or fair consideration in return
for either issuing the notes or incurring the guarantees and, in
the case of (2) only, one of the following is also true at
the time thereof:
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we or any of the subsidiary guarantors, as applicable, were
insolvent or rendered insolvent by reason of the issuance of the
notes or the incurrence of the guarantees;
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the issuance of the notes or the incurrence of the guarantees
left us or any of the subsidiary guarantors, as applicable, with
an unreasonably small amount of capital to carry on the business;
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we or any of the subsidiary guarantors intended to, or believed
that we or such subsidiary guarantor would, incur debts beyond
our or such subsidiary guarantors ability to pay as they
mature; or
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we or any of the subsidiary guarantors was a defendant in an
action for money damages, or had a judgment for money damages
docketed against us or such subsidiary guarantor if, in either
case, after final judgment, the judgment is unsatisfied.
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If a court were to find that the issuance of the notes or the
incurrence of the guarantee was a fraudulent transfer or
conveyance, the court could void the payment obligations under
the notes or such guarantee or subordinate the notes or such
guarantee to presently existing and future indebtedness of ours
or of the related subsidiary guarantor, or require the holders
of the notes to repay any amounts received with respect to such
guarantee. In the event of a finding that a fraudulent transfer
or conveyance occurred, you may not receive any repayment on the
notes. Further, the voidance of the notes could result in an
event of default with respect to our and our subsidiaries
other debt that could result in acceleration of such debt.
18
We cannot be certain as to the standards a court would use to
determine whether or not we or the subsidiary guarantors were
solvent at the relevant time or, regardless of the standard that
a court uses, that the issuance of the guarantees would not be
further subordinated to our or any of our subsidiary
guarantors other debt.
We may
not be able to repurchase the notes if we experience a change of
control.
The indenture governing the notes requires us to offer to
repurchase the notes when certain change of control events
occur. If we experience a change of control, you will have the
right to require us to repurchase some or all of your notes at a
purchase price in cash equal to 101% of the principal amount of
your notes to be repurchased plus accrued and unpaid interest
and liquidated damages, if any. The indenture governing our
existing convertible notes contains a change of control
provision which gives the holders of such convertible notes the
right to require us to repurchase the convertible notes at a
purchase price in cash equal to 100% of the principal amount of
the convertible notes to be repurchased plus accrued and unpaid
interest.
In the event that we experience a change of control that results
in having to repurchase the notes, we may not have sufficient
financial resources to satisfy all of our obligations under the
notes and our existing convertible notes. In addition, the
change of control covenant in the indenture governing the notes
does not cover all corporate reorganizations, mergers or similar
transactions and may not provide you with protection in a highly
leveraged transaction. See Description of the Exchange
Notes Change of Control.
The
notes carry original issue discount for United States federal
income tax purposes.
As in the case of the old notes, the exchange notes will be
treated as having been issued with original issue discount for
United States federal income tax purposes (but based on the
issue date of the old notes). Thus, in addition to stated
interest on the notes, U.S. holders (as defined in
Certain Material United States Federal Income Tax
Considerations) will be required to include any amounts
representing the original issue discount in gross income on a
constant yield basis for United States federal income tax
purposes in advance of the receipt of cash payments to which
such income is attributable. You should consult your own tax
adviser as to the particular tax consequences that would bear on
your exchange of old notes for exchange notes, and the holding
of exchange notes, including the applicability and effect of any
state, local or foreign tax laws and of any proposed changes in
applicable laws.
If a
bankruptcy petition were filed by or against us, you may receive
a lesser amount for your claim than you would have been entitled
to receive under the indenture governing the
notes.
As the notes continue to carry original issue discount, if a
bankruptcy petition were filed by or against us under the
U.S. Bankruptcy Code after the issuance of the notes, the
claim by any holder of the notes for the principal amount of the
notes may be limited to an amount equal to the sum of:
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the original issue price for the notes; and
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that portion of the original issue discount that does not
constitute unmatured interest for purposes of the
U.S. Bankruptcy Code.
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Any original issue discount that was not amortized as of the
date of the bankruptcy filing would constitute unmatured
interest. Accordingly, under these circumstances you may receive
a lesser amount than you would be entitled to under the terms of
the indenture governing the notes, even if sufficient funds are
available. To the extent that the U.S. Bankruptcy Code
differs from the U.S. Internal Revenue Code of 1986, as
amended with respect to the determination of the amount of
discount and the method of amortizing such discount, you may
recognize taxable gain or loss upon payment of your claim in
bankruptcy.
Our
credit ratings may not reflect the risks of investing in the
notes.
Our credit ratings are an assessment by rating agencies of our
ability to pay our debts when due. Consequently, real or
anticipated changes in our credit ratings will generally affect
the value of the notes. These credit ratings may not reflect the
potential impact of risks relating to structure or marketing of
the notes.
19
Agency ratings are not a recommendation to buy, sell or hold any
security and may be revised or withdrawn at any time by the
issuing organization. Each agencys rating should be
evaluated independently of any other agencys rating. There
can be no assurance our credit ratings will remain in effect for
any given period of time or that such ratings will not be
lowered, suspended or withdrawn entirely by the rating agencies,
if, in each rating agencys judgment, circumstances so
warrant. Actual or anticipated changes or downgrades in our
credit ratings, including any announcement that our ratings are
under further review for a downgrade could affect the value of
the notes and increase our borrowing costs.
Risks
Relating to Our Company
We
operate in an extremely competitive industry. If competitors
develop more effective or less costly drugs for our target
indications, our business could be seriously
harmed.
Many of our competitors, particularly large pharmaceutical
companies, have substantially greater financial, technical and
human resources than we do. Many of our competitors spend
significantly more on research and development related
activities than we do. Others may succeed in developing products
that are more effective than those currently marketed or
proposed for development by us. Progress by other researchers in
areas similar to those being explored by us may result in
further competitive challenges. In addition, academic
institutions, government agencies and other public and private
organizations conducting research may seek patent protection
with respect to potentially competitive products. They may also
establish exclusive collaborative or licensing relationships
with our competitors.
Our
business, financial condition and results of operations are
subject to risks arising from the international scope of our
operations.
We conduct a significant portion of our business outside the
U.S. Approximately 57% and 66% of our revenues from
continuing operations were generated outside the
U.S. during the years ended December 31, 2009 and
2008, respectively. We sell our pharmaceutical products in many
countries around the world. All of our foreign operations are
subject to risks inherent in conducting business abroad,
including possible nationalization or expropriation, price and
currency exchange controls, fluctuations in the relative values
of currencies, political instability and restrictive
governmental actions.
If
retigabine and other product candidates in development do not
become approved and commercially successful products, our
ability to generate future growth in revenue and earnings will
be adversely affected.
We focus our development activities on areas in which we have
particular strengths. The outcome of any development program is
highly uncertain. Products in clinical trials may fail to yield
a commercial product, or a product may be approved by the
U.S. Food and Drug Administration (FDA) yet not
be a commercial success. Success in preclinical and early stage
clinical trials may not necessarily translate into success in
large-scale clinical trials.
In addition, we or a partner will need to obtain and maintain
regulatory approval in order to market retigabine and other
product candidates. Even if they appear promising in large-scale
Phase III clinical trials, regulatory approval may not be
achieved. The results of clinical trials are susceptible to
varying interpretations that may delay, limit or prevent
approval or result in the need for post-marketing studies. In
addition, changes in regulatory policy for product approval
during the period of product development and FDA review of a new
application may cause delays or rejection. Even if we receive
regulatory approval, this approval may include limitations on
the indications for which we can market a product or onerous
risk management programs, thereby reducing the size of the
market that we would be able to address or our product may not
be chosen by physicians for use by their patients. There is no
guarantee that we will be able to satisfy the needed regulatory
requirements, and we may not be able to generate significant
revenue, if any, from retigabine and other product candidates.
20
Obtaining
necessary government approvals is time consuming and not
assured.
FDA approval must be obtained in the United States and approval
must be obtained from comparable agencies in other countries
prior to marketing or manufacturing new pharmaceutical products
for use by humans. Obtaining FDA approval for new products and
manufacturing processes can take a number of years and involves
the expenditure of substantial resources. Numerous requirements
must be satisfied, including preliminary testing programs on
animals and subsequent clinical testing programs on humans, to
establish product safety and efficacy. No assurance can be given
that we will obtain approval in the United States, or any other
country, of any application we may submit for the commercial
sale of a new or existing drug or compound. Nor can any
assurance be given that if such approval is secured, the
approved labeling will not have significant labeling
limitations, or that those drugs or compounds will be
commercially successful.
Furthermore, changes in existing regulations or adoption of new
regulations could prevent or delay us from obtaining future
regulatory approvals or jeopardize existing approvals, which
could significantly increase our costs associated with obtaining
approvals and negatively impact our market position.
If we,
our partners or licensees cannot successfully develop and/or
commercialize our products, our growth rate would be negatively
impacted.
Our future growth rate will depend, in part, upon our ability or
the ability of our partners or licensees to develop or obtain
and commercialize new products and new formulations of, or
indications for, current products. We are engaged in programs
involving compounds which we may develop
and/or
commercialize ourselves, or with a partner or by a licensee. We
may also participate in the development
and/or
commercialization of our partners product candidates.
Commercializing products is time consuming, expensive and
unpredictable. There can be no assurance that we will be able
to, either by ourselves or in collaboration with our partners or
through our licensees, successfully develop or commercialize new
products, complete clinical trials, obtain regulatory approvals,
or gain market acceptance for such products. Our existing
arrangements with our partners and licensees contain, and future
arrangements are likely to contain, various provisions, such as
repayment upon termination rights, that, if exercised, could
have a negative impact on efforts to commercialize the
applicable products, or on our company in general. It may be
necessary for us to enter into other arrangements with other
pharmaceutical companies in order to market effectively any new
products or new indications for existing products. There can be
no assurance that we will be successful in entering into such
arrangements on terms favorable to us or at all.
Any future revenue we may obtain under our worldwide license and
collaboration agreement with GSK is subject to the risks and
uncertainties described above.
Due to
the large portion of our business conducted outside the United
States, we have significant foreign currency risk.
We sell products in many countries that are susceptible to
significant foreign currency risk. In some of these markets we
sell products for U.S. Dollars. While this eliminates our
direct currency risk in such markets, it increases our risk that
we could lose market share to competitors because if a local
currency is devalued significantly, it becomes more expensive
for customers in that market to purchase our products in
U.S. Dollars. The international scope of our operations may
also lead to volatile financial results and difficulties in
managing our operations.
We may
be unable to identify, acquire and integrate acquisition targets
successfully.
Part of our business strategy includes acquiring and integrating
complementary businesses, products, technologies or other
assets, and forming strategic alliances, joint ventures and
other business combinations, to help drive future growth.
Acquisitions or similar arrangements may be complex, time
consuming and expensive. They may fail to further our business
strategy as anticipated, expose us to increased competition or
challenges with respect to our products or geographic markets,
and expose our to additional liabilities associated with
acquired business, product, technology or other asset or
arrangement. Any one of these
21
challenges or risks could impair our ability to realize any
benefit from our acquisition or arrangement after we have
expended resources on them.
In addition, our acquisitions strategy may require us to use a
significant portion of our available cash, obtain additional
debt or contingent liabilities that may increase leverage, or
issue additional equity that may dilute ownership of our
stockholders. We may not be able to finance acquisitions on
terms satisfactory to us.
Finally, we may not consummate some negotiations for
acquisitions or arrangements. Negotiations for acquisitions or
arrangements that are not ultimately consummated could result in
significant diversion of management time, as well as substantial
out-of-pocket
costs. Our competitors may have greater resources than us and
therefore be better able to complete acquisitions or may cause
the ultimate price we pay for acquisitions to increase.
We cannot forecast the number, timing or size of future
acquisitions or arrangements, or the effect that any such
transactions might have on our operating or financial results.
Any such acquisition or arrangement could disrupt our business
and negatively impact our operating results and financial
condition. Our failure to implement successfully our acquisition
strategy would limit our potential growth and could have a
material adverse effect on our business.
If we
or our third-party manufacturers are unable to manufacture our
products or the manufacturing process is interrupted due to
failure to comply with regulations or for other reasons, the
manufacture of our products could be interrupted.
We manufacture and have contracted with third parties to
manufacture some of our drug products, including products under
the rights acquired from other pharmaceutical companies.
Manufacturers are required to adhere to current good
manufacturing (cGMP) regulations enforced by the FDA
or similar regulations required by regulatory agencies in other
countries. Compliance with the FDAs cGMP requirements
applies to both drug products seeking regulatory approval and to
approved drug products. Our manufacturing facilities and those
of our contract manufacturers must be inspected and found to be
in full compliance with cGMP or similar standards before
approval for marketing.
Our dependence upon others to manufacture our products may
adversely affect our profit margins and our ability to develop
and obtain approval for our products on a timely and competitive
basis, if at all. Our failure or that of our contract
manufacturers to comply with cGMP regulations or similar
regulations outside of the United States can result in
enforcement action by the FDA or its foreign counterparts,
including, among other things, warning letters, fines,
injunctions, civil penalties, recall or seizure of products,
total or partial suspension of production, refusal of the
government to renew marketing applications and criminal
prosecution. In addition, delays or difficulties by us or with
our contract manufacturers in producing, packaging, or
distributing our products could adversely affect the sales of
our current products or introduction of other products.
In addition to regulatory compliance risks, our contract
manufacturers in the United States and in other countries are
subject to a wide range of business risks, such as seizure of
assets by governmental authorities, natural disasters, and
domestic and international economic conditions. Were we or any
of our contract manufacturers not able to manufacture our
products because of regulatory, business or any other reasons,
the manufacture of our products would be interrupted. This could
have a negative impact on our sales, financial condition and
competitive position.
Adverse
U.S. and international economic and market conditions may
adversely affect our product sales and business.
Current U.S. and international economic and market
conditions are uncertain. Our revenues and operating results may
be affected by uncertain or changing economic and market
conditions, including the challenges faced in the credit markets
and financial services industry. If domestic and global economic
and market conditions remain uncertain or persist or deteriorate
further, we may experience material impacts on our business,
operating results and financial condition. Adverse economic
conditions impacting our customers,
22
including among others, increased taxation, higher unemployment,
lower customer confidence in the economy, higher customer debt
levels, lower availability of customer credit, higher interest
rates and hardships relating to declines in the stock markets,
could cause purchases of our products to decline, which could
adversely affect our revenues and operating results.
Moreover, our projected revenues and operating results are based
on assumptions concerning certain levels of customer spending.
Any failure to attain our projected revenues and operating
results as a result of adverse economic or market conditions
estimated by us, our investors or the securities analysts that
follow our common stock, could have a material adverse effect on
our business and result in a decline in the price of our common
stock.
Adverse economic and market conditions could also negatively
impact our business by negatively impacting the parties with
whom we do business, including among others, our business
partners (including our customers as well as our alliance
partners from whom we receive royalties and milestone payments),
our manufacturers and our suppliers.
If our
products cause, or are alleged to cause, serious or widespread
personal injury, we may have to withdraw those products from the
market and/or incur significant costs, including payment of
substantial sums in damages.
Even in well designed clinical trials, the potential of a drug
to cause serious or widespread personal injury may not be
apparent. In addition, the existence of a correlation between
use of a drug and serious or widespread personal injury may not
be apparent until it has been in widespread use for some period
of time. Particularly when a drug is used to treat a disease or
condition which is complex and the patients are taking multiple
medications, such correlations may indicate, but do not
necessarily indicate, that the drug has caused the injury;
nevertheless we may decide to, or regulatory authorities may
require that we, withdraw the drug from the market
and/or we
may incur significant costs, including the potential of paying
substantial damages. Withdrawals of products from the market
and/or
incurring significant costs, including the requirement to pay
substantial damages in personal injury cases, would materially
affect our business and results of operation.
Legislative
or regulatory reform of the healthcare system may affect our
ability to sell our products profitably.
In both the United States and certain foreign jurisdictions,
there have been a number of legislative and regulatory proposals
to change the healthcare system in ways that could impact our
ability to sell our products profitably. In recent years, new
legislation has been proposed in the United States at the
federal and state levels that would effect major changes in the
healthcare system, either nationally or at the state level.
Recently, President Obama and members of Congress have proposed
significant reforms. On November 7, 2009, the House of
Representatives passed and, on December 24, 2009, the
Senate passed health care reform legislation that would require
most individuals to have health insurance, establish new
regulations on health plans, create insurance pooling mechanisms
and a government health insurance option to compete with private
plans and other expanded public health measures. This
legislation would also reduce Medicare spending on services
provided by hospitals and other providers.
Given that legislation has not yet been enacted, it is still not
possible to determine what, if any impact this legislation may
have on the pharmaceutical industry and our business. Further
federal and state proposals are likely. However, an expansion in
governments role in the U.S. healthcare industry may
lower reimbursements for our products, reduce medical procedure
volumes and adversely affect our business, possibly materially.
In addition, the potential for adoption of these proposals
affects or will affect our ability to raise capital, obtain
additional collaborators and market our products. We expect to
experience pricing pressures in connection with the sale of our
products due to the trend toward managed health care, the
increasing influence of health maintenance organizations and
additional legislative proposals. Our results of operations
could be adversely affected by future health care reforms.
23
Products
representing a significant amount of our revenue are not
protected by patent or data exclusivity rights.
A majority of the products we sell have no meaningful
exclusivity protection via patent or data exclusivity rights.
These products represent a significant amount of our revenues.
Without exclusivity protection, competitors face fewer barriers
in introducing competing products. The introduction of competing
products could adversely affect our results of operations and
financial condition.
Many
of our key processes, opportunities and expenses are a function
of existing national and/or local government regulation.
Significant changes in regulations could have a material adverse
impact on our business.
The process by which pharmaceutical products are approved is
lengthy and highly regulated. Our multi-year clinical trials
programs are planned and executed to conform to these
regulations, and once begun, can be difficult and expensive to
change should the regulations regarding approval of
pharmaceutical products significantly change.
Failures to comply with the applicable legal requirements at any
time during the product development process, approval process or
after approval may result in administrative or judicial
sanctions. These sanctions could include the FDAs
imposition of a hold on clinical trials, refusal to approve
pending applications, withdrawal of an approval, warning
letters, product recalls, product seizures, total or partial
suspension of production or distribution, injunctions, fines,
civil penalties or criminal prosecution. Any agency or judicial
enforcement action could have a material adverse effect on us.
In addition, newly discovered or developed safety or
effectiveness data may require changes to a products
approved labeling, including the addition of new warnings,
precautions and contraindications.
Manufacturers of drug products are required to comply with
manufacturing regulations, including current good manufacturing
regulations enforced by the FDA and similar regulations enforced
by regulatory agencies outside the United States. In addition,
we are subject to price control restrictions on our
pharmaceutical products in many countries in which we operate.
We are also subject to extensive health care marketing and fraud
and abuse regulation by the federal and state governments and
foreign countries in which we may conduct our business. If our
operations are found to be in violation of any of these laws,
regulations, rules or policies or any other law or governmental
regulation, or if interpretations of the foregoing change, we
may be subject to civil and criminal penalties, damages, fines,
exclusion from the Medicare and Medicaid programs and the
curtailment or restructuring of our operations.
In addition, we depend on patent law and data exclusivity to
keep generic products from reaching the market in our
evaluations of the development of our products. In assessing
whether we will invest in any development program, or license a
product from a third party, we assess the likelihood of patent
and/or data
exclusivity under the laws and regulations then in effect. If
those schemes significantly change in a large market, or across
many smaller markets, our ability to protect our investment may
be adversely affected.
Appropriate tax planning requires that we consider the current
and prevailing national and local tax laws and regulations, as
well as international tax treaties and arrangements that we
enter into with various government authorities. Changes in
national/local tax regulations or changes in political
situations may limit or eliminate the effects of our tax
planning and could result in unanticipated tax expenses.
We are
involved in various legal proceedings that could adversely
affect us.
We are involved in several legal proceedings, including those
described in Note 21 of notes to the consolidated financial
statements in our Annual Report on
Form 10-K
for the year ended December 31, 2009. Defending against
claims and any unfavorable legal decisions, settlements or
orders could have a material adverse effect on us.
24
We are
subject to fraud and abuse and similar laws and
regulations, and a failure to comply with such regulations or
prevail in any litigation related to noncompliance could harm
our business.
Pharmaceutical and biotechnology companies have faced lawsuits
and investigations pertaining to violations of health care
fraud and abuse laws, such as the federal False
Claims Act, the federal Anti-kickback Statute, the Foreign
Corrupt Practices Act and other state and federal laws and
regulations. Increasingly, states require pharmaceutical
companies to have comprehensive compliance programs and to
disclose certain payments made to healthcare providers or funds
spent on marketing and promotion of drug products. If we are in
violation of any of these requirements or any such actions are
instituted against us, and we are not successful in defending
ourselves or asserting our rights, those actions could have a
significant impact on our business, including the imposition of
significant fines or other sanctions.
We
could be adversely affected by violations of the U.S. Foreign
Corrupt Practices Act and similar worldwide anti-bribery
laws.
The U.S. Foreign Corrupt Practices Act, or FCPA, and
similar worldwide anti-bribery laws generally prohibit companies
and their intermediaries from making improper payments to
non-U.S. officials
for the purpose of obtaining or retaining business. Our policies
mandate compliance with these anti-bribery laws.
We operate in many parts of the world that have experienced
governmental corruption to some degree and in certain
circumstances, strict compliance with anti-bribery laws may
conflict with local customs and practices or may require us to
interact with doctors and hospitals, some of which may be state
controlled, in a manner that is different than in the United
States. Despite our training and compliance program, we cannot
assure you that our internal control policies and procedures
always will protect us from reckless or criminal acts committed
by our employees or agents. Violations of these laws, or
allegations of such violations, could disrupt our business and
result in a material adverse effect on our financial condition,
results of operations and cash flows.
We may
be involved in infringement actions which are uncertain, costly
and time-consuming and could have a material adverse effect on
our business, results of operations, financial condition and
cash flows.
In order to protect or enforce patent rights, we may initiate
litigation against third parties, and we may also become subject
to infringement claims by third parties. The outcomes of
infringement action are uncertain and infringement actions are
costly and divert technical and management personnel from their
normal responsibilities. The cost of such actions as well as the
ultimate outcome of such actions could have a material adverse
effect on our business, results of operations, financial
condition and cash flows.
The existence of a patent will not necessarily protect us from
competition. Competitors may successfully challenge our patents,
produce similar drugs that do not infringe our patents or
produce drugs in countries that do not respect our patents.
Existing
and future audits by, or other disputes with, taxing authorities
may not be resolved in our favor.
Our income tax returns are subject to audit in various
jurisdictions. Existing and future audits by, or other disputes
with, tax authorities may not be resolved in our favor and could
have an adverse effect on our reported effective tax rate and
after-tax cash flows.
We are
subject to a consent order with the SEC.
We are subject to a consent order with the SEC, which
permanently enjoins us from violating securities laws and
regulations. The consent order also precludes protection for
forward-looking statements under the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995 with
respect to forward-looking statements we made prior to
November 28, 2005. The existence of the permanent
injunction under the consent order, and the lack of protection
under the safe harbor with respect to forward-looking statements
we made prior to November 28, 2005 may limit our
ability to defend against future allegations.
25
The
current SEC investigation could adversely affect our business
and the trading price of our securities.
The SEC is conducting an investigation regarding events and
circumstances surrounding trading in our common stock and the
public release of data from our first pivotal Phase III
trial for taribavirin in March 2006. In addition, the SEC
requested information regarding our restatement of certain
historical financial statements announced in March 2008, data
regarding our stock option grants since January 1, 2000 and
information about our pursuit in the Delaware Chancery Court of
the return of certain bonuses paid to Milan Panic, a former
chairman and chief executive officer, and others. In September
2006, our board of directors established the Special Committee
to review our historical stock option practices and related
accounting. The Special Committee concluded its investigation in
January 2007. We have briefed the SEC with the results of the
Special Committees investigation. We have cooperated fully
and will continue to cooperate with the SEC on its
investigation. We cannot predict the outcome of the
investigation. In the event that the investigation leads to SEC
action against any current or former officer or director, our
business (including our ability to complete financing
transactions) and the trading price of our securities may be
adversely impacted. In addition, if the SEC investigation
continues for a prolonged period of time, it may have an adverse
impact on our business or the trading price of our securities
regardless of the ultimate outcome of the investigation. In
addition, the SEC inquiry has resulted in the incurrence of
significant legal expenses and the diversion of
managements attention from our business, and this may
continue, or increase, until the investigation is concluded.
The
matters relating to the Special Committees review of our
historical stock option granting practices and the restatement
of our consolidated financial statements have resulted in
increased litigation and regulatory proceedings against us and
could have a material adverse effect on us.
In September 2006, our board of directors appointed a Special
Committee, which consisted solely of independent directors, to
conduct a review of our historical stock option granting
practices and related accounting during the period from 1982
through July 2006. The Special Committee identified a number of
occasions on which the exercise prices for stock options granted
to certain of our directors, officers and employees were set
using closing prices of our common stock with dates different
than the actual approval dates, resulting in additional
compensation charges.
To correct these and other accounting errors, we amended our
Annual Report on
Form 10-K
for the year ended December 31, 2005 and our quarterly
reports on
Form 10-Q
for the quarters ended March 31, 2006 and June 30,
2006 to restate the consolidated financial statements contained
in those reports.
Our historical stock option granting practices and the
restatement of our prior financial statements have exposed us to
greater risks associated with litigation and regulatory
proceedings. We were named as nominal defendant in three
shareholder derivative lawsuits which asserted claims related to
our historic stock option practices. To date, these shareholder
derivative lawsuits have been dismissed. In addition, the SEC
has opened a formal SEC inquiry into our historical stock option
grant practices. We cannot assure you that this current
litigation, the SEC inquiry or any future litigation or
regulatory action will result in the same conclusions reached by
the Special Committee. The conduct and resolution of these
matters will be time consuming, expensive and distracting from
the conduct of our business. Furthermore, if we are subject to
adverse findings in any of these matters, we could be required
to pay damages or penalties or have other remedies imposed upon
us which could have a material adverse effect on our business,
financial condition, results of operations and cash flows.
If we
identify a material weakness in our internal control over
financial reporting in future periods, our stock price could be
adversely affected and our ability to prepare complete and
accurate financial statements in a timely manner could be
adversely affected.
We identified a material weakness in our internal control over
financial reporting as of December 31, 2007. The material
weakness, which arose primarily as a result of our lack of a
sufficient complement of personnel in our foreign locations and
monitoring controls at the corporate level, is further described
in Item 9A of our Annual Report on
Form 10-K
for the year ended December 31, 2007. Because of the
26
foregoing, we concluded that certain financial statements,
earnings press releases and similar communications should no
longer be relied upon and that certain of our financial
statements would need to be restated. We also concluded that our
disclosure controls and procedures were not effective as of
December 31, 2007. As more fully described in Item 9A
of our Annual Report on
Form 10-K
for the year ended December 31, 2008, in 2008 we took steps
to remediate this material weakness and to improve our
disclosure controls and procedures.
If we fail to maintain our disclosure controls and procedures at
the reasonable assurance level, our financial statements and
related disclosure could contain material misstatements, the
preparation and filing of our financial statements and related
filings could be delayed, and substantial costs and resources
may be required to remediate any weaknesses or deficiencies or
to improve our disclosure controls and procedures. If we cannot
produce reliable and timely financial statements, investors
could lose confidence in our reported financial information, the
market price of our stock could decline significantly or we may
be unable to obtain financing on acceptable terms, and our
business and financial condition could be harmed.
27
USE OF
PROCEEDS
We will not receive any cash proceeds from the issuance of the
exchange notes pursuant to the exchange offer. In consideration
for issuing the exchange notes as contemplated in this
prospectus, we will receive in exchange a like principal amount
of outstanding old notes. The outstanding old notes surrendered
in exchange for the exchange notes will be retired and cancelled
and cannot be reissued. Accordingly, the issuance of the
exchange notes will not result in any change in our indebtedness.
DESCRIPTION
OF OTHER INDEBTEDNESS
3.0% Convertible Subordinated Notes due 2010
4.0% Convertible Subordinated Notes due 2013
In November 2003, we issued $240.0 million aggregate
principal amount of 3.0% Convertible Subordinated Notes due
2010 (referred to in this prospectus as, the
3.0% Notes) and $240.0 million aggregate
principal amount of 4.0% Convertible Subordinated Notes due
2013 (referred to in this prospectus as, the
4.0% Notes). The 3.0% Notes and
4.0% Notes were issued as two series of convertible notes
under a single indenture. We previously filed the indenture
governing the 3.0% Notes and the 4.0% Notes, as well
as the forms of such convertible notes, as exhibits to the
reports we file with the SEC. These documents are hereby
incorporated into this prospectus by reference, and they qualify
this summary in its entirety. A copy of these documents may be
obtained by contacting us as described in this prospectus under
the heading Documents Incorporated by Reference.
The 3.0% Notes and 4.0% Notes are general unsecured
obligations subordinated in right of payment to all of our
existing and future senior indebtedness, including the notes.
Interest on the 3.0% Notes is payable semi-annually on
February 16 and August 16 of each year. Interest on the
4.0% Notes is payable semi-annually on May 15 and November
15 of each year. We have no right to redeem the 3.0% Notes.
We have the right to redeem the 4.0% Notes, in whole or in
part, at their principal amount on or after May 20, 2011.
The 3.0% Notes and 4.0% Notes are convertible into our
common stock at an initial conversion rate of
31.6336 shares per each $1,000 principal amount of
convertible note, or approximately $31.61 per share, subject to
adjustment. Upon conversion, we will have the right to satisfy
the conversion obligations by delivery, at our option, of either
shares of our common stock, cash or a combination thereof. The
indenture governing the 3.0% Notes and 4.0% Notes
contains a change of control provision which gives each holder
of the convertible notes the right to require us to repurchase
all or part of such holders convertible notes at a
purchase price in cash equal to 100% of the principal amount of
the convertible notes to be repurchased, plus accrued and unpaid
interest. As of December 31, 2009, $48.9 million
aggregate principal amount of the 3.0% Notes and
$225.0 million aggregate principal amount of the
4.0% Notes were outstanding.
In connection with the offering of the 3.0% Notes and the
4.0% Notes, we entered into convertible note hedge and
written call option transactions with respect to our common
stock. The written call options have a strike price per share of
$39.515. The convertible note hedge is expected to reduce the
potential dilution from conversion of the notes. The written
call option is expected to offset, to some extent, the cost of
the convertible note hedge.
Other
Indebtedness
We maintain no lines of credit in the U.S. and have
short-term lines of credit of $0.5 million in the aggregate
outside the U.S., under which there were no amounts outstanding
at December 31, 2009. The lines of credit provide for
short-term borrowings and bear interest at the banks rate
of interest or a variable rate based upon WIBOR (Warsaw
Interbank Offered Rate) or an equivalent index.
28
THE
EXCHANGE OFFER
Purpose
and Effect
We issued and sold the old notes to the initial purchasers on
June 9, 2009 in a private placement transaction (referred
to this prospectus as, the private placement). The
initial purchasers subsequently sold the old notes to qualified
institutional buyers in reliance on Rule 144A under the
Securities Act and outside the United States to
non-U.S. persons
in reliance on Regulation S under the Securities Act. The
old notes were, and the exchange notes will be, issued under an
indenture, dated June 9, 2009, between us, the subsidiary
guarantors and The Bank of New York Mellon Trust Company,
N.A., as trustee. In connection with the private placement, we
entered into the exchange and registration rights agreement,
which requires that we file this registration statement under
the Securities Act with respect to the exchange notes to be
issued in the exchange offer and, upon the effectiveness of this
registration statement, offer to you the opportunity to exchange
your old notes for a like principal amount of exchange notes.
The exchange notes will be issued without a restrictive legend
and, except as set forth below, you may generally reoffer and
resell them without registration under the Securities Act. After
we complete the exchange offer, our obligation to register the
exchange of exchange notes for old notes will terminate. The
exchange and registration rights agreement has been filed as an
exhibit to the registration statement of which this prospectus
is a part and is hereby incorporated into this prospectus by
reference. A copy of the exchange and registration rights
agreement may be obtained by contacting us as described in this
prospectus under the heading Documents Incorporated by
Reference.
We believe that the exchange notes issued in exchange for the
old notes may be offered for resale, resold and otherwise
transferred by any exchange note holder without compliance with
the registration and prospectus delivery provisions of the
Securities Act if the conditions set forth below are met:
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the holder must acquire the exchange notes in the ordinary
course of its business,
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the holder must not be engaged in or intend to engage in a
distribution of the exchange notes within the meaning of the
Securities Act or have no arrangement or understanding with any
person to participate in the distribution of the exchange notes,
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the holder must not be an affiliate, as defined in
Rule 405 of the Securities Act, of ours or any subsidiary
guarantor, and
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the holder must not be acting on behalf of any person or entity
that could not truthfully make these representations.
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We base this belief solely on interpretations of the federal
securities laws by the SEC set forth in Exxon Capital
Holdings Corp., SEC no-action letter (April 13, 1988),
Morgan Stanley and Co. Inc., SEC no-action letter
(June 5, 1991), Shearman & Sterling, SEC
no-action letter (July 2, 1993) and
Brown & Wood LLP, SEC no-action letter
(February 7, 1997). A no-action letter is a letter from the
SEC responding to a request for its views as to whether a
particular matter complies with the federal securities laws or
whether the SEC would refer the matter to the SECs
enforcement division for action. We have not obtained, and do
not intend to obtain, our own no-action letter from the SEC
regarding the resale of the exchange notes. Instead, holders of
notes will be relying on the no-action letters that the SEC has
issued to third parties in circumstances that we believe are
similar to ours. We cannot assure you that the SEC would make a
similar interpretation with respect to our exchange offer. We
will not be responsible for or indemnify you against any
liability you may incur under the Securities Act. You should
consult your own legal adviser with respect to such matters.
Each holder of old notes that wishes to exchange old notes for
exchange notes in the exchange offer must represent to us that
it satisfies all of the conditions listed in the preceding
paragraph. Any holder who tenders in the exchange offer who does
not satisfy all of the above listed conditions:
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cannot rely on the position of the SEC set forth in the
no-action letters referred to above, and
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must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a resale
of the exchange notes.
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29
The SEC considers broker-dealers that acquired old notes
directly from us, but not as a result of market-making
activities or other trading activities, to be making a
distribution of the exchange notes if they participate in the
exchange offer. Consequently, these holders must comply with the
registration and prospectus delivery requirements of the
Securities Act in connection with a resale of the exchange notes
in the absence of an exemption from such requirements.
Each broker-dealer that receives exchange notes for its own
account pursuant to the exchange offer must acknowledge that it
may be deemed to be an underwriter within the
meaning of the Securities Act and that it will deliver a
prospectus in connection with any resale of such exchange notes.
The accompanying letter of transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an underwriter within the
meaning of the Securities Act. This prospectus, as it may be
amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of exchange notes
received in exchange for old notes where such old notes were
acquired by such broker-dealer as a result of market-making or
other trading activities. We have agreed that, for a period of
up to 180 days after the completion of the exchange offer,
we will make this prospectus available to any broker-dealer for
use in connection with any such resale. See Plan of
Distribution.
Except as described in the prior paragraph, holders may not use
this prospectus for an offer to resell, for the resale of or for
any other retransfer of exchange notes.
After the exchange offer is complete, you will no longer be
entitled to any exchange or registration rights with respect to
the notes unless you notify us prior to the 20th business
day following the completion of the exchange offer that you
would not receive freely tradable exchange notes in the exchange
offer or you are ineligible to participate in the exchange
offer. In such event, the exchange and registration rights
agreement requires us to file a registration statement for a
continuous offering in accordance with Rule 415 under the
Securities Act for your benefit and keep the registration
statement effective for a period of two years following the date
of original issuance of the old notes or such shorter period
that will terminate when all of the old notes covered by the
registration statement have been sold pursuant to the
registration statement.
The exchange offer is not being made to, nor will we accept
tenders for exchange from, holders of old notes in any
jurisdiction in which the exchange offer or the acceptance of
tenders would not be in compliance with the securities or blue
sky laws of such jurisdiction.
Consequences
of Failure to Exchange
If you do not participate or properly tender your old notes in
this exchange offer:
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you will retain old notes that are not registered under the
Securities Act and that will continue to be subject to
restrictions on transfer that are described in the legend on the
old notes;
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you will not be able to require us to register your old notes
under the Securities Act unless, except in the very limited
circumstances described above under Purpose
and Effect;
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you will not be able to offer to resell or transfer your old
notes unless they are registered under the Securities Act or
unless you offer to resell or transfer them pursuant to an
exemption under the Securities Act; and
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the trading market for your old notes will become more limited
to the extent that other holders of old notes participate in the
exchange offer.
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Terms of
the Exchange Offer
Upon the terms and subject to the conditions set forth in this
prospectus and in the letter of transmittal, we will accept any
and all old notes validly tendered and not withdrawn prior to
5:00 p.m., New York City time, on the expiration date of
the exchange offer. We will issue an aggregate principal amount
of up to $365,000,000 of the exchange notes for a like principal
amount of the old notes tendered and accepted in connection with
the exchange offer. You may tender some or all of your old notes
pursuant to the exchange
30
offer; however, old notes may be tendered only in denominations
of $2,000 and any integral multiples of $1,000 in excess thereof.
The form and terms of the exchange notes will be substantially
identical to the form and terms of the old notes, except that:
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the offer and sale of the exchange notes will have been
registered under the Securities Act of 1933, and therefore, the
exchange notes generally will not be subject to the restrictions
on transfer applicable to the old notes or bear legends
restricting their transfer; and
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specified rights under the exchange and registration rights
agreement, including the provisions providing for registration
rights and the right to earn additional interest under
circumstances relating to our registration obligations
thereunder, will be limited or eliminated.
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The exchange notes will evidence the same indebtedness as the
old notes and will be issued under and entitled to the benefits
of the same indenture that authorized the issuance of the
outstanding old notes. As of the date of this prospectus, all of
the old notes are outstanding. This prospectus, together with
the letter of transmittal, is being sent on or about
March 30, 2010 to all registered holders of old notes and
to others believed to have beneficial interests in the old notes.
We will be deemed to have accepted validly tendered old notes if
and when we have given oral or written notice of our acceptance
to The Bank of New York Mellon Trust Company, N.A., the
exchange agent for the exchange offer. The exchange agent will
act as our agent for the purpose of receiving from us the
exchange notes for the tendering noteholders. If we do not
accept any tendered old notes because of an invalid tender, the
occurrence of certain other events set forth in this prospectus
or otherwise, we will return certificates, if any, for any
unaccepted old notes, without expense, to the tendering
noteholder as promptly as practicable after the expiration date
of the exchange offer. Our obligation to accept old notes for
exchange pursuant to the exchange offer is subject to conditions
as set forth under Conditions below.
You will not be required to pay brokerage commissions or fees or
transfer taxes, except as set forth below under
Transfer Taxes, with respect to the
exchange of your old notes in the exchange offer. We will pay
all charges and expenses, other than certain applicable taxes,
in connection with the exchange offer. See
Fees and Expenses below.
Holders of the old notes do not have any appraisal or
dissenters rights under the Delaware General Corporation
Law in connection with the exchange offer.
Interest
on the Exchange Notes
Interest on the exchange notes will accrue at the rate of 8.375%
per annum and will be payable semi-annually in arrears on June
15 and December 15. Interest on the exchange notes will
accrue from December 15, 2009 (the date interest was most
recently paid on the old notes). In order to avoid duplicative
payment of interest, all interest accrued on old notes that are
accepted for exchange before June 15, 2010 will be
superseded by the interest that is deemed to have accrued on the
exchange notes from December 15, 2009 through the date of
the exchange. Interest will be computed on the basis of a
360-day year
comprised of twelve
30-day
months. Valeant will make each interest payment to the Holders
of record on the immediately preceding June 1 and
December 1.
Expiration
Date; Amendment
The exchange offer will expire at 5:00 p.m., New York City
time, on April 28, 2010, unless we determine, in our sole
discretion, to extend the exchange offer, in which case it will
expire at the later date and time to which it is extended. We do
not intend to extend the exchange offer, although we reserve the
right to do so. If we extend the exchange offer, we will give
oral or written notice of the extension to the exchange agent
and give each registered holder of old notes notice by means of
a press release or other public announcement of any extension
prior to 9:00 a.m., New York City time, on the next
business day after the scheduled expiration date.
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We also reserve the right, in our sole discretion:
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to accept tendered notes upon the expiration of the exchange
offer and extend the exchange offer with respect to untendered
old notes only;
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to terminate the exchange offer at any time before the
acceptance of any old notes for exchange;
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to delay accepting any old notes or, if any of the conditions
set forth below under Conditions have
not been satisfied or waived; or
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to amend the terms of the exchange offer in any manner by
complying with
Rule 14e-l(d)
under the Exchange Act, to the extent that rule applies.
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We will notify you as promptly as we can of any extension,
termination or amendment. In addition, we acknowledge and
undertake to comply with the provisions of
Rule 14e-l(c)
under the Exchange Act, which requires us to pay the
consideration offered, or return the old notes surrendered for
exchange, promptly after the termination or withdrawal of the
exchange offer.
Procedures
for Tendering Old Notes
Valid
Tender
Only a registered holder of old notes may tender the old notes
in the exchange offer. Except as set forth under
Book-Entry Transfer, to tender in the
exchange offer a holder must complete, sign and date the letter
of transmittal, or a copy of the letter of transmittal, have the
signatures on the letter of transmittal guaranteed if required
by the letter of transmittal and mail or otherwise deliver the
letter of transmittal or copy to The Bank of New York Mellon
Trust Company, N.A., as the exchange agent, prior to the
expiration date. In addition:
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the certificates representing your old notes must be received by
the exchange agent prior to the expiration date;
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a timely confirmation of book-entry transfer of such notes into
the exchange agents account at DTC pursuant to the
procedure for book-entry transfers described below under
Book-Entry Transfer must be received by
the exchange agent prior to the expiration date; or
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you must comply with the guaranteed delivery procedures
described below.
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If you hold old notes through a broker, dealer, commercial bank,
trust company or other nominee and you wish to tender your old
notes, you should contact the registered holder of your old
notes promptly and instruct the registered holder to tender on
your behalf.
If you tender an old note and you do not properly withdraw the
tender prior to the expiration of the exchange offer, you will
have made an agreement with us to participate in the exchange
offer in accordance with the terms and subject to the conditions
set forth in this prospectus and in the letter of transmittal.
Signatures on a letter of transmittal or a notice of withdrawal
must be guaranteed by an eligible institution unless:
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old notes tendered in the exchange offer are tendered either by
a registered holder who has not completed the box entitled
Special Registration Instructions or Special
Delivery Instructions on the holders letter of
transmittal or for the account of an eligible
institution; and
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the box entitled Special Registration Instructions
on the letter of transmittal has not been completed.
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If signatures on a letter of transmittal or a notice of
withdrawal are required to be guaranteed, the guarantee must be
by a financial institution, which includes most banks, savings
and loan associations and brokerage houses, that is a
participant in the Securities Transfer Agents Medallion Program,
the New York Stock Exchange Medallion Program or the Stock
Exchanges Medallion Program.
32
If the letter of transmittal is signed by a person other than
you, your old notes must be endorsed or accompanied by a
properly completed bond power and signed by you as your name
appears on those old notes.
If the letter of transmittal or any old notes or bond powers are
signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in
a fiduciary or representative capacity, those persons should so
indicate when signing. Unless we waive this requirement, in this
instance you must submit with the letter of transmittal proper
evidence satisfactory to us of their authority to act on your
behalf.
We will determine, in our sole discretion, all questions
regarding the validity, form, eligibility, including time of
receipt, acceptance and withdrawal of tendered old notes. Our
determination will be final and binding. We reserve the absolute
right to reject any and all old notes not properly tendered or
any old notes our acceptance of which would, in the opinion of
our counsel, be unlawful. We also reserve the right to waive any
defects, irregularities or conditions of tender as to certain
old notes. Our interpretation of the terms and conditions of the
exchange offer, including the instructions in the letter of
transmittal, will be final and binding on all parties.
You must cure any defects or irregularities in connection with
tenders of your old notes within the time period that we
determine unless we waive that defect or irregularity. Although
we intend to notify you of defects or irregularities with
respect to your tender of old notes, neither we, the exchange
agent nor any other person will incur any liability for failure
to give this notification. Your tender will not be deemed to
have been made and your old notes will be returned to you if:
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you improperly tender your old notes;
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you have not cured any defects or irregularities in your
tender; and
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we have not waived those defects, irregularities or improper
tender.
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In such instances, the exchange agent will return your old
notes, unless otherwise provided in the letter of transmittal,
as soon as practicable following the expiration of the exchange
offer.
In addition, we reserve the right in our sole discretion to:
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purchase or make offers for, or offer exchange notes for, any
old notes that remain outstanding subsequent to the expiration
of the exchange offer;
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terminate the exchange offer at any time before the acceptance
of any old notes for exchange; and
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to the extent permitted by applicable law, purchase notes in the
open market, in privately negotiated transactions or otherwise.
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The terms of any of these purchases or offers could differ from
the terms of the exchange offer.
In all cases, the issuance of exchange notes for old notes that
are accepted for exchange in the exchange offer will be made
only after timely receipt by the exchange agent of certificates
for your old notes or a timely book-entry confirmation of your
old notes into the exchange agents account at DTC, a
properly completed and duly executed letter of transmittal or an
agents message (as defined below under
Book-Entry Transfer) instead of the letter of
transmittal, and all other required documents. If any tendered
old notes are not accepted for any reason set forth in the terms
and conditions of the exchange offer or if old notes are
submitted for a greater principal amount than you desire to
exchange, the unaccepted or non-exchanged old notes, or old
notes in substitution therefor, will be returned without expense
to you. In addition, in the case of old notes tendered by
book-entry transfer into the exchange agents account at
DTC pursuant to the book-entry transfer procedures described
below, the non-exchanged old notes will be credited to your
account maintained with DTC, as promptly as practicable after
the expiration or termination of the exchange offer.
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Book-Entry
Transfer
We understand that the exchange agent will make a request
promptly after the date of this prospectus to establish accounts
with respect to the outstanding notes at the book-entry transfer
facility, The Depository Trust Company (referred to in this
prospectus as, DTC) for the purpose of facilitating
the exchange offer. Subject to the establishment of the
accounts, any financial institution that is a participant in
DTCs system may make book-entry delivery of outstanding
notes by causing DTC to transfer such outstanding notes into the
exchange agents account in accordance with DTCs
procedures for such transfer. However, although delivery of
outstanding notes may be effected through book-entry transfer
into the exchange agents account at DTC, the letter of
transmittal (or a manually signed facsimile of the letter of
transmittal) with any required signature guarantees, or an
agents message (as defined below) in
connection with a book-entry transfer, and any other required
documents, must, in any case, be transmitted to and received by
the exchange agent, or the guaranteed delivery procedures set
forth below must be complied with, in each case, prior to the
expiration date. Delivery of documents to DTC does not
constitute delivery to the exchange agent.
The exchange agent and DTC have confirmed that the exchange
offer is eligible for the DTC Automated Tender Offer Program.
Accordingly, the DTC participants may electronically transmit
their acceptance of the exchange offer by causing the DTC to
transfer outstanding notes to the exchange agent in accordance
with DTCs Automated Tender Offer Program procedures for
transfer. Upon receipt of such holders acceptance through
the Automated Tender Offer Program, DTC will edit and verify the
acceptance and send an agents message to the
exchange agent for its acceptance. Delivery of tendered notes
must be made to the exchange agent pursuant to the book-entry
delivery procedures set forth above, or the tendering DTC
participant must comply with the guaranteed delivery procedures
set forth below.
The term agents message means a message
transmitted by DTC, and received by the exchange agent and
forming part of the confirmation of a book-entry transfer, which
states that:
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DTC has received an express acknowledgment from the participant
in DTC tendering notes subject to the book-entry confirmation;
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the participant has received and agrees to be bound by the terms
of the letter of transmittal; and
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we may enforce such agreement against such participant.
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In the case of an agents message relating to guaranteed
delivery, the term means a message transmitted by DTC and
received by the exchange agent, which states that DTC has
received an express acknowledgment from the participant in DTC
tendering notes that such participant has received and agrees to
be bound by the notice of guaranteed delivery.
Guaranteed
Delivery Procedures
If a registered holder of the old notes desires to tender the
old notes and the old notes are not immediately available, or
time will not permit the holders old notes or other
required documents to reach the exchange agent before the
expiration date of the exchange offer, or the procedure for
book-entry transfer cannot be completed on a timely basis, you
may nevertheless tender such outstanding notes with the effect
that such tender will be deemed to have been received on or
prior to the expiration date if all the following conditions are
satisfied:
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the tender is made through a firm which is a member of a
registered national securities exchange or a member of the
National Association of Securities Dealers, Inc. or a commercial
bank or trust company having an office or correspondent in the
United States;
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prior to the expiration date of the exchange offer, the exchange
agent received from the firm which is a member of a registered
national securities exchange or a member of the National
Association of Securities Dealers, Inc. or commercial bank or
trust company having an office or correspondent in the United
States a properly completed and duly executed letter of
transmittal (or a facsimile of the letter
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of transmittal) and notice of guaranteed delivery, substantially
in the form provided by us (by telegram, telex, facsimile
transmission, mail or hand delivery), setting forth:
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the name and address of the holder of old notes,
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the amount of old notes tendered,
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a statement that the tender is being made and guaranteeing that
within five New York Stock Exchange trading days after the date
of execution of the notice of guaranteed delivery,
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the certificates for all physically tendered old notes, in
proper form for transfer, or a confirmation of a book-entry
transfer, as the case may be, and any other documents required
by the letter of transmittal will be deposited by the firm which
is a member of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc.
or commercial bank or trust company having an office or
correspondent in the United States with the exchange
agent; and
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the certificates for all physically tendered old notes, in
proper form for transfer, or a confirmation of a book-entry
transfer, as the case may be, and all other documents required
by the letter of transmittal are received by the exchange agent
within five New York Stock Exchange trading days after the date
of execution of the notice of guaranteed delivery.
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Withdrawal
Rights
Tenders of old notes may be withdrawn at any time prior to the
expiration of the exchange offer. For a withdrawal to be
effective, a written notice of withdrawal must be received by
the exchange agent on or prior to the expiration of the exchange
offer at the address set forth below under
Exchange Agent. For DTC participants, a
written notice of withdrawal may be made by electronic
transmission through DTCs Automated Tender Offer Program.
Any notice of withdrawal must:
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specify the name of the person having tendered the old notes to
be withdrawn;
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identify the old notes to be withdrawn, including the
certificate number(s) and principal amount of such notes, or, in
the case of notes transferred by book-entry transfer, the name
and number of the account at DTC);
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be signed by the holder in the same manner as the original
signature on the letter of transmittal by which such notes were
tendered, with any required signature guarantees, or be
accompanied by documents of transfer sufficient to have the
trustee with respect to the notes register the transfer of such
notes into the name of the person withdrawing the tender and a
properly completed irrevocable proxy authorizing such person to
effect such withdrawal on behalf of such holder; and
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where certificates for old notes have been transmitted specify
the name in which the old notes are registered, if different
from that of the withdrawing holder.
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We will determine all questions regarding the validity, form and
eligibility (including time of receipt) of the notices and such
determination shall be final and binding on all parties. Any old
notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the exchange offer. Any
old notes which have been tendered for exchange but which are
not exchanged for any reason will be returned to the holder
without cost to the holder (or in the case of old notes tendered
by book-entry transfer into the exchange agents account at
The Depository Trust Company according to the book-entry
transfer procedures described above, the old notes will be
credited to an account maintained with The Depository
Trust Company for the old notes) as soon as practicable
after withdrawal, rejection of tender or termination of the
exchange offer. Properly withdrawn old notes may be retendered
by following one of the procedures described under
Procedures for Tendering Old Notes above
at any time on or prior to the expiration date of the exchange
offer.
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Conditions
Notwithstanding any other provision of the exchange offer, we
will not be required to accept for exchange, or to issue
exchange notes in exchange for, any old notes and may terminate
or amend the exchange offer, if at any time before the
acceptance of any old notes for exchange any one of the
following events occurs:
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any injunction, order or decree has been issued by any court or
any governmental agency that would prohibit, prevent or
otherwise materially impair our ability to proceed with the
exchange offer;
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we decide, in our sole discretion, to terminate the exchange
offer; or
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the exchange offer violates any applicable law or any applicable
interpretation of the staff of the Commission.
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These conditions are for our sole benefit and we may assert them
regardless of the circumstances giving rise to them, subject to
applicable law. We also may waive in whole or in part at any
time and from time to time any particular condition in our sole
discretion. If we waive a condition, we may be required, in
order to comply with applicable securities laws, to extend the
expiration date of the exchange offer. Our failure at any time
to exercise any of the foregoing rights will not be deemed a
waiver of these rights and these rights will be deemed ongoing
rights which may be asserted at any time and from time to time.
In addition, we will not accept for exchange any old notes
tendered, and no exchange notes will be issued in exchange for
any tendered old notes, if, at the time the notes are tendered,
any stop order is threatened by the Commission or in effect with
respect to the registration statement of which this prospectus
is a part or the qualification of the indentures under the
Trust Indenture Act of 1939, as amended.
The exchange offer is not conditioned on any minimum principal
amount of old notes being tendered for exchange.
Fees and
Expenses
We will bear the expenses of soliciting tenders. The principal
solicitation is being made by mail. However, we may make
additional solicitations by telegraph, telephone or in person by
our officers and regular employees and those of our affiliates.
We have not retained any dealer-manager in connection with the
exchange offer and will not make any payments to broker-dealers
or others soliciting acceptances of the exchange offer. We may,
however, pay the exchange agent reasonable and customary fees
for its services and reimburse it for its related reasonable
out-of-pocket
expenses.
We will pay the cash expenses to be incurred in connection with
the exchange offer, including the following:
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SEC registration fees,
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fees and expenses of the exchange agent and trustee,
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our accounting and legal fees, and
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our printing and mailing costs.
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These are estimated in the aggregate to be approximately
$300,000.
Transfer
Taxes
Holders who tender their old notes for exchange notes will not
be obligated to pay transfer taxes. However, if:
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exchange notes are to be delivered to, or issued in the name of,
any person other than the registered holder of the original
notes tendered; or
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tendered original notes are registered in the name of any person
other than the person signing the letter of transmittal; or
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a transfer tax is imposed for any reason other than the exchange
of original notes in connection with the exchange offer;
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then the amount of any such transfer taxes (whether imposed on
the registered holder or any other person) will be payable by
the tendering holder. If satisfactory evidence of payment of
such taxes or exemption from them is not submitted with the
letter of transmittal, the amount of such transfer taxes will be
billed directly to the tendering holder.
Exchange
Agent
We have appointed The Bank of New York Mellon
Trust Company, N.A., as exchange agent for the exchange
offer. Questions, requests for assistance and requests for
additional copies of the prospectus, the letter of transmittal
and other related documents should be directed to the exchange
agent addressed as follows:
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By Registered or Certified Mail:
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By Hand or Overnight Courier:
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The Bank of New York Mellon
Corporate Trust Operations
Reorganization Unit
101 Barclay Street 7 East
New York, N.Y. 10286
Attn: Mr. David Mauer
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The Bank of New York Mellon
Corporate Trust Operations
Reorganization Unit
101 Barclay Street 7 East
New York, N.Y. 10286
Attn: Mr. David Mauer
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By Facsimile:
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For information, call:
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(212)
298-1915
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(212) 815-3687
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Confirm by telephone:
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(212)
815-3687
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DELIVERY
OF A LETTER OF TRANSMITTAL OR NOTICE OF GUARANTEED DELIVERY TO
ANY ADDRESS OR FACSIMILE NUMBER OTHER THAN THE ONES SET FORTH
ABOVE WILL NOT CONSTITUTE VALID DELIVERY.
Accounting
Treatment
The exchange notes will be recorded at the same carrying value
as the old notes as reflected in our accounting records on the
date of the exchange. Accordingly, we will not recognize any
gain or loss for accounting purposes upon the completion of the
exchange offer. The expenses of the exchange offer that we pay
will increase our deferred financing costs in accordance with
generally accepted accounting principles and such costs will be
amortized over the term of the exchange notes under generally
accepted accounting principles.
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DESCRIPTION
OF THE EXCHANGE NOTES
We issued the old notes, and will issue the exchange notes,
under an indenture, dated June 9, 2009, among us, the
Subsidiary Guarantors (as defined below) and The Bank of New
York Mellon Trust Company, N.A., as trustee. The terms of
the notes include those stated in the indenture and those made
part of the indenture by reference to the Trust Indenture
Act of 1939, as amended. The form and terms of the exchange
notes will be substantially identical to the form and terms of
the old notes, except that:
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the offer and sale of the exchange notes will have been
registered under the Securities Act of 1933, and therefore, the
exchange notes generally will not be subject to the restrictions
on transfer applicable to the old notes or bear legends
restricting their transfer; and
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specified rights under the exchange and registration rights
agreement, including the provisions providing for registration
rights and the right to earn additional interest under
circumstances relating to our registration obligations
thereunder, will be limited or eliminated.
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Accordingly, unless specifically stated to the contrary, the
following description applies equally to the old notes and the
exchange notes.
The following description of certain provisions of the indenture
and the notes does not purport to be complete and is subject to,
and qualified in its entirety by reference to, all of the
provisions of the indenture and the notes. This summary may not
contain all of the information that you may find useful. We urge
you to read the indenture and the notes because they, and not
this description defines your rights as holders of the notes.
The indenture governing the notes, as well as the form of the
notes, have been filed as exhibits to the registration statement
of which this prospectus forms a part, and are hereby
incorporated into this prospectus by reference. Copies of the
indenture and the notes may be obtained by contacting us as
described under the heading Documents Incorporated by
Reference. Throughout this description we have included
parenthetical references to the indenture sections to help you
locate the provisions being discussed.
You can find the definitions of certain capitalized terms used
in this description under the subheading Certain
Definitions. For purposes of this section of the
prospectus, references to we, us,
our, the Company and Valeant
are to Valeant Pharmaceuticals International (parent company
only) and not to any of its subsidiaries. Also, for purposes of
this section of the prospectus, references to
holders mean those who own the notes registered in
their own names on the books that we or the trustee maintain for
this purpose, and not those who own beneficial interests in the
notes registered in street name or in notes issued in book-entry
form through one or more intermediaries. Owners of beneficial
interests in the notes should read the section below entitled
Depository Procedures.
Brief
Description of the Exchange Notes and the Subsidiary
Guarantees
The notes and the guarantees will be:
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general unsecured obligations of Valeant and the Subsidiary
Guarantors, as applicable;
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equal in right of payment to all existing and future unsecured
and unsubordinated indebtedness of Valeant and the Subsidiary
Guarantors, as applicable;
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senior in right of payment to all existing and future
indebtedness of Valeant and the Subsidiary Guarantors, as
applicable, that expressly provides for its subordination to the
notes;
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effectively junior in right of payment to all existing and
future secured Indebtedness of Valeant and the Subsidiary
Guarantors, as applicable, to the extent of the value of the
assets securing such Indebtedness. As of December 31, 2009,
Valeant and the Subsidiary Guarantors had no secured
indebtedness outstanding; and
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effectively junior in right of payment to all Indebtedness and
other liabilities of our Subsidiaries that do not guarantee the
notes. As of December 31, 2009, our non-guarantor
Subsidiaries had an aggregate of $344.1 million of total
liabilities.
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38
As of the date of the indenture, all of our Subsidiaries will be
Restricted Subsidiaries. However, under the
circumstances described below under the subheading
Certain Covenants Designation of
Restricted and Unrestricted Subsidiaries, we will be
permitted to designate certain of our current and future
Subsidiaries as Unrestricted Subsidiaries. Our
Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants in the indenture and will not be required
to guarantee the notes. (Section 4.16) A Subsidiary
Guarantor may be released of its guarantee obligations under
certain circumstances as described below under the caption
Subsidiary Guarantees.
Principal,
Maturity and Interest
Valeant will issue the notes in the aggregate principal amount
of $365.0 million. (Section 2.2) Valeant may issue
additional notes under the indenture from time to time after
this offering. Any offering of additional notes is subject to
the covenant described below under the caption
Certain Covenants Incurrence of
Indebtedness and Issuance of Preferred Stock.
(Section 2.1) The notes and any additional notes
subsequently issued under the indenture will be treated as a
single class for all purposes under the indenture, including,
without limitation, waivers, amendments, redemptions and offers
to purchase. Valeant will issue notes in denominations of $2,000
and integral multiples of $1,000 in excess thereof.
(Section 2.1) The notes will mature on June 15, 2016.
(Section 1.1)
Interest on the exchange notes will accrue at the rate of 8.375%
per annum and will be payable semi-annually in arrears on June
15 and December 15. Interest on the exchange notes will
accrue from December 15, 2009 (the date interest was most
recently paid on the old notes). In order to avoid duplicative
payment of interest, all interest accrued on old notes that are
accepted for exchange before June 15, 2010 will be
superseded by the interest that is deemed to have accrued on the
exchange notes from December 15, 2009 through the date of
the exchange. Interest will be computed on the basis of a
360-day year
comprised of twelve
30-day
months. Valeant will make each interest payment to the Holders
of record on the immediately preceding June 1 and
December 1.
Paying
Agent and Registrar for the Notes
The trustee will initially act as Paying Agent and Registrar.
(Section 2.3) Valeant may change the Paying Agent or
Registrar without prior notice to the Holders, and Valeant or
any of its Subsidiaries may act as Paying Agent or Registrar.
Transfer
and Exchange
A Holder may transfer or exchange notes in accordance with the
indenture. The Registrar and the trustee may require a Holder,
among other things, to furnish appropriate endorsements and
transfer documents in connection with a transfer of notes.
Holders will be required to pay all taxes due on transfer.
Valeant is not required to transfer or exchange any note
selected for redemption. (Section 2.6) Also, Valeant is not
required to transfer or exchange any note for a period of
15 days before a selection of notes to be redeemed.
Subsidiary
Guarantees
Valeants obligations under the notes and the indenture
will be jointly and severally guaranteed (the Subsidiary
Guarantees) by certain of our Subsidiaries.
Not all of our Subsidiaries will guarantee the notes. In the
event of a bankruptcy, liquidation or reorganization of any of
these non-guarantor Subsidiaries, these non-guarantor
Subsidiaries will pay the holders of their debts and their trade
creditors before they will be able to distribute any of their
assets to us. As of December 31, 2009, the non-guarantor
subsidiaries held $667.1 million, or 51% of our total
consolidated assets. The non-guarantor subsidiaries generated
$422.4 million, or 51%, of our total consolidated revenue
and $122.2 million, or 52%, of our total consolidated
income from operations for the year ended December 31, 2009.
39
If after the date of the indenture any Subsidiary of Valeant
provides a Guarantee in connection with any Indebtedness of
Valeant or a Domestic Subsidiary that is a Restricted
Subsidiary, then that Subsidiary will promptly execute a
supplemental indenture pursuant to which it will guarantee, on a
senior unsecured basis, Valeants obligations under the
notes for so long as the Guarantee in connection with the
applicable Indebtedness remains in place. (Section 4.15)
The obligations of each Subsidiary Guarantor under its Guarantee
will be limited as necessary to prevent such Guarantee from
constituting a fraudulent conveyance under applicable law.
(Section 10.3)
A Subsidiary Guarantor shall be released from its obligations
under its Guarantee and its obligations under the indenture and
the exchange and registration rights agreement:
(1) in the event of a sale or other disposition of all or
substantially all of the assets of such Subsidiary Guarantor, by
way of merger, consolidation or otherwise, or a sale or other
disposition of all of the Equity Interests of such Subsidiary
Guarantor then held by Valeant and the Restricted Subsidiaries;
(2) if such Subsidiary Guarantor is designated as an
Unrestricted Subsidiary or otherwise ceases to be a Restricted
Subsidiary, in each case in accordance with the provisions of
the indenture, upon effectiveness of such designation or when it
first ceases to be a Restricted Subsidiary, respectively; or
(3) if we exercise our legal defeasance option or our
covenant defeasance option as described under Legal
Defeasance and Covenant Defeasance or if our obligations
under the indenture are discharged in accordance with the terms
of the indenture. (Section 10.5)
Optional
Redemption
At any time prior to June 15, 2012, Valeant may on any one
or more occasions redeem up to 35% of the aggregate principal
amount of notes issued under the indenture at a redemption price
of 108.375% of the principal amount, plus accrued and unpaid
interest and Liquidated Damages, if any, to the redemption date,
with the net cash proceeds of one or more Equity Offerings;
provided that:
(1) at least 65% of the aggregate principal amount of notes
issued under the indenture remains outstanding immediately after
the occurrence of such redemption (excluding notes held by
Valeant and its Subsidiaries); and
(2) the redemption occurs within 90 days of the date
of the closing of such Equity Offering.
On or after June 15, 2012, Valeant may redeem all or a part
of the notes upon not less than 30 nor more than
60 days notice, at the redemption prices (expressed
as percentages of principal amount) set forth below plus accrued
and unpaid interest and Liquidated Damages, if any, on the notes
redeemed, to the applicable redemption date, if redeemed during
the twelve-month period beginning on June 15 of the years
indicated below:
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Year
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Percentage
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2012
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104.188
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%
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2013
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102.094
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2014 and thereafter
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100.000
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In addition, at any time prior to June 15, 2012, we may
redeem the notes, in whole or in part, at a redemption price
equal to the principal amount of the notes plus the Applicable
Premium plus accrued and unpaid interest, if any, to the date of
redemption. (Section 3.7)
Mandatory
Redemption
Valeant is not required to make mandatory redemption or sinking
fund payments with respect to the notes.
40
Other
Purchases
Valeant and its Subsidiaries may at any time and from time to
time, attempt to acquire or acquire notes by means other than a
redemption, whether pursuant to an issuer tender offer, open
market purchases or otherwise, assuming such acquisition does
not otherwise violate the terms of the indenture.
Repurchase
at the Option of Holders
Change
of Control
If a Change of Control occurs, each Holder of notes will have
the right to require Valeant to repurchase all or any part
(equal to $2,000 or any integral multiple of $1,000 in excess
thereof) of that Holders notes pursuant to an offer (the
Change of Control Offer) on the terms set forth in
the indenture. In the Change of Control Offer, Valeant will
offer a payment in cash equal to 101% of the aggregate principal
amount of notes repurchased plus accrued and unpaid interest and
Liquidated Damages, if any, on the notes repurchased, to the
date of purchase (the Change of Control Payment).
Within ten days following any Change of Control, Valeant will
mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering
to repurchase notes on the Change of Control Payment Date
specified in the notice, which date will be no earlier than
30 days and no later than 60 days from the date such
notice is mailed, pursuant to the procedures required by the
indenture and described in such notice. Valeant will comply with
the requirements of
Rule 14e-1
under the Exchange Act and any other securities laws and
regulations thereunder to the extent those laws and regulations
are applicable in connection with the repurchase of the notes as
a result of a Change of Control. To the extent that the
provisions of any securities laws or regulations conflict with
the Change of Control provisions of the indenture, Valeant will
comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations under the
Change of Control provisions of the indenture by virtue of such
conflict.
On the Change of Control Payment Date, Valeant will, to the
extent lawful:
(1) accept for payment all notes or portions of notes
properly tendered pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the
Change of Control Payment in respect of all notes or portions of
notes properly tendered; and
(3) deliver or cause to be delivered to the trustee the
notes properly accepted together with an officers
certificate stating the aggregate principal amount of notes or
portions of notes being purchased by Valeant.
The Paying Agent will promptly mail to each Holder of notes
properly tendered the Change of Control Payment for such notes,
and the trustee will promptly authenticate and mail (or cause to
be transferred by book entry) to each Holder a new note equal in
principal amount to any unpurchased portion of the notes
surrendered, if any; provided that each new note will be in a
principal amount of $2,000 or any integral multiple of $1,000 in
excess thereof.
Valeant will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of
Control Payment Date.
The provisions described above that require Valeant to make a
Change of Control Offer following a Change of Control will be
applicable whether or not any other provisions of the indenture
are applicable.
Except as described above with respect to a Change of Control,
the indenture does not contain provisions that permit the
Holders of the notes to require that Valeant repurchase or
redeem the notes in the event of a takeover, recapitalization or
similar transaction. Subject to the limitations discussed below,
Valeant could, in the future, enter into certain transactions,
including acquisitions, refinancings or recapitalizations, that
would not constitute a Change of Control under the indenture,
but that could increase the amount of Indebtedness outstanding
at such time or otherwise affect Valeants capital
structure or credit ratings. Restrictions on the ability of
Valeant to incur additional Indebtedness are contained in the
covenants described under Certain
41
Covenants Incurrence of Indebtedness and Issuance of
Preferred Stock and Liens. Except
for the limitations contained in such covenants, however, the
indenture does not contain any covenants or provisions that may
afford Holders protection in the event of a highly leveraged
transaction.
Valeant will not be required to make a Change of Control Offer
upon a Change of Control if (1) a third party makes the
Change of Control Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in the
indenture applicable to a Change of Control Offer made by
Valeant and purchases all notes properly tendered and not
withdrawn under the Change of Control Offer, (2) notice of
redemption has been given pursuant to the indenture as described
above under the caption Optional
Redemption, unless and until there is a default in payment
of the applicable redemption price, or (3) after giving
effect to such Change of Control, (i) no Default or Event
of Default has occurred and is continuing, (ii) the Change
of Control transaction has been approved by the Board of
Directors of Valeant, and (iii) the notes have received an
Investment Grade Rating. In addition, a Change of Control Offer
may be made in advance of a Change of Control, conditional upon
such Change of Control, if a definitive agreement is in place
for the Change of Control at the time of launching the Change of
Control Offer. (Section 3.8)
The definition of Change of Control includes a phrase relating
to the direct or indirect sale, lease, transfer, conveyance or
other disposition of all or substantially all of the
properties or assets of Valeant and its Restricted Subsidiaries
taken as a whole. (Section 1.1) Although there is a limited
body of case law interpreting the phrase substantially
all, there is no precise established definition of the
phrase under applicable law. Accordingly, the ability of a
Holder of notes to require Valeant to repurchase its notes as a
result of a sale, lease, transfer, conveyance or other
disposition of less than all of the assets of Valeant and its
Restricted Subsidiaries taken as a whole to another Person or
group may be uncertain.
In a recent decision, the Chancery Court of the State of
Delaware raised the possibility that a fundamental change
occurring as a result of a failure to have continuing
directors comprising a majority of a board of directors
may be unenforceable on public policy grounds.
Asset
Sales
Valeant will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) Valeant (or the Restricted Subsidiary, as the case may
be) receives consideration at the time of the Asset Sale at
least equal to the Fair Market Value (determined, for purposes
of this clause (1), by Valeant or, in the case of any asset(s)
valued in excess of $10.0 million, by the Board of
Directors, in each case evidenced by an officers
certificate delivered to the trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of; and
(2) at least 75% of the consideration received in the Asset
Sale by Valeant or such Restricted Subsidiary is in the form of
cash or Cash Equivalents. For purposes of this provision, each
of the following will be deemed to be cash:
(a) any liabilities, as shown on Valeants most recent
consolidated balance sheet, of Valeant or any Restricted
Subsidiary (other than contingent liabilities and liabilities
that are by their terms subordinated to the notes and the
Subsidiary Guarantees) that are assumed by the transferee of any
such assets pursuant to an agreement that releases Valeant or
such Restricted Subsidiary from further liability; and
(b) any securities, notes or other obligations received by
Valeant or any such Restricted Subsidiary from such transferee
that are contemporaneously, subject to ordinary settlement
periods, converted by Valeant or such Restricted Subsidiary into
cash, to the extent of the cash received in that conversion.
42
Within 365 days after the receipt of any Net Proceeds from
an Asset Sale, Valeant may apply those Net Proceeds:
(1) to repay Indebtedness and other Obligations under
(x) a Credit Facility and, if the Indebtedness repaid is
revolving credit Indebtedness, to correspondingly reduce
commitments with respect thereto, (y) other secured
Indebtedness or (z) other Indebtedness of a Subsidiary that
does not guarantee the notes, so long as the relevant assets
were assets of such Subsidiary (provided, in the case of (y),
that such Indebtedness is not subordinated in right of payment
to the Notes);
(2) to acquire all or substantially all of the assets of,
or a majority of the Voting Stock of, another Permitted Business;
(3) to make payments with respect to the acquisition or
license of intellectual property rights that are used in a
Permitted Business;
(4) to make a capital expenditure in or that is useful in a
Permitted Business;
(5) to retire notes pursuant to privately negotiated
transactions, open market purchases or otherwise; or
(6) to acquire other assets that are not classified as
current assets (for the avoidance of doubt, including
acquisitions of in-process research and development) under GAAP
and that are used or useful in a Permitted Business.
Pending the final application of any Net Proceeds, Valeant may
temporarily reduce revolving credit borrowings or otherwise
invest the Net Proceeds in any manner that is not prohibited by
the indenture.
Any Net Proceeds from Asset Sales that are not applied or
invested as provided in the preceding paragraph will constitute
Excess Proceeds. When the aggregate amount of Excess
Proceeds exceeds $25.0 million, Valeant will make an offer
(an Asset Sale Offer) to all Holders of notes and
all holders of other Indebtedness that is pari passu with
the notes containing provisions similar to those set forth in
the indenture with respect to offers to purchase or redeem with
the proceeds of sales of assets to purchase the maximum
principal amount of notes and such other pari passu
Indebtedness that may be purchased out of the Excess
Proceeds. The offer price in any Asset Sale Offer will be equal
to 100% of principal amount plus accrued and unpaid interest and
Liquidated Damages, if any, to the date of purchase, and will be
payable in cash. If any Excess Proceeds remain after
consummation of an Asset Sale Offer, Valeant may use those
Excess Proceeds for any purpose not otherwise prohibited by the
indenture. If the aggregate principal amount of notes and other
pari passu Indebtedness tendered into such Asset Sale
Offer exceeds the amount of Excess Proceeds, the notes and such
other pari passu Indebtedness will be purchased on a pro
rata basis. Upon completion of each Asset Sale Offer, the amount
of Excess Proceeds will be reset at zero.
Valeant will comply with the requirements of
Rule 14e-1
under the Exchange Act and any other securities laws and
regulations thereunder to the extent those laws and regulations
are applicable in connection with each repurchase of notes
pursuant to an Asset Sale Offer. To the extent that the
provisions of any securities laws or regulations conflict with
the Asset Sale provisions of the indenture, Valeant will comply
with the applicable securities laws and regulations and will not
be deemed to have breached its obligations under the Asset Sale
provisions of the indenture by virtue of such compliance.
(Section 4.14)
The agreements governing Valeants other Indebtedness,
including any future Credit Facilities, may contain prohibitions
of certain events, including events that would constitute a
Change of Control or an Asset Sale. In addition, the exercise by
the Holders of notes of their right to require Valeant to offer
to repurchase the notes upon a Change of Control or an Asset
Sale may cause a default under these other agreements, even if
the Change of Control or Asset Sale itself does not, due to the
financial effect of such repurchases on Valeant. Finally,
Valeants ability to pay cash to the Holders of notes upon
a repurchase may be limited by Valeants then existing
financial resources. See Risk Factors We may
not be able to repurchase the notes if we experience a change of
control.
43
Selection
and Notice
If less than all of the notes are to be redeemed at any time,
the trustee will select notes for redemption as follows:
(1) if the notes are listed on any national securities
exchange, in compliance with the requirements of the principal
national securities exchange on which the notes are
listed; or
(2) if the notes are not listed on any national securities
exchange, on a pro rata basis, by lot or by such method as the
trustee deems fair and appropriate.
No notes of $2,000 or less can be redeemed in part.
(Section 3.2) Notices of redemption will be mailed by first
class mail at least 30 but not more than 60 days before the
redemption date to each Holder of notes to be redeemed at its
registered address, except that redemption notices may be mailed
more than 60 days prior to a redemption date if the notice
is issued in connection with a defeasance of the notes or a
satisfaction and discharge of the indenture. Notices of
redemption may not be conditional. (Section 3.3)
If any note is to be redeemed in part only, the notice of
redemption that relates to that note will state the portion of
the principal amount of that note that is to be redeemed. A new
note in principal amount equal to the unredeemed portion of the
original note will be issued in the name of the Holder of the
original notes upon cancellation of the original note.
(Section 3.6) Notes called for redemption become due on the
date fixed for redemption. (Section 3.4)
On and after the redemption date, interest ceases to accrue on
notes or portions of them called for redemption.
(Section 3.4)
Certain
Covenants
Changes
in Covenants when Notes Rated Investment Grade
Beginning on the date that:
(1) the notes have an Investment Grade Rating; and
(2) no Default or Event of Default shall have occurred and
be continuing,
and ending on the date (the Reversion Date) that
either Rating Agency ceases to have Investment Grade Ratings on
the Notes (such period of time, the Suspension
Period), the covenants specifically listed under the
following captions in this offering circular will no longer be
applicable to the notes:
(1) Repurchase at the Option of
Holders Asset Sales;
(2) Restricted Payments;
(3) Incurrence of Indebtedness and
Issuance of Preferred Stock;
(4) Dividend and Other Payment
Restrictions Affecting Restricted Subsidiaries;
(5) Transactions with
Affiliates;
(6) clause (4) of the covenant listed under
Merger, Consolidation or Sale of Assets.
During a Suspension Period, Valeants Board of Directors
may not designate any of our Subsidiaries as Unrestricted
Subsidiaries.
On the Reversion Date, all Indebtedness incurred during the
Suspension Period will be classified to have been incurred
pursuant to and permitted under the Consolidated Fixed Charge
Coverage Ratio or one of the clauses set forth in the definition
of Permitted Debt (to the extent such Indebtedness would be
permitted to be incurred thereunder as of the Reversion Date and
after giving effect to Indebtedness incurred prior to the
Suspension Period and outstanding on the Reversion Date). To the
extent any Indebtedness would not be permitted to be incurred
pursuant to the Consolidated Fixed Charge Coverage Ratio or any
of the clauses set forth in the definition of Permitted Debt,
such Indebtedness will be deemed to have been outstanding on the
44
Issue Date, so that it is classified as Permitted Debt under
clause (2) of the definition of Permitted Debt and
permitted to be refinanced under clause (5) of the
definition of Permitted Debt.
Notwithstanding the fact that covenants suspended during a
Suspension Period may be reinstated, no Default or Event of
Default will be deemed to have occurred as a result of a failure
to comply with the covenants during the Suspension Period or at
the time the covenants are reinstated. Furthermore, the
indenture also permits, without causing a Default or Event of
Default, Valeant and the Restricted Subsidiaries to honor any
contractual commitments to take actions in the future after any
date on which the notes no longer have an Investment Grade
Rating from both of the Rating Agencies as long as such
contractual commitments were entered into during a Suspension
Period and not in anticipation of the notes no longer having an
Investment Grade Rating from both of the Rating Agencies.
(Section 4.7)
Restricted
Payments
Valeant will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment
or distribution on account of Valeants or any of its
Restricted Subsidiaries Equity Interests (including,
without limitation, any payment in connection with any merger or
consolidation involving Valeant or any of its Restricted
Subsidiaries) or to the direct or indirect holders of
Valeants or any of its Restricted Subsidiaries
Equity Interests in their capacity as such (other than dividends
or distributions payable in Equity Interests (other than
Disqualified Stock) of Valeant or to Valeant or a Restricted
Subsidiary of Valeant);
(2) purchase, redeem or otherwise acquire or retire for
value (including, without limitation, in connection with any
merger or consolidation involving Valeant) any Equity Interests
of Valeant or any direct or indirect parent of Valeant, except
for any purchase or redemption of Valeants common Equity
Interests with the net proceeds of the notes issued on the Issue
Date and within twelve months of the Issue Date;
(3) make any payment on or with respect to, or purchase,
redeem, defease or otherwise acquire or retire for value, any
Indebtedness that is subordinated to the notes, except
(i) payments of interest thereon, (ii) payments of
principal at the Stated Maturity thereof and (iii) any
payment on or with respect to the 3% Convertible
Subordinated Notes due 2010 or the 4% Convertible
Subordinated Notes due 2013 made, in the case of clause (iii),
with the net proceeds of the notes issued on the Issue Date and
within twelve months of the Issue Date; or
(4) make any Restricted Investment;
(all such payments and other actions set forth in these
clauses (1) through (4) above being collectively
referred to as Restricted Payments), unless, at the
time of and after giving effect to such Restricted Payment:
(1) no Default or Event of Default has occurred and is
continuing or would occur as a consequence of such Restricted
Payment;
(2) Valeant would, at the time of such Restricted Payment
and after giving pro forma effect thereto as if such Restricted
Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00
of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant
described below under the caption Incurrence
of Indebtedness and Issuance of Preferred Stock; and
(3) such Restricted Payment, together with the aggregate
amount of all other Restricted Payments made by Valeant and its
Restricted Subsidiaries after the date of the indenture
(excluding Restricted Payments permitted by clauses (2), (3),
(4) and (5) of the next succeeding paragraph), is less
than the sum, without duplication, of:
(a) 50% of the Consolidated Net Income of Valeant for the
period (taken as one accounting period) from April 1, 2009
to the end of Valeants most recently ended fiscal quarter
for which
45
internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such
period is a deficit, less 100% of such deficit), plus
(b) 100% of the aggregate net cash proceeds received by
Valeant since the date of the indenture as a contribution to its
common equity capital or from the issue or sale of Equity
Interests of Valeant (other than Disqualified Stock) or from the
issue or sale of convertible or exchangeable Disqualified Stock
or convertible or exchangeable debt securities of Valeant that
have been converted into or exchanged for such Equity Interests
(other than Equity Interests (or Disqualified Stock or debt
securities) sold to a Subsidiary of Valeant), plus
(c) to the extent that any Restricted Investment that was
made after the date of the indenture is sold for cash or
otherwise liquidated or repaid for cash, the lesser of
(i) the cash return of capital with respect to such
Restricted Investment (less the cost of disposition, if any) or
(ii) the initial amount of such Restricted Investment, plus
(d) to the extent that any Unrestricted Subsidiary of
Valeant is redesignated as a Restricted Subsidiary after the
date of the indenture, the lesser of (i) the Fair Market
Value of Valeants Investment in such Subsidiary as of the
date of such redesignation or (ii) such Fair Market Value
as of the date on which such Subsidiary was originally
designated as an Unrestricted Subsidiary.
So long as no Default or Event of Default has occurred and is
continuing or would be caused thereby, the preceding provisions
will not prohibit:
(1) the payment of any dividend within 60 days after
the date of declaration of the dividend, if at the date of
declaration the dividend payment would have complied with the
provisions of the indenture;
(2) the redemption, repurchase, retirement, defeasance or
other acquisition of any subordinated Indebtedness of Valeant or
of any Equity Interests of Valeant in exchange for, or out of
the net cash proceeds of the substantially concurrent sale
(other than to a Restricted Subsidiary of Valeant) of, Equity
Interests of Valeant (other than Disqualified Stock) or other
subordinated Indebtedness incurred under the first paragraph of
the covenant described under Incurrence of
Indebtedness and Issuance of Preferred Stock;
provided, that (i) the amount of any such net cash
proceeds that are utilized for any such redemption, repurchase,
retirement, defeasance or other acquisition will be excluded
from clause (3)(b) of the preceding paragraph and (ii) any
such subordinated Indebtedness shall be Permitted Refinancing
Indebtedness;
(3) the defeasance, redemption, repurchase or other
acquisition of subordinated Indebtedness of Valeant with the net
cash proceeds from an incurrence of Permitted Refinancing
Indebtedness;
(4) the payment of any dividend by a Restricted Subsidiary
of Valeant to the holders of its Equity Interests on a pro rata
basis;
(5) the repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of Valeant or any
Restricted Subsidiary of Valeant held by any employee of Valeant
or any of its Restricted Subsidiaries pursuant to any equity
subscription agreement, stock option agreement or similar
agreement; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests may
not exceed an aggregate of $15.0 million since the date of
the indenture;
(6) payments to holders of Equity Interests (or to the
holders of Indebtedness that is convertible into or exchangeable
for Equity Interests upon such conversion or exchange) in lieu
of the issuance of fractional shares; provided, however, that
such payments shall be excluded in the calculation of the amount
of Restricted Payments;
(7) the redemption, repurchase, retirement, defeasance or
other acquisition of subordinated Indebtedness of Valeant, so
long as, at the time of any such redemption, repurchase,
retirement, defeasance or acquisition, the Total Leverage Ratio
is less than 1.25x, in an aggregate amount not to exceed
$50.0 million since the date of the indenture; and
46
(8) other Restricted Payments in an aggregate amount not to
exceed $75.0 million since the date of the indenture.
The amount of all Restricted Payments (other than cash) will be
the Fair Market Value (determined, for purposes of this
covenant, by Valeant or, in the case of any asset(s) valued in
excess of $10.0 million, by the Board of Directors, in each
case evidenced by an officers certificate delivered to the
trustee) on the date of the Restricted Payment of the asset(s)
or securities proposed to be transferred or issued by Valeant or
such Restricted Subsidiary, as the case may be, pursuant to the
Restricted Payment. The Board of Directors determination
must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national
standing if the Fair Market Value exceeds $50.0 million.
(Section 4.8)
Incurrence
of Indebtedness and Issuance of Preferred Stock
Valeant will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise (collectively,
incur), with respect to any Indebtedness (including
Acquired Debt), and Valeant will not issue any Disqualified
Stock and will not permit any of its Restricted Subsidiaries to
issue any Disqualified Stock or preferred stock; provided,
however, that Valeant or any Restricted Subsidiary may incur
Indebtedness (including Acquired Debt) or issue Disqualified
Stock if the Fixed Charge Coverage Ratio for Valeants most
recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the
date on which such additional Indebtedness is incurred or such
Disqualified Stock is issued would have been at least 2.0 to 1,
determined on a pro forma basis (including a pro forma
application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred or the Disqualified Stock had
been issued, as the case may be, at the beginning of such
four-quarter period.
The first paragraph of this covenant will not prohibit the
incurrence of any of the following items of Indebtedness
(collectively, Permitted Debt):
(1) the incurrence by Valeant of Indebtedness under Credit
Facilities in an aggregate principal amount at any one time
outstanding under this clause (1) not to exceed
$150.0 million;
(2) the incurrence by Valeant and its Restricted
Subsidiaries of the Existing Indebtedness;
(3) the incurrence by Valeant of Indebtedness represented
by the notes to be issued on the date of the indenture
(including the Guarantees) and the Exchange Notes to be issued
pursuant to the exchange and registration rights agreement and
Guarantees thereof, if any, by Domestic Subsidiaries of Valeant;
(4) the incurrence by Valeant or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease
Obligations, mortgage financings or purchase money obligations,
in each case, incurred for the purpose of financing all or any
part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business
of Valeant or such Restricted Subsidiary, in an aggregate
principal amount, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (4), not to exceed
$25.0 million at any time outstanding;
(5) the incurrence by Valeant or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange
for, or the net proceeds of which are used to refund, refinance
or replace Indebtedness (other than intercompany Indebtedness)
that was permitted by the indenture to be incurred under the
first paragraph of this covenant or clauses (2), (3), (4),
(11) or (12) of this paragraph;
(6) the incurrence by Valeant or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among
Valeant and any of its Restricted Subsidiaries; provided,
however, that:
(a) if Valeant or a Subsidiary Guarantor is the obligor on
such Indebtedness, such Indebtedness must be expressly
subordinated to the prior payment in full in cash of all
Obligations with respect to the notes; and
47
(b) (i) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a
Person other than Valeant or a Restricted Subsidiary of Valeant
and (ii) any sale or other transfer of any such
Indebtedness to a Person that is not either Valeant or a
Restricted Subsidiary of Valeant will be deemed, in each case,
to constitute an incurrence of such Indebtedness by Valeant or
such Restricted Subsidiary, as the case may be, that was not
permitted by this clause (6);
(7) the incurrence by Valeant or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred in the
ordinary course of business and not for speculative purposes;
(8) the Guarantee by Valeant or any Subsidiary Guarantor of
Indebtedness of Valeant or a Subsidiary Guarantor of Valeant
that was permitted to be incurred by another provision of this
covenant (other than the Subsidiary Guarantees); provided that
if the Indebtedness being guaranteed is subordinated to or
pari passu with the notes, then the Guarantee shall be
subordinated to the same extent as the Indebtedness guaranteed;
(9) the accrual of interest, the accretion or amortization
of original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the
same terms, and the payment of dividends on Disqualified Stock
in the form of additional shares of the same class of
Disqualified Stock will not be deemed to be an incurrence of
Indebtedness or an issuance of Disqualified Stock for purposes
of this covenant; provided, in each such case, that the amount
thereof is included in Fixed Charges of Valeant as accrued;
(10) Obligations in respect of performance and surety bonds
and completion guarantees provided by Valeant or any Restricted
Subsidiary in an aggregate principal amount at any time
outstanding not to exceed $25.0 million;
(11) the incurrence by Valeant or any of its Restricted
Subsidiaries of Acquired Debt in an aggregate principal amount
at any time outstanding not to exceed $50.0 million;
(12) the incurrence by Valeant or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate
principal amount (or accreted value, as applicable) at any time
outstanding, including all Permitted Refinancing Indebtedness
incurred to refund, refinance or replace any Indebtedness
incurred pursuant to this clause (12), not to exceed
$50.0 million; and
(13) the Guarantee by Domestic Subsidiaries of Valeant of
Indebtedness of Valeant or the Subsidiary Guarantors permitted
to be incurred under another provision of this covenant.
Valeant will not, and will not permit any Subsidiary Guarantor
to, incur any Indebtedness (including Permitted Debt) that is
contractually subordinated in right of payment to any other
Indebtedness of Valeant or the Subsidiary Guarantors unless such
Indebtedness is also contractually subordinated in right of
payment to the notes on substantially identical terms; provided,
however, that no Indebtedness of Valeant or the Subsidiary
Guarantors will be deemed to be contractually subordinated in
right of payment to any other Indebtedness of Valeant or any
Subsidiary Guarantor solely by virtue of being unsecured.
For purposes of determining compliance with this
Incurrence of Indebtedness and Issuance of Preferred
Stock covenant, in the event that an item of proposed
Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1)
through (12) above, or is entitled to be incurred pursuant
to the first paragraph of this covenant, Valeant will be
permitted to classify such item of Indebtedness on the date of
its incurrence, or later reclassify all or a portion of such
item of Indebtedness, in any manner that complies with this
covenant. Indebtedness permitted by this covenant need not be
permitted solely by reference to one provision permitting such
Indebtedness but may be permitted in part by one such provision
and in part by one or more other provisions of this covenant
permitting such Indebtedness. Indebtedness under Credit
Facilities outstanding on the date on which notes are first
issued and authenticated under the indenture will be deemed to
have been incurred on such date in reliance on the exception
provided by clause (1) of the definition of Permitted Debt.
(Section 4.9)
48
Liens
Valeant will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume
or suffer to exist any Lien of any kind on any asset now owned
or hereafter acquired, except Permitted Liens, unless
contemporaneously therewith:
(1) in the case of any Lien securing an obligation that
ranks pari passu with the notes or a Subsidiary
Guarantee, effective provision is made to secure the notes or
such Subsidiary Guarantee, as the case may be, at least equally
and ratably with or prior to such obligation with a Lien on the
same assets of the Issuer or such Restricted Subsidiary, as the
case may be; and
(2) in the case of any Lien securing an obligation that is
subordinated in right of payment to the notes or a Subsidiary
Guarantee, effective provision is made to secure the Notes or
such Subsidiary Guarantee, as the case may be, with a Lien on
the same assets of the Issuer or such Restricted Subsidiary, as
the case may be, that is prior to the Lien securing such
subordinated obligation. (Section 4.11)
Dividend
and Other Payment Restrictions Affecting Restricted
Subsidiaries
Valeant will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to
exist or become effective any consensual encumbrance or
restriction on the ability of any Restricted Subsidiary to:
(1) pay dividends or make any other distributions on its
Capital Stock to Valeant or any of its Restricted Subsidiaries,
or with respect to any other interest or participation in, or
measured by, its profits, or pay any indebtedness owed to
Valeant or any of its Restricted Subsidiaries;
(2) make loans or advances to Valeant or any of its
Restricted Subsidiaries; or
(3) transfer any of its properties or assets to Valeant or
any of its Restricted Subsidiaries.
However, the preceding restrictions will not apply to
encumbrances or restrictions existing under or by reason of:
(1) agreements governing Existing Indebtedness as in effect
on the date of the indenture and any amendments, modifications,
restatements, renewals, increases, supplements, refundings,
replacements or refinancings of those agreements, provided that
the amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacement or refinancings
are no more restrictive, taken as a whole, with respect to such
dividend and other payment restrictions than those contained in
those agreements on the date of the indenture;
(2) the indenture, the notes and the Subsidiary Guarantees;
(3) any encumbrance or restriction pursuant to Credit
Facilities incurred under clause (1) of the second
paragraph of the covenant entitled Certain
Covenants Incurrence of Indebtedness and Issuance of
Preferred Stock;
(4) applicable law, rule, regulation or order, approval,
license, permit or similar restriction, including under
contracts with foreign governments or agencies thereof entered
into in the ordinary course of business;
(5) any instrument governing Indebtedness or Capital Stock
of a Person acquired by Valeant or any of its Restricted
Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred, or such
Capital Stock was issued, in connection with or in contemplation
of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any
Person, other than the Person, or the property or assets of the
Person, so acquired, provided that, in the case of Indebtedness,
such Indebtedness was permitted by the terms of the indenture to
be incurred;
(6) customary non-assignment provisions in leases,
contracts and licenses entered into in the ordinary course of
business and consistent with past practices;
49
(7) purchase money obligations for property acquired in the
ordinary course of business that impose restrictions on that
property of the nature described in clause (3) of the
preceding paragraph;
(8) any agreement for the sale or other disposition of a
Restricted Subsidiary that restricts distributions by that
Restricted Subsidiary pending its sale or other disposition;
(9) Permitted Refinancing Indebtedness, provided
that the restrictions contained in the agreements governing
such Permitted Refinancing Indebtedness are no more restrictive,
taken as a whole, than those contained in the agreements
governing the Indebtedness being refinanced;
(10) Permitted Liens securing Indebtedness that limit the
right of the debtor to dispose of the assets subject to such
Liens;
(11) customary provisions with respect to the disposition
or distribution of assets or property in joint venture
agreements, assets sale agreements, stock sale agreements and
other similar agreements entered into in the ordinary course of
business; and
(12) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the
ordinary course of business. (Section 4.12)
Merger,
Consolidation or Sale of Assets
Valeant may not, and will not permit any Subsidiary Guarantor
to, directly or indirectly: (1) consolidate or merge with
or into another Person (whether or not Valeant or the Subsidiary
Guarantor is the surviving corporation); or (2) sell,
assign, transfer, convey or otherwise dispose of all or
substantially all of the properties or assets of Valeant and its
Restricted Subsidiaries taken as a whole, in one or more related
transactions, to another Person; unless:
(1) either: (a) Valeant or a Subsidiary Guarantor is
the surviving corporation; or (b) the Person formed by or
surviving any such consolidation or merger (if other than
Valeant or a Subsidiary Guarantor) or to which such sale,
assignment, transfer, conveyance or other disposition has been
made is organized and validly existing under the laws of the
United States, any state of the United States or the District of
Columbia;
(2) the Person formed by or surviving any such
consolidation or merger (if other than Valeant or a Subsidiary
Guarantor) or the Person to which such sale, assignment,
transfer, conveyance or other disposition has been made
expressly assumes all the obligations of Valeant, or the
Subsidiary Guarantor, as applicable, under the notes (or the
Subsidiary Guarantee), the indenture and the exchange and
registration rights agreement pursuant to agreements reasonably
satisfactory to the trustee;
(3) immediately after such transaction, no Default or Event
of Default exists; and
(4) Valeant or the Person formed by or surviving any such
consolidation or merger (if other than Valeant or a Subsidiary
Guarantor), or to which such sale, assignment, transfer,
conveyance or other disposition has been made will, on the date
of such transaction after giving pro forma effect thereto and
any related financing transactions as if the same had occurred
at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in
the first paragraph of the covenant described above under the
caption Incurrence of Indebtedness and
Issuance of Preferred Stock.
In addition, Valeant may not, directly or indirectly, lease all
or substantially all of its properties or assets, in one or more
related transactions, to any other Person.
Notwithstanding the foregoing: (A) any Restricted
Subsidiary may consolidate with, merge into or transfer all or
part of its properties and assets to Valeant or any Subsidiary
Guarantor and (B) Valeant may merge with an Affiliate
incorporated solely for the purpose of reincorporating Valeant
in another jurisdiction within the United States of America, any
state thereof or the District of Columbia. (Section 5.1)
50
Transactions
with Affiliates
Valeant will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer
or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or
amend any transaction, contract, agreement, understanding, loan,
advance or guarantee with, or for the benefit of, any Affiliate
(each, an Affiliate Transaction), unless:
(1) the Affiliate Transaction is on terms that are no less
favorable to Valeant or the relevant Restricted Subsidiary than
those that would have been obtained in a comparable transaction
by Valeant or such Restricted Subsidiary with an unrelated
Person; and
(2) Valeant delivers to the trustee:
(a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration
in excess of $10.0 million, a resolution of the Board of
Directors set forth in an officers certificate certifying
that such Affiliate Transaction complies with this covenant and
that such Affiliate Transaction has been approved by a majority
of the disinterested members of the Board of Directors;
provided, that a series of related Affiliate Transactions that
provides for payments of no more than $2 million in any
calendar year shall be exempted; and
(b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration
in excess of $25.0 million, an opinion as to the fairness
to Valeant or such Restricted Subsidiary of such Affiliate
Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national
standing; provided, that a series of related Affiliate
Transactions that provides for payments of no more than
$5 million in any calendar year shall be exempted.
The following items will not be deemed to be Affiliate
Transactions and, therefore, will not be subject to the
provisions of the prior paragraph:
(1) any employment agreement entered into by Valeant or any
of its Restricted Subsidiaries in the ordinary course of
business and consistent with the past practice of Valeant or
such Restricted Subsidiary;
(2) transactions between or among Valeant
and/or its
Restricted Subsidiaries;
(3) transactions with a Person that is an Affiliate of
Valeant solely because Valeant owns, directly or through a
Restricted Subsidiary, an Equity Interest in, or controls, such
Person;
(4) payment of reasonable directors fees to Persons
who are not otherwise Affiliates of Valeant;
(5) issuances or sales of Equity Interests (other than
Disqualified Stock) of Valeant to Affiliates or employees of or
consultants to Valeant;
(6) Restricted Payments that are permitted by the
provisions of the indenture described above under the caption
Restricted Payments;
(7) transactions effected pursuant to agreements in effect
on the date of the indenture and any amendment, modification, or
replacement to such agreement (so long as the amendment,
modification or replacement is not disadvantageous to the
Holders of the notes in any respect);
(8) advances to employees in the ordinary course of
business not to exceed $1.0 million in the aggregate at any
one time outstanding; and
(9) transactions with a Permitted Joint Venture.
(Section 4.13)
Designation
of Restricted and Unrestricted Subsidiaries
The Board of Directors may designate any Restricted Subsidiary
to be an Unrestricted Subsidiary if that designation would not
cause a Default. Any designation of a Subsidiary as an
Unrestricted Subsidiary will be deemed to be a redesignation of
each of such entitys Subsidiaries as Unrestricted
Subsidiaries. If a Restricted Subsidiary is designated as an
Unrestricted Subsidiary, the aggregate Fair Market Value of all
outstanding
51
Investments owned by Valeant and its Restricted Subsidiaries in
the Subsidiary designated as an Unrestricted Subsidiary will be
deemed to be an Investment made as of the time of the
designation and will reduce the amount available for Restricted
Payments under the covenant described above under the caption
Restricted Payments or under one or more
of the clauses of the definition of Permitted Investments, as
determined by Valeant. That designation will only be permitted
if the Investment would be permitted at that time and if the
Restricted Subsidiary otherwise meets the definition of an
Unrestricted Subsidiary. The Board of Directors may redesignate
any Unrestricted Subsidiary to be a Restricted Subsidiary if the
redesignation would not cause a Default. (Section 4.16)
Business
Activities
Valeant will not, and will not permit any Restricted Subsidiary
to, engage in any business other than Permitted Businesses,
except to such extent as would not be material to Valeant and
its Restricted Subsidiaries, taken as a whole.
(Section 4.17)
Payments
for Consent
Valeant will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, pay or cause to be paid
any consideration to or for the benefit of any Holder of notes
for or as an inducement to any consent, waiver or amendment of
any of the terms or provisions of the indenture or the notes
unless such consideration is offered to be paid and is paid to
all Holders of the notes that consent, waive or agree to amend
in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
(Section 4.18)
Reports
Whether or not required by the Commissions rules and
regulations, so long as any notes are outstanding, Valeant will
furnish (to the extent not publicly available on the
Commissions IDEA (f/k/a EDGAR) system) to the Holders of
notes and post on the Companys website (in a format that
is accessible to Holders of notes as well as prospective Holders
of notes), within the time periods specified in the
Commissions rules and regulations:
(1) all quarterly and annual reports that would be required
to be filed with the Commission on
Forms 10-Q
and 10-K if
Valeant were required to file such reports; and
(2) all current reports that would be required to be filed
with the Commission on
Form 8-K
if Valeant were required to file such reports.
All such reports will be prepared in all material respects in
accordance with all of the rules and regulations applicable to
such reports (other than consolidating financial information
required by
Rule 3-10
of
Regulation S-X
or any comparable provision so long as the Company complies with
the last paragraph of this Reports
covenant). Each annual report on
Form 10-K
will include a report on Valeants consolidated financial
statements by Valeants certified independent accountants.
In addition, Valeant will file a copy of each of the reports
referred to in clauses (1) and (2) above with the
Commission for public availability within the time periods
specified in the rules and regulations applicable to such
reports (unless the Commission will not accept such a filing)
and make such information available to securities analysts and
prospective investors upon request.
If, at any time, Valeant is no longer subject to the periodic
reporting requirements of the Exchange Act for any reason,
Valeant will nevertheless continue filing with the Commission
and posting on its website the reports specified in the
preceding paragraph with the Commission within the time periods
specified above unless the Commission will not accept such a
filing.
Valeant agrees that it will not take any action for the purpose
of causing the Commission not to accept any such filings. If,
notwithstanding the foregoing, the Commission will not accept
Valeants filings for any reason, Valeant will post the
reports referred to in the preceding paragraph on its website
within the time periods that would apply if Valeant were
required to file those reports with the Commission.
52
In addition, Valeant agrees that, for so long as any notes
remain outstanding, at any time it is not required to file the
reports required by the preceding paragraphs with the
Commission, it will furnish to the Holders and to securities
analysts and prospective investors, upon their request, the
information required to be delivered pursuant to
Rule 144A(d)(4) under the Securities Act.
The quarterly and annual financial information required by the
preceding paragraphs will include a reasonably detailed
presentation, either on the face of the financial statements, in
the footnotes of the financial statements or in
Managements Discussion and Analysis of Financial Condition
and Results of Operations, that discloses the total assets,
liabilities, revenues and income from operations of subsidiaries
of Valeant that do not guarantee the notes. (Section 4.3)
Events of
Default and Remedies
Each of the following is an Event of Default:
(1) default for 30 days in the payment when due of
interest on, or Liquidated Damages with respect to, the notes;
(2) default in payment when due of the principal of, or
premium, if any, on the notes;
(3) failure by Valeant or any of its Restricted
Subsidiaries (a) to comply with the provisions described
under the captions Repurchase at the Option of
Holders Asset Sales, Certain
Covenants Restricted Payments,
Certain Covenants Incurrence of
Indebtedness and Issuance of Preferred Stock, which
failure remains uncured for 30 days after notice or
(b) to comply with the provisions described under the
captions Repurchase at the Option of
Holders Change of Control or
Certain Covenants Merger,
Consolidation or Sale of Assets;
(4) failure by Valeant or any of its Restricted
Subsidiaries for 60 days after notice to comply with any of
the other agreements in the indenture;
(5) default under any mortgage, indenture or instrument
under which there may be issued or by which there may be secured
or evidenced any Indebtedness for money borrowed by Valeant or
any of its Restricted Subsidiaries (or the payment of which is
guaranteed by Valeant or any of its Restricted Subsidiaries)
whether such Indebtedness or guarantee now exists, or is created
after the date of the indenture, if that default:
(a) is caused by a failure to pay principal of, or interest
or premium, if any, on such Indebtedness prior to the expiration
of the grace period provided in such Indebtedness on the date of
such default (a Payment Default); or
(b) results in the acceleration of such Indebtedness prior
to its express maturity;
and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default
or the maturity of which has been so accelerated, aggregates
$20.0 million or more;
(6) failure by Valeant or any of its Restricted
Subsidiaries to pay final non-appealable judgments aggregating
in excess of $20.0 million, which judgments are not paid,
discharged or stayed for a period of 60 days;
(7) any Subsidiary Guarantee by a Significant Subsidiary
ceases to be in full force and effect in all material respects
(except as contemplated by the terms thereof) or any Subsidiary
Guarantor that is a Significant Subsidiary denies or disaffirms
such Subsidiary Guarantors obligations under the Indenture
or any Subsidiary Guarantee and such Default continues for
10 days after receipt of the notice as specified in the
Indenture; or
(8) certain events of bankruptcy, administration,
administrative receivership, composition, insolvency or
liquidation described in the indenture with respect to Valeant,
any Significant Subsidiary, or any group of
53
Subsidiaries that, when taken together, would constitute a
Significant Subsidiary or a Significant Subsidiary upon the
occurrence of such events. (Section 6.1)
In the case of an Event of Default arising from certain events
of bankruptcy or insolvency with respect to Valeant, any
Subsidiary that is a Significant Subsidiary or any group of
Subsidiaries that, taken together, would constitute a
Significant Subsidiary, all outstanding notes will become due
and payable immediately without further action or notice. If any
other Event of Default occurs and is continuing, the trustee or
the Holders of at least 25% in principal amount of the then
outstanding notes may declare all the notes to be due and
payable immediately. (Section 6.2)
Holders of the notes may not enforce the indenture or the notes
except as provided in the indenture.
Subject to certain limitations, Holders of a majority in
aggregate principal amount of the then outstanding notes may
direct the trustee in its exercise of any trust or power.
(Section 6.5) The trustee may withhold from Holders of the
notes notice of any continuing Default or Event of Default
(except a Default or Event of Default in the payment of
principal, interest or Liquidated Damages) if it determines that
withholding notice is in their interest. (Section 7.5)
The Holders of a majority in aggregate principal amount of the
notes then outstanding by notice to the trustee may on behalf of
the Holders of all of the notes waive any existing Default or
Event of Default and its consequences under the indenture except
a continuing Default or Event of Default in the payment of
interest or Liquidated Damages on, or the principal of, the
notes. (Section 6.4)
Valeant is required to deliver to the trustee annually a
statement regarding compliance with the indenture. Upon becoming
aware of any Default or Event of Default, Valeant is required to
deliver to the trustee a statement specifying such Default or
Event of Default. (Section 4.4)
No
Personal Liability of Directors, Officers, Employees and
Stockholders
No director, officer, employee, incorporator or stockholder of
Valeant, as such, will have any liability for any obligations of
Valeant under the notes, the indenture or for any claim based
on, in respect of, or by reason of, such obligations or their
creation. Each Holder of notes by accepting a note waives and
releases all such liability. The waiver and release are part of
the consideration for issuance of the notes. The waiver may not
be effective to waive liabilities under the U.S. federal
securities laws. (Section 13 of Note)
Legal
Defeasance and Covenant Defeasance
Valeant may, at its option and at any time, elect to have all of
its and the Subsidiary Guarantors obligations discharged
with respect to the outstanding notes and guarantees
(Legal Defeasance) except for:
(1) the rights of Holders of outstanding notes to receive
payments in respect of the principal of, or interest or premium
and Liquidated Damages, if any, on, such notes when such
payments are due from the trust referred to below;
(2) Valeants obligations with respect to the notes
concerning issuing temporary notes, registration of notes,
mutilated, destroyed, lost or stolen notes and the maintenance
of an office or agency for payment and money for security
payments held in trust;
(3) the rights, powers, trusts, duties and immunities of
the trustee, and Valeants obligations in connection
therewith; and
(4) the Legal Defeasance provisions of the indenture.
(Section 8.2)
In addition, Valeant may, at its option and at any time, elect
to have the obligations of Valeant and the Subsidiary Guarantors
released with respect to certain covenants that are described in
the indenture (Covenant Defeasance) and thereafter
any omission to comply with those covenants will not constitute
a Default or Event of Default with respect to the notes. In the
event Covenant Defeasance occurs, certain events (not including
non-payment, bankruptcy, receivership, rehabilitation or
insolvency events) described under
54
Events of Default and Remedies will no
longer constitute an Event of Default with respect to the notes.
(Section 8.3)
In order to exercise either Legal Defeasance or Covenant
Defeasance:
(1) Valeant must irrevocably deposit with the trustee, in
trust, for the benefit of the Holders of the notes, cash in
U.S. Dollars, non-callable Government Securities, or a
combination of cash in U.S. Dollars and non-callable
Government Securities, in amounts as will be sufficient, in the
opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, or interest and premium
and Liquidated Damages, if any, on, the outstanding notes on the
stated maturity or on the applicable redemption date, as the
case may be, and Valeant must specify whether the notes are
being defeased to maturity or to a particular redemption date;
(Section 8.2 and 8.3)
(2) in the case of Legal Defeasance, Valeant must deliver
to the trustee an opinion of counsel reasonably acceptable to
the trustee confirming that (a) Valeant has received from,
or there has been published by, the Internal Revenue Service a
ruling or (b) since the date of the indenture, there has
been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion
of counsel will confirm that, the Holders of the outstanding
notes will not recognize income, gain or loss for federal income
tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
Legal Defeasance had not occurred; (Section 8.2)
(3) in the case of Covenant Defeasance, Valeant must
deliver to the trustee an opinion of counsel reasonably
acceptable to the trustee confirming that the Holders of the
outstanding notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant
Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such Covenant Defeasance had not occurred;
(Section 8.3)
(4) no Default or Event of Default may have occurred and be
continuing either: (a) on the date of such deposit (other
than a Default or Event of Default resulting from the borrowing
of funds to be applied to such deposit); or (b) insofar as
Events of Default from bankruptcy or insolvency events are
concerned, at any time in the period ending on the 91st day
after the date of deposit; (Section 8.2 and 8.3)
(5) such Legal Defeasance or Covenant Defeasance must not
result in a breach or violation of, or constitute a default
under any material agreement or instrument (other than the
indenture) to which Valeant or any of its Subsidiaries is a
party or by which Valeant or any of its Subsidiaries is bound;
(Section 8.2 and 8.3)
(6) Valeant must deliver to the trustee an opinion of
counsel reasonably acceptable to the trustee to the effect that
after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting
creditors rights generally; (Section 8.2 and 8.3)
(7) Valeant must deliver to the trustee an officers
certificate stating that the deposit was not made by Valeant
with the intent of preferring the Holders of notes over the
other creditors of Valeant with the intent of defeating,
hindering, delaying or defrauding creditors of Valeant or
others; (Section 8.2 and 8.3) and
(8) Valeant must deliver to the trustee an officers
certificate and an opinion of counsel, each stating that all
conditions precedent relating to the Legal Defeasance or the
Covenant Defeasance have been complied with. (Section 8.2
and 8.3)
Amendment,
Supplement and Waiver
Except as provided in the next two succeeding paragraphs, the
indenture or the notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal
amount of the notes then outstanding (including, without
limitation, consents obtained in connection with a purchase of,
or tender offer or exchange offer for, notes), and any existing
default or compliance with any provision of the indenture or the
55
notes may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding notes
(including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for,
notes). (Section 9.2)
Without the consent of each Holder affected, an amendment or
waiver may not (with respect to any notes held by a
non-consenting Holder):
(1) reduce the principal amount of notes whose Holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of
any note or alter the provisions with respect to the redemption
of the notes (other than provisions relating to the covenants
described above under the caption Repurchase
at the Option of Holders);
(3) reduce the rate of or change the time for payment of
interest on any note;
(4) make any note payable in money other than
U.S. Dollars;
(5) make any change in the provisions of the indenture
relating to waivers of past Defaults or the rights of Holders of
notes to receive payments of principal of, or interest or
premium or Liquidated Damages, if any, on the notes;
(6) waive a redemption payment with respect to any note
(other than a payment required by one of the covenants described
above under the caption Repurchase at the
Option of Holders);
(7) impair the right to institute suit for the enforcement
of any payment on or with respect to the notes;
(8) modify the Subsidiary Guarantees in any manner adverse
to the Holders of notes; or
(9) make any change in the preceding amendment and waiver
provisions. (Section 9.2)
Notwithstanding the preceding, without the consent of any Holder
of notes, Valeant and the trustee may amend or supplement the
indenture or the notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated notes in addition to or
in place of certificated notes;
(3) to provide for the assumption of Valeants or any
Subsidiary Guarantors obligations to Holders of notes in
the case of a consolidation or merger or sale of all or
substantially all of Valeants or a Subsidiary
Guarantors assets;
(4) to make any change that would provide any additional
rights or benefits to the Holders of notes or that does not
adversely affect the legal rights under the indenture of any
such Holder;
(5) to comply with requirements of the Commission in order
to effect or maintain the qualification of the indenture under
the Trust Indenture Act;
(6) to conform the text of the indenture or the notes to
any provision of this Description of the Exchange Notes to the
extent that such provision in the indenture was intended to be a
verbatim recitation of a provision of this Description of the
Exchange Notes;
(7) to provide for the issuance of additional notes in
accordance with the limitations set forth in the indenture as of
its date; or
(8) to add additional Guarantees with respect to the notes
or to confirm and evidence the release, termination or discharge
of any Guarantee when such release, termination or discharge is
permitted under the indenture. (Section 9.1)
56
Satisfaction
and Discharge
The indenture will be discharged and will cease to be of further
effect as to all notes issued thereunder, when:
(1) either:
(a) all notes that have been authenticated, except lost,
stolen or destroyed notes that have been replaced or paid and
notes for whose payment money has been deposited in trust and
thereafter repaid to Valeant, have been delivered to the trustee
for cancellation; or
(b) all notes that have not been delivered to the trustee
for cancellation have become due and payable by reason of the
mailing of a notice of redemption or otherwise or will become
due and payable within one year and Valeant has irrevocably
deposited or caused to be deposited with the trustee as trust
funds in trust solely for the benefit of the Holders, cash in
U.S. Dollars, non-callable Government Securities, or a
combination of cash in U.S. Dollars and non-callable
Government Securities, in amounts as will be sufficient without
consideration of any reinvestment of interest, to pay and
discharge the entire indebtedness on the notes not delivered to
the trustee for cancellation for principal, premium and
Liquidated Damages, if any, and accrued interest to the date of
maturity or redemption;
(2) no Default or Event of Default has occurred and is
continuing on the date of the deposit or will occur as a result
of the deposit and the deposit will not result in a breach or
violation of, or constitute a default under, any other
instrument to which Valeant is a party or by which Valeant is
bound, and as to which the rights of the other parties thereto
are senior to those of the Holders;
(3) Valeant has paid or caused to be paid all sums payable
by it under the indenture; and
(4) Valeant has delivered irrevocable instructions to the
trustee under the indenture to apply the deposited money toward
the payment of the notes at maturity or the redemption date, as
the case may be.
In addition, Valeant must deliver an officers certificate
and an opinion of counsel to the trustee stating that all
conditions precedent to satisfaction and discharge have been
satisfied. (Section 8.1)
Concerning
the Trustee
If the trustee becomes a creditor of Valeant, the indenture
limits its right to obtain payment of claims in certain cases,
or to realize on certain property received in respect of any
such claim as security or otherwise. The trustee will be
permitted to engage in other transactions; however, if it
acquires any conflicting interest it must eliminate such
conflict within 90 days, apply to the Commission for
permission to continue or resign. (Section 7.11)
The Holders of a majority in principal amount of the then
outstanding notes will have the right to direct the time, method
and place of conducting any proceeding for exercising any remedy
available to the trustee, subject to certain exceptions.
(Section 6.5) The indenture provides that in case an Event
of Default occurs and is continuing, the trustee will be
required, in the exercise of its power, to use the degree of
care of a prudent person in the conduct of such persons
own affairs. Subject to such provisions, the trustee will be
under no obligation to exercise any of its rights or powers
under the indenture at the request of any Holder of notes,
unless such Holder has offered to the trustee security and
indemnity satisfactory to it against any loss, liability or
expense. (Section 7.1)
Governing
Law
The indenture and the notes will be governed by the laws of the
State of New York. (Section 11.8)
Book-Entry,
Delivery and Form
The notes will be represented by one or more notes in registered
global form, without interest coupons attached. Upon the
consummation of the exchange offer, these global notes, or the
Global Notes, will be
57
deposited with The Depository Trust Company, or DTC, in New
York, New York, or remain in the custody of the trustee and
registered in the name of DTC or its nominee, in each case for
credit to an account of a direct or indirect participant in DTC
as described below. (Section 2.1)
Except as set forth below, the Global Notes may be transferred,
in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee. In addition, transfers of
beneficial interests in the Global Notes will be subject to the
applicable rules and procedures of DTC and its direct or
indirect participants, including, if applicable, those of
Euroclear Bank S.A./ N.V., as operator of the Euroclear System,
or Euroclear, and Clearstream Banking, société
anonyme, or Clearstream, which may change from time to time.
Beneficial interests in the Global Notes may not be exchanged
for notes in certificated form except in the limited
circumstances described below. See Exchange of
Global Notes for Certificated Notes. (Section 2.12)
Depository
Procedures
The following description of the operations and procedures of
DTC, Euroclear and Clearstream are provided solely as a matter
of convenience. These operations and procedures are solely
within the control of the respective settlement systems and are
subject to changes by them. Valeant takes no responsibility for
these operations and procedures and urges investors to contact
the system or their participants directly to discuss these
matters.
DTC has advised Valeant that DTC is a limited-purpose trust
company created to hold securities for its participating
organizations, collectively, the participants, and to facilitate
the clearance and settlement of transactions in those securities
between participants through electronic book-entry changes in
accounts of its participants. The participants include
securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations. Access to
DTCs system is also available to other entities such as
banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a participant, either
directly or indirectly, collectively, the indirect participants.
Persons who are not participants may beneficially own securities
held by or on behalf of DTC only through the participants or the
indirect participants. The ownership interests in, and transfers
of ownership interests in, each security held by or on behalf of
DTC are recorded on the records of the participants and indirect
participants.
DTC has also advised Valeant that, pursuant to procedures
established by it:
(1) upon deposit of the Global Notes, DTC will credit the
accounts of participants with portions of the principal amount
of the Global Notes; and
(2) ownership of these interests in the Global Notes will
be shown on, and the transfer of ownership of these interests
will be effected only through, records maintained by DTC (with
respect to the participants) or by the participants and the
indirect participants (with respect to other owners of
beneficial interest in the Global Notes).
Investors in the Global Notes who are participants in DTCs
system may hold their interests therein directly through DTC.
Investors in the Global Notes who are not participants may hold
their interests therein indirectly through organizations
(including Euroclear and Clearstream) which are participants in
such system. Euroclear and Clearstream will hold interests in
the Global Notes on behalf of their participants through
customers securities accounts in their respective names on
the books of their respective depositories, which are Euroclear
Bank S.A./ N.V., as operator of Euroclear, and Citibank, N.A.,
as operator of Clearstream. All interests in a Global Note,
including those held through Euroclear or Clearstream, may be
subject to the procedures and requirements of DTC.
Those interests held through Euroclear or Clearstream may also
be subject to the procedures and requirements of such systems.
The laws of some states require that certain Persons take
physical delivery in definitive form of securities that they
own. Consequently, the ability to transfer beneficial interests
in a Global Note to such Persons will be limited to that extent.
Because DTC can act only on behalf of participants, which in
turn act on behalf of indirect participants, the ability of a
Person having beneficial interests in a Global
58
Note to pledge such interests to Persons that do not participate
in the DTC system, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate
evidencing such interests.
Except as described below, owners of interests in the Global
Notes will not have notes registered in their names, will not
receive physical delivery of notes in certificated form and will
not be considered the registered owners or Holders
thereof under the indenture for any purpose.
Payments in respect of the principal of, and interest and
premium and Liquidated Damages, if any, on a Global Note
registered in the name of DTC or its nominee will be payable to
DTC in its capacity as the registered Holder under the
indenture. Under the terms of the indenture, Valeant and the
trustee will treat the Persons in whose names the notes,
including the Global Notes, are registered as the owners of the
notes for the purpose of receiving payments and for all other
purposes. Consequently, neither Valeant, the trustee nor any
agent of Valeant or the trustee has or will have any
responsibility or liability for:
(1) any aspect of DTCs records or any
participants or indirect participants records
relating to or payments made on account of beneficial ownership
interest in the Global Notes or for maintaining, supervising or
reviewing any of DTCs records or any participants or
indirect participants records relating to the beneficial
ownership interests in the Global Notes; or
(2) any other matter relating to the actions and practices
of DTC or any of its participants or indirect participants.
DTC has advised Valeant that its current practice, upon receipt
of any payment in respect of securities such as the notes
(including principal and interest), is to credit the accounts of
the relevant participants with the payment on the payment date
unless DTC has reason to believe it will not receive payment on
such payment date. Each relevant participant is credited with an
amount proportionate to its beneficial ownership of an interest
in the principal amount of the relevant security as shown on the
records of DTC. Payments by the participants and the indirect
participants to the beneficial owners of notes will be governed
by standing instructions and customary practices and will be the
responsibility of the participants or the indirect participants
and will not be the responsibility of DTC, the trustee or
Valeant. Neither Valeant nor the trustee will be liable for any
delay by DTC or any of its participants in identifying the
beneficial owners of the notes, and Valeant and the trustee may
conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Transfers between participants in DTC will be effected in
accordance with DTCs procedures, and will be settled in
same-day
funds, and transfers between participants in Euroclear and
Clear-stream will be effected in accordance with their
respective rules and operating procedures.
Cross-market transfers between the participants in DTC, on the
one hand, and DTC participants acting on behalf of Euroclear or
Clearstream participants, on the other hand, will be effected
through DTC in accordance with DTCs rules on behalf of DTC
participants acting on behalf of Euroclear or Clearstream, as
the case may be; however, such cross-market transactions will
require delivery of instructions to Euroclear or Clearstream, as
the case may be, by the counterparty in such system in
accordance with the rules and procedures and within the
established deadlines (Brussels time) of such system. Euroclear
or Clearstream, as the case may be, will, if the transaction
meets its settlement requirements, deliver instructions to the
DTC participant acting on its behalf to take action to effect
final settlement on its behalf by delivering or receiving
interests in the relevant Global Note in DTC, and making or
receiving payment in accordance with normal procedures for
same-day
funds settlement applicable to DTC. Euroclear participants and
Clearstream participants may not deliver instructions directly
to the DTC participants acting on behalf of Euroclear or
Clearstream.
DTC has advised us that it will take any action permitted to be
taken by a Holder of notes only at the direction of one or more
participants to whose account DTC has credited the interests in
the Global Notes and only in respect of such portion of the
aggregate principal amount of the notes as to which such
participant or participants has or have given such direction.
However, if there is an Event of Default under the notes, DTC
reserves the right to exchange the Global Notes for notes in
certificated form, and to distribute such notes to its
participants.
59
Although DTC, Euroclear and Clearstream have agreed to the
foregoing procedures to facilitate transfers of interests in the
Global Notes among participants in DTC, Euroclear and
Clearstream, they are under no obligation to perform or to
continue to perform such procedures, and may discontinue such
procedures at any time. Neither Valeant nor the trustee nor any
of their respective agents will have any responsibility for the
performance by DTC, Euroclear or Clearstream or their respective
participants or indirect participants of their respective
obligations under the rules and procedures governing their
operations.
Exchange
of Global Notes for Certificated Notes
A Global Note is exchangeable for definitive notes in registered
certificated form, or Certificated Notes, if:
(1) DTC (a) notifies Valeant that it is unwilling or
unable to continue as depositary for the Global Notes or
(b) has ceased to be a clearing agency registered under the
Exchange Act and, in either case, Valeant fails to appoint a
successor depositary; or
(2) there has occurred and is continuing a Default or Event
of Default with respect to the notes.
In all cases, Certificated Notes delivered in exchange for any
Global Note or beneficial interests in Global Notes will be
registered in the names, and issued in any approved
denominations, requested by or on behalf of the depositary (in
accordance with its customary procedures), and the Certificated
Notes shall bear appropriate legends indicating the transfer
restrictions applicable thereto. (Section 2.12)
Same Day
Settlement and Payment
Valeant will make payments in respect of the notes represented
by the Global Notes (including principal, premium, if any,
interest and Liquidated Damages, if any) by wire transfer of
immediately available funds to the accounts specified by the
Global Note Holder. Valeant will make all payments of principal,
interest and premium and Liquidated Damages, if any, with
respect to Certificated Notes by wire transfer of immediately
available funds to the accounts specified by the Holders of the
Certificated Notes, in the case of a Holder holding an aggregate
principal amount of notes of $1 million or more, or, if no
such account is specified or in the case of a Holder holding an
aggregate principal amount of notes of less than
$1 million, by mailing a check to each such Holders
registered address. (Section 4.1) The notes represented by
the Global Notes are expected to be eligible to trade in
DTCs
Same-Day
Funds Settlement System, and any permitted secondary market
trading activity in such notes will, therefore, be required by
DTC to be settled in immediately available funds. Valeant
expects that secondary trading in any Certificated Notes will
also be settled in immediately available funds.
Because of time zone differences, the securities account of a
Euroclear or Clearstream participant purchasing an interest in a
Global Note from a participant in DTC will be credited, and any
such crediting will be reported to the relevant Euroclear or
Clearstream participant, during the securities settlement
processing day (which must be a business day for Euroclear and
Clearstream) immediately following the settlement date of DTC.
DTC has advised Valeant that cash received in Euroclear or
Clearstream as a result of sales of interests in a Global Note
by or through a Euroclear or Clearstream participant to a
participant in DTC will be received with value on the settlement
date of DTC but will be available in the relevant Euroclear or
Clearstream cash account only as of the business day for
Euroclear or Clearstream following DTCs settlement date.
Certain
Definitions
Set forth below are certain defined terms used in the indenture.
Reference is made to the indenture (Section 1.1) for a full
disclosure of all such terms, as well as any other capitalized
terms used herein for which no definition is provided.
Acquired Debt means, with respect to any
specified Person:
(1) Indebtedness of any other Person existing at the time
such other Person is merged with or into or became a Subsidiary
of such specified Person and which is not satisfied in full at
such time, whether or
60
not such Indebtedness is incurred in connection with, or in
contemplation of, such other Person merging with or into, or
becoming a Subsidiary of, such specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset
acquired by such specified Person.
Affiliate of any specified Person means any
other Person directly or indirectly controlling or controlled by
or under direct or indirect common control with such specified
Person. For purposes of this definition, control, as
used with respect to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of
the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise;
provided, that beneficial ownership of 10% or more of the Voting
Stock of a Person will be deemed to be control. For purposes of
this definition, the terms controlling,
controlled by and under common control
with have correlative meanings.
Applicable Premium means, with respect to a
note, the greater of
(1) 1.0% of the then outstanding principal amount of
such note and
(2) (a) the present value of all remaining
required interest and principal payments due on such note and
all premium payments relating to such note assuming a redemption
date of June 15, 2012, computed using a discount rate equal
to the Treasury Rate plus 50 basis points, minus
(b) the then outstanding principal amount of such note minus
(c) accrued interest paid on the date of redemption.
Asset Sale means:
(1) the sale, lease, conveyance or other disposition of any
assets, property or rights; provided, that the sale, conveyance
or other disposition of all or substantially all of the assets
of Valeant and its Restricted Subsidiaries taken as a whole will
be governed by the provisions of the indenture described above
under the caption Repurchase at the Option of
Holders Change of Control
and/or the
provisions described above under the caption
Certain Covenants Merger,
Consolidation or Sale of Assets and not by the provisions
of the Asset Sale covenant; and
(2) the issuance of Equity Interests by any of
Valeants Restricted Subsidiaries or the sale of Equity
Interests in any of its Restricted Subsidiaries.
Notwithstanding the preceding, none of the following items will
be deemed to be an Asset Sale:
(1) any single transaction or series of related
transactions that involves assets having a Fair Market Value of
less than $5.0 million;
(2) a transfer of assets between or among Valeant and its
Restricted Subsidiaries;
(3) an issuance of Equity Interests by a Restricted
Subsidiary to Valeant or to another Restricted Subsidiary;
(4) the sale or lease of equipment, inventory or accounts
receivable in the ordinary course of business;
(5) the sale or other disposition of cash or Cash
Equivalents;
(6) a Restricted Payment or Permitted Investment that is
permitted by the covenant described above under the caption
Certain Covenants Restricted
Payments;
(7) the license of intellectual property to third persons
in the ordinary course of business as determined by the Board of
Directors of Valeant in good faith;
(8) the sale, exchange or other disposition of obsolete
assets not integral to any Permitted Business; and
(9) sales, transfers or other dispositions of assets for
consideration at least equal to the Fair Market Value of the
assets sold or disposed of, but only if the consideration
received consists of property or assets
61
(other than cash, except to the extent used as a bona fide means
of equalizing the value of the property or assets involved in
the swap transaction; provided, however, that cash does not
exceed 10% of the sum of the amount of the cash and the Fair
Market Value of the assets received or given) of a nature or
type that are used in, a business having property or assets of a
nature or type or engaged in a Permitted Business (or Capital
Stock of a Person whose assets consist of assets of the type
described in this clause (9)).
Attributable Debt in respect of a sale and
leaseback transaction means, at the time of determination, the
present value of the obligation of the lessee for net rental
payments during the remaining term of the lease included in such
sale and leaseback transaction including any period for which
such lease has been extended or may, at the option of the
lessor, be extended. Such present value shall be calculated
using a discount rate equal to the rate of interest implicit in
such transaction, determined in accordance with GAAP.
Beneficial Owner has the meaning assigned to
such term in
Rule 13d-3
and
Rule 13d-5
under the Exchange Act, except that in calculating the
beneficial ownership of any particular person (as
that term is used in Section 13(d)(3) of the Exchange Act),
such person will be deemed to have beneficial
ownership of all securities that such person has the
right to acquire by conversion or exercise of other securities,
whether such right is currently exercisable or is exercisable
only upon the occurrence of a subsequent condition. The terms
Beneficially Owns and Beneficially Owned
have a corresponding meaning.
Board of Directors means:
(1) with respect to a company or corporation, the board of
directors of the company or corporation or any committee thereof
duly authorized to act on behalf of such board;
(2) with respect to a partnership, the Board of Directors
of the general partner of the partnership or any committee
thereof duly authorized to act on behalf of such board; and
(3) with respect to any other Person, the board or
committee of such Person serving a similar function.
Capital Lease Obligations means, at the time
any determination is to be made, the amount of the liability in
respect of a capital lease that would at that time be required
to be capitalized on a balance sheet in accordance with GAAP.
Capital Stock means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any
and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock;
(3) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or
limited); and
(4) any other interest or participation that confers on a
Person the right to receive a share of the profits and losses
of, or distributions of assets of, the issuing Person.
Cash Equivalents means:
(1) securities issued or directly and fully guaranteed or
insured by the U.S. government or any agency or
instrumentality thereof (provided, that the full faith and
credit of the U.S. is pledged in support thereof) having
repricings or maturities of not more than one year from the date
of acquisition;
(2) certificates of deposit and time deposits with
maturities of one year or less from the date of acquisition,
bankers acceptances with maturities not exceeding one year
and overnight bank deposits, in each case, with any domestic
commercial bank having capital and surplus in excess of
$500.0 million and a Thomson Bank Watch Rating of
B or better;
(3) repurchase obligations with a term of not more than
14 days for underlying securities of the types described in
clauses (1) and (2) above entered into with any
financial institution meeting the qualifications specified in
clause (2) above;
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(4) commercial paper having a rating of at least
P-2
or better from Moodys or at least
A-2
or better from S&P, or carrying an equivalent rating by an
internationally recognized rating agency and, in each case,
maturing within one year after the date of acquisition;
(5) Auction-rate, corporate and municipal securities, in
each case (x) having either short-term debt ratings of at
least
P-2
or better from Moodys or at least
A-2
or better from S&P or long-term senior debt ratings of
A2 or better from Moodys or at least
A or better from S&P, or carrying an equivalent
rating by an internationally recognized rating agency,
(y) having repricings or maturities of not more than one
year from the date of acquisition and (z) which are
classifiable as cash and cash equivalents under GAAP;
(6) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in
clauses (1) through (5) of this definition; or
(7) in the case of any Foreign Subsidiary:
(a) direct obligations of the sovereign nation, or any
agency thereof, in which such Foreign Subsidiary is organized
and is conducting business or in obligations fully and
unconditionally guaranteed by such sovereign nation, or any
agency thereof; provided, that such obligations are acquired and
held by such Foreign Subsidiary in the ordinary course of
business and have repricings or maturities of not more than one
year from the date of acquisition; or
(b) investments of the type and maturity described in
clauses (1) through (5) above of foreign obligors,
which investments or obligors have ratings described in such
clauses or equivalent ratings from internationally recognized
rating agencies; provided, that such investments are acquired
and held by such Foreign Subsidiary in the ordinary course of
business.
Change of Control means the occurrence of any
of the following:
(1) any person (as that term is used in
Section 13(d)(3) of the Exchange Act) becomes the
Beneficial Owner of shares of Valeants Voting Stock
representing (i) 50% or more of the total voting power of
all of Valeants outstanding Voting Stock or (ii) the
power, directly or indirectly, or elect a majority of the
members of Valeants Board of Directors;
(2) Valeant consolidates with, or merges with or into,
another Person, or Valeant, directly or indirectly, sells,
assigns, conveys, transfers, leases or otherwise disposes of all
or substantially all of the properties or assets of Valeant and
its Restricted Subsidiaries, taken as a whole (other than by way
of merger or consolidation), in one or a series of related
transactions, or any Person consolidates with, or merges with or
into, Valeant, in any such event other than pursuant to a
transaction in which the Persons that Beneficially Owned the
shares of Valeants Voting Stock immediately prior to such
transaction Beneficially Own at least a majority of the total
voting power of all outstanding Voting Stock (other than
Disqualified Stock) of the surviving or transferee Person;
(3) the holders of Valeants Capital Stock approve any
plan or proposal for the liquidation or dissolution of Valeant
(whether or not otherwise in compliance with the
indenture); or
(4) during any period of two consecutive years, individuals
who at the beginning of such period constituted the Board of
Directors of Valeant (together with any new directors whose
election by such Board of Directors or whose nomination for
election by the shareholders of Valeant has been approved by a
majority of the directors then still in office who either were
directors at the beginning of such period or whose election or
recommendation for election was previously so approved) cease to
constitute a majority of the Board of Directors of Valeant.
Consolidated Cash Flow means, with respect to
any specified Person for any period, the Consolidated Net Income
of such Person for such period plus:
(1) an amount equal to any extraordinary loss plus any net
loss realized by such Person or any of its Restricted
Subsidiaries in connection with an Asset Sale, to the extent
such losses were deducted in computing such Consolidated Net
Income; plus
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(2) provision for taxes based on income or profits of such
Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was deducted in computing
such Consolidated Net Income; plus
(3) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued
and whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue discount,
non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions,
discounts and other fees and charges incurred in respect of
letter of credit or bankers acceptance financings, and net
of the effect of all payments made or received pursuant to
Interest Rate Hedging Obligations), to the extent that any such
expense was deducted in computing such Consolidated Net Income;
plus
(4) any restructuring charges (which, for the avoidance of
doubt, shall include retention, severance, systems establishment
costs, excess pension charges, contract termination costs and
costs to consolidate facilities and relocate employees), to the
extent that any such charge or expense was deducted in computing
such Consolidated Net Income; plus
(5) depreciation, amortization (including amortization of
intangibles but excluding amortization of prepaid cash expenses
that were paid in a prior period), and other non-cash charges or
expenses (excluding any such non-cash charge or expense to the
extent that it represents an accrual of or reserve for cash
expenses in any future period or amortization of a prepaid cash
expense that was paid in a prior period) of such Person and its
Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash charge or expenses
were deducted in computing such Consolidated Net Income; minus
(6) non-cash items increasing such Consolidated Net Income
for such period, other than the accrual of revenue in the
ordinary course of business, in each case, on a consolidated
basis and determined in accordance with GAAP.
Notwithstanding the preceding, the provision for taxes based on
the income or profits of, and the depreciation and amortization
and other non-cash expenses of, a Restricted Subsidiary of
Valeant will be added to Consolidated Net Income to compute
Consolidated Cash Flow of Valeant only to the extent that a
corresponding amount would be permitted at the date of
determination to be dividended to Valeant by such Restricted
Subsidiary without prior governmental approval (that has not
been obtained), and without direct or indirect restriction
pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and
governmental regulations applicable to that Restricted
Subsidiary or its stockholders.
Consolidated Net Income means, with respect
to any specified Person for any period, the aggregate of the Net
Income of such Person and its Restricted Subsidiaries for such
period, on a consolidated basis, determined in accordance with
GAAP; provided that:
(1) the Net Income (but not loss) of any Person that is not
a Restricted Subsidiary or that is accounted for by the equity
method of accounting will be included only to the extent of the
amount of dividends or distributions paid in cash to the
specified Person or a Restricted Subsidiary of the Person;
(2) the Net Income of any Restricted Subsidiary will be
excluded to the extent that the declaration or payment of
dividends or similar distributions by that Restricted Subsidiary
of that Net Income is not at the date of determination permitted
without any prior governmental approval (that has not been
obtained) or, directly or indirectly, by operation of the terms
of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to
that Restricted Subsidiary or its stockholders;
(3) the cumulative effect of a change in accounting
principles will be excluded;
(4) any extraordinary or nonrecurring gain or loss and any
expense or charge in connection with acquired intellectual
property and research & development will be excluded;
64
(5) any extraordinary or nonrecurring gain or loss and any
expense or charge attributable to the disposition of
discontinued operations will be excluded;
(6) charges incurred in connection with the retirement or
redemption of the 3% Convertible Subordinated Notes due
2010 or the 4% Convertible Subordinated Notes due 2013 will
be excluded;
(7) any gain (but not loss), together with any related
provision for taxes on such gain (but not loss), realized in
connection with: (a) any Asset Sale; or (b) the
disposition of any securities by such Person or any of its
Restricted Subsidiaries or the extinguishment of any
Indebtedness of such Person or any of its Restricted
Subsidiaries will be excluded; and
(8) any extraordinary gain (but not loss), together with
any related provision for taxes on such extraordinary gain (but
not loss) will be excluded.
Credit Facilities means one or more debt
facilities or commercial paper facilities, in each case with
banks or other institutional lenders providing for revolving
credit loans, term loans, receivables financing (including
through the sale of receivables to such lenders or to special
purpose entities formed to borrow from such lenders against such
receivables) or letters of credit or other borrowings, in each
case, as amended, restated, modified, renewed, refunded,
replaced or refinanced (including, in the case of any amendment,
restatement, modification, renewal, refunding, replacement or
refinancing only, by means of sales of debt securities to
institutional investors under an indenture, credit facility or
otherwise) in whole or in part from time to time.
Default means any event that is, or with the
passage of time or the giving of notice or both would be, an
Event of Default.
Disqualified Stock means any Capital Stock
that, by its terms (or by the terms of any security into which
it is convertible, or for which it is exchangeable, in each case
at the option of the holder thereof), or upon the happening of
any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the
option of the holder thereof, in whole or in part, on or prior
to the date that is 91 days after the date on which the
notes mature. Notwithstanding the preceding sentence, any
Capital Stock that would constitute Disqualified Stock solely
because the holders of the Capital Stock have the right to
require Valeant to repurchase such Capital Stock upon the
occurrence of a change of control or an asset sale will not
constitute Disqualified Stock if the terms of such Capital Stock
provide that Valeant may not repurchase or redeem any such
Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with the covenant described above under
the caption Certain Covenants
Restricted Payments.
Domestic Subsidiary means any Restricted
Subsidiary that was formed under the laws of the United States
or any state thereof or the District of Columbia.
Equity Interests means Capital Stock and all
warrants, options or other rights to acquire Capital Stock (but
excluding any debt security that is convertible into, or
exchangeable for, Capital Stock).
Equity Offering means a public or private
offering of Equity Interests (other than Disqualified Stock).
Existing Indebtedness means Indebtedness of
Valeant and its Restricted Subsidiaries (other than
Indebtedness, if any, under Credit Facilities incurred under
clause (1) of the second paragraph of the covenant entitled
Certain Covenants Incurrence of
Indebtedness and Issuance of Preferred Stock) in existence
on the date of the indenture, until such amounts are repaid.
Fair Market Value means the price that could
be negotiated in an arms-length transaction, for cash,
between a willing seller and a willing and able buyer, neither
of whom is under undue pressure or compulsion to complete the
transaction, determined in good faith by the Board of Directors
of Valeant (unless otherwise provided in the indenture).
Fixed Charge Coverage Ratio means with
respect to any specified Person for any period, the ratio of the
Consolidated Cash Flow of such Person for such period to the
Fixed Charges of such Person for such period.
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In the event that the specified Person or any of its Restricted
Subsidiaries incurs, assumes, Guarantees, repays, repurchases or
redeems any Indebtedness (other than ordinary working capital
borrowings) or issues, repurchases or redeems preferred stock
subsequent to the commencement of the period for which the Fixed
Charge Coverage Ratio is being calculated and on or prior to the
date on which the event for which the calculation of the Fixed
Charge Coverage Ratio is made (the Calculation
Date), then the Fixed Charge Coverage Ratio will be
calculated giving pro forma effect to such incurrence,
assumption, Guarantee, repayment, repurchase or redemption of
Indebtedness, or such issuance, repurchase or redemption of
preferred stock, and the use of the proceeds therefrom as if the
same had occurred at the beginning of the applicable
four-quarter reference period.
In addition, for purposes of calculating the Fixed Charge
Coverage Ratio:
(1) acquisitions that have been made by the specified
Person or any of its Restricted Subsidiaries, including through
consolidations or mergers and including any related financing
transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the
Calculation Date will be given pro forma effect as if they had
occurred on the first day of the four-quarter reference period
and Consolidated Cash Flow for such reference period will be
calculated on a pro forma basis in accordance with
Regulation S-X
promulgated by the Commission;
(2) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and
operations or businesses disposed of prior to the Calculation
Date, will be excluded; and
(3) the Fixed Charges attributable to discontinued
operations, as determined in accordance with GAAP, and
operations or businesses disposed of prior to the Calculation
Date, will be excluded, but only to the extent that the
obligations giving rise to such Fixed Charges will not be
obligations of the specified Person or any of its Restricted
Subsidiaries following the Calculation Date.
Fixed Charges means, with respect to any
specified Person for any period, the sum, without duplication,
of:
(1) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or
accrued, including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest
payments, the interest component of any deferred payment
obligations, the interest component of all payments associated
with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers
acceptance financings, and net of the effect of all payments
made or received pursuant to Interest Rate Hedging Obligations;
plus
(2) the consolidated interest of such Person and its
Restricted Subsidiaries that was capitalized during such period;
plus
(3) any interest expense on Indebtedness of another Person
that is Guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or
one of its Restricted Subsidiaries, whether or not such
Guarantee or Lien is called upon; plus
(4) the product of (a) all dividends, whether paid or
accrued and whether or not in cash, on any series of preferred
stock of such Person or any of its Restricted Subsidiaries,
other than dividends on Equity Interests payable solely in
Equity Interests of Valeant (other than Disqualified Stock) or
to Valeant or a Restricted Subsidiary of Valeant, times
(b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined
federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis
and in accordance with GAAP.
GAAP means generally accepted accounting
principles set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements
of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a
significant segment of the accounting profession, which are in
effect from time to time.
66
Guarantee means a guarantee other than by
endorsement of negotiable instruments for collection in the
ordinary course of business, direct or indirect, in any manner
including, without limitation, by way of a pledge of assets or
through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
Hedging Obligations means, with respect to
any specified Person
(1) Interest Rate Hedging Obligations; and
(2) the obligations of such Person under agreements or
arrangements designed to protect such Person against
fluctuations in currency exchange rates.
Indebtedness means, with respect to any
specified Person, any indebtedness of such Person, whether or
not contingent:
(1) in respect of borrowed money;
(2) evidenced by bonds, notes, debentures or similar
instruments or letters of credit (or reimbursement agreements in
respect thereof);
(3) in respect of bankers acceptances;
(4) representing Capital Lease Obligations or Attributable
Debt in respect of sale and leaseback transactions;
(5) representing the balance deferred and unpaid of the
purchase price of any property, except any such balance that
constitutes an accrued expense or trade payable; or
(6) representing any Hedging Obligations,
if and to the extent any of the preceding items (other than
letters of credit, Attributable Debt and Hedging Obligations)
would appear as a liability upon a balance sheet of the
specified Person prepared in accordance with GAAP. In addition,
the term Indebtedness includes all Indebtedness of
others secured by a Lien on any asset of the specified Person
(whether or not such Indebtedness is assumed by the specified
Person) and, to the extent not otherwise included, the Guarantee
by the specified Person of any Indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date will
be:
(1) the accreted value of the Indebtedness, in the case of
any Indebtedness issued with original issue discount; and
(2) the principal amount of the Indebtedness, together with
any interest on the Indebtedness that is more than 30 days
past due, in the case of any other Indebtedness.
Interest Rate Hedging Obligations means, with
respect to any specified Person, the obligations of such Person
under:
(1) interest rate swap agreements, interest rate cap
agreements and interest rate collar agreements; and
(2) other agreements or arrangements designed to protect
such Person against fluctuations in interest rates.
Investment Grade Rating means a rating of
Baa3 or better by Moodys and BBB− or better by
S&P (or its equivalent under any successor rating
categories of S&P) (or, in each case, if such Rating Agency
ceases to rate the notes for reasons outside of the control of
Valeant, the equivalent investment grade credit rating from any
Rating Agency selected by Valeant as a replacement Rating
Agency).
Investments means, with respect to any
Person, all direct or indirect investments by such Person in
other Persons (including Affiliates) in the forms of loans
(including Guarantees or other obligations), advances or capital
contributions (excluding commission, travel and similar advances
to officers and employees made in the ordinary course of
business), purchases or other acquisitions for consideration of
Indebtedness, Equity
67
Interests or other securities, together with all items that are
or would be classified as investments on a balance sheet
prepared in accordance with GAAP. If (i) Valeant or any
Restricted Subsidiary of Valeant sells or otherwise disposes of
any Equity Interests of any direct or indirect Restricted
Subsidiary of Valeant such that, after giving effect to any such
sale or disposition, such Person is no longer a Restricted
Subsidiary of Valeant or (ii) a Restricted Subsidiary is
redesignated as an Unrestricted Subsidiary, Valeant will be
deemed to have made an Investment on the date of any such sale,
disposition or redesignation equal to the Fair Market Value of
Valeants Investments in such Subsidiary that were not sold
or disposed of in an amount determined as provided in the final
paragraph of the covenant described above under the caption
Certain Covenants Restricted
Payments. The acquisition by Valeant or any Restricted
Subsidiary of Valeant of a Person that holds an Investment in a
third Person will be deemed to be an Investment by Valeant or
such Restricted Subsidiary in such third Person (but only to the
extent such Investment in a third person is material to the
acquired entity) in an amount equal to the Fair Market Value of
the Investments held by the acquired Person in such third Person
in an amount determined as provided in the final paragraph of
the covenant described above under the caption
Certain Covenants Restricted
Payments. For the avoidance of doubt, acquisitions of or
licenses for products or assets used or useful in a Permitted
Business do not constitute Investments.
Issue Date means June 9, 2009, the date
of the initial issuance of the notes under the indenture.
Lien means, with respect to any asset, any
mortgage, lien, pledge, charge (fixed
and/or
floating), security interest or encumbrance of any kind in
respect of such asset, whether or not filed, recorded or
otherwise perfected under applicable law, including any
conditional sale or other title retention agreement, any lease
in the nature thereof, any option or other agreement to sell or
give a security interest in and any filing of or agreement to
give any financing statement under the Uniform Commercial Code
(or equivalent statutes) of any jurisdiction.
Liquidated Damages has the meaning given to
such term or similar terms (including Additional
Interest) in the exchange and registration rights
agreement.
Moodys means Moodys Investors
Service, Inc., or any successor to the rating agency business
thereof.
Net Income means, with respect to any
specified Person, the net income (loss) of such Person,
determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends.
Net Proceeds means the aggregate cash
proceeds received by Valeant or any of its Restricted
Subsidiaries in respect of any Asset Sale (including, without
limitation, any cash received upon the sale or other disposition
of any non-cash consideration received in any Asset Sale), net
of the direct costs relating to such Asset Sale, including,
without limitation, legal, accounting and investment banking
fees, and sales commissions, and any relocation expenses
incurred as a result of the Asset Sale, taxes paid or payable as
a result of the Asset Sale, in each case, after taking into
account any available tax credits or deductions and any tax
sharing arrangements, and amounts required to be applied to the
repayment of Indebtedness, other than Indebtedness under a
Credit Facility, secured by a Lien on the asset or assets that
were the subject of such Asset Sale and any reserve for
adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP.
Non-Recourse Debt means Indebtedness:
(1) as to which neither Valeant nor any of its Restricted
Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly
liable as a guarantor or otherwise, or (c) constitutes the
lender;
(2) no default with respect to which (including any rights
that the holders of the Indebtedness may have to take
enforcement action against an Unrestricted Subsidiary) would
permit upon notice, lapse of time or both any holder of any
other Indebtedness (other than the notes) of Valeant or any of
its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment of the Indebtedness to be
accelerated or payable prior to its stated maturity; and
(3) as to which the lenders have been notified in writing
that they will not have any recourse to the stock or assets of
Valeant or any of its Restricted Subsidiaries.
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Obligations means any principal, interest,
penalties, fees, indemnifications, reimbursements, damages and
other liabilities payable under the documentation governing any
Indebtedness.
Permitted Business means any business
conducted by Valeant and its Restricted Subsidiaries on the date
of the indenture and any business that is in the judgment of
Valeant reasonably related, ancillary or complimentary to the
business of Valeant and its Restricted Subsidiaries on the date
of the indenture.
Permitted Investments means:
(1) any Investment in Valeant or in a Restricted Subsidiary
of Valeant;
(2) any Investment in cash and Cash Equivalents;
(3) any Investment by Valeant or any Subsidiary of Valeant
in a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of
Valeant; or
(b) such Person is merged or consolidated with or into, or
transfers or conveys substantially all of its assets to, or is
liquidated into, Valeant or a Restricted Subsidiary of Valeant;
(4) any Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant
to and in compliance with the covenant described above under the
caption Repurchase at the Option of
Holders Asset Sales;
(5) any Investments made solely in exchange for the
issuance of Equity Interests (other than Disqualified Stock) of
Valeant;
(6) any Investments received in compromise of obligations
of such persons incurred in the ordinary course of trade
creditors or customers that were incurred in the ordinary course
of business, including pursuant to any plan of reorganization or
similar arrangement upon the bankruptcy or insolvency of any
trade creditor or customer;
(7) Investments represented by Hedging Obligations;
(8) Investments in existence on the date of the indenture;
(9) Payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be
treated as expenses for accounting purposes and that are made in
the ordinary course of business;
(10) Advances to employees in the ordinary course of
business of Valeant or a Restricted Subsidiary;
(11) Investments in a Permitted Joint Venture, when taken
together with all other Investments made pursuant to this
clause (11) that are at the time outstanding not to exceed
$25.0 million; and
(12) other Investments in any Person having an aggregate
Fair Market Value (measured on the date each such Investment was
made and without giving effect to subsequent changes in value),
when taken together with all other Investments made pursuant to
this clause (12) that are at the time outstanding not to
exceed $50.0 million.
Permitted Joint Venture means any joint
venture (which may be in the form of a limited liability
company, partnership, corporation or other entity) in which
Valeant or any of its Restricted Subsidiaries is a joint
venturer; provided, however, that (a) the joint venture is
engaged solely in a Permitted Business and (b) Valeant or a
Restricted Subsidiary is required by the governing documents of
the joint venture or an agreement with the other parties to the
joint venture to participate in the management of such joint
venture as a member of such joint ventures Board of
Directors or otherwise.
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Permitted Liens means:
(1) Liens securing Indebtedness and other Obligations under
Credit Facilities that were permitted by the terms of the
indenture to be incurred under clause (1) of the second
paragraph of the covenant entitled Certain
Covenants Incurrence of Indebtedness and Issuance of
Preferred Stock;
(2) Liens in favor of Valeant;
(3) Liens on property of a Person existing at the time such
Person is merged with or into or consolidated with or is
acquired by Valeant or any Subsidiary of Valeant; provided, that
such Liens were not incurred in contemplation of such merger,
consolidation or acquisition and do not extend to any assets
other than those of the Person merged into, consolidated with or
acquired by Valeant or the Subsidiary;
(4) Liens on property existing at the time of acquisition
of the property by Valeant or any Subsidiary of Valeant,
provided, that such Liens were not incurred in contemplation of
such acquisition;
(5) Liens to secure the performance of statutory
obligations, surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course of
business;
(6) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (4) of the second
paragraph of the covenant entitled Certain
Covenants Incurrence of Indebtedness and Issuance of
Preferred Stock covering only the assets acquired with
such Indebtedness;
(7) Liens existing on the date of the indenture;
(8) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested
in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided, that any reserve or other
appropriate provision as is required in conformity with GAAP has
been made therefor;
(9) Liens securing Hedging Obligations;
(10) Liens arising by reason of deposits necessary to
obtain standby letters of credit in the ordinary course of
business (including deposits necessary to obtain standby letters
of credit);
(11) Liens to secure any Permitted Refinancing Indebtedness
permitted to be incurred under the indenture; provided, however,
that:
(a) the new Lien shall be limited to all or part of the
same property and assets that secured or, under the written
agreements pursuant to which the original Lien arose, could
secure the original Lien (plus improvements and accessions to,
such property or proceeds or distributions thereof); and
(b) the Indebtedness secured by the new Lien is not
increased to any amount greater than the sum of (x) the
outstanding principal amount or, if greater, committed amount,
of the Permitted Refinancing Indebtedness and (y) an amount
necessary to pay any fees and expenses, including premiums,
related to such refinancings, refunding, extension, renewal or
replacement;
(12) Liens incurred in the ordinary course of business of
Valeant or any Restricted Subsidiary of Valeant with respect to
obligations that do not exceed $25.0 million at any one
time outstanding;
(13) survey title exceptions, title defects, encumbrances,
easements, reservations of, or rights of others for, rights of
way, sewers, electric lines, telegraph or telephone lines and
other similar purposes or zoning or other restrictions as to the
use of real property not materially interfering with the
ordinary conduct of the business of Valeant and its Subsidiaries
taken as a whole;
(14) Liens arising by operation of law in favor of
landlords, mechanics, carriers, warehousemen, materialmen,
laborers, employees, suppliers or the like, incurred in the
ordinary course of business for sums which are not yet
delinquent or are being contested in good faith by negotiations
or by appropriate proceedings which suspend the collection
thereof;
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(15) Liens arising out of judgments, decrees, orders or
awards in respect of which Valeant shall in good faith be
prosecuting an appeal or proceedings for review which appeal or
proceedings shall not have been finally terminated, or if the
period within which such appeal or proceedings may be initiated
shall not have expired;
(16) Liens securing the notes and the Subsidiary
Guarantees; and
(17) Liens securing one or more local working capital
facilities of foreign Restricted Subsidiaries, so long as such
Liens do not extend to the assets of any Person other than such
foreign Restricted Subsidiaries.
Permitted Refinancing Indebtedness means any
Indebtedness of Valeant or any of its Restricted Subsidiaries
issued in exchange for, or the net proceeds of which are used to
extend, refinance, renew, replace, defease or refund other
Indebtedness of Valeant or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided, that:
(1) the principal amount (or accreted value, if applicable)
of such Permitted Refinancing Indebtedness does not exceed the
principal amount (or accreted value, if applicable) of the
Indebtedness extended, refinanced, renewed, replaced, defeased
or refunded (plus all accrued interest on the Indebtedness and
the amount of all expenses and premiums incurred in connection
therewith);
(2) such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right
of payment to the notes, such Permitted Refinancing Indebtedness
has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the notes on terms
at least as favorable to the Holders of notes as those contained
in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded;
(4) such Indebtedness is incurred either by Valeant or by
the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or
refunded; and
(5) if the Indebtedness being refinanced is Indebtedness of
a Valeant or a Subsidiary Guarantor, such Permitted Refinancing
Indebtedness is also Indebtedness of Valeant or a Subsidiary
Guarantor.
Person means any individual, corporation,
partnership, joint venture, association, joint-stock company,
trust, unincorporated organization, limited liability company or
government or other entity.
Rating Agency means (1) each of
Moodys and S&P and (2) if Moodys or
S&P ceases to rate the notes for reasons outside of the
control of Valeant, a nationally recognized statistical rating
organization under the Exchange Act selected by Valeant as a
replacement agency for Moodys or S&P, as the case may
be.
Restricted Investment means an Investment
other than a Permitted Investment.
Restricted Subsidiary of a Person means any
Subsidiary of the referent Person that is not an Unrestricted
Subsidiary.
S&P means Standard &
Poors Ratings Group, Inc., or any successor to the rating
agency business thereof.
Significant Subsidiary means any Subsidiary
that would be a significant subsidiary as defined in
Article 1,
Rule 1-02
of
Regulation S-X
promulgated by the Commission, as such Regulation is in effect
on the date hereof.
Stated Maturity means, with respect to any
installment of interest or principal on any series of
Indebtedness, the date on which the payment of interest or
principal was scheduled to be paid in the original documentation
governing such Indebtedness, and will not include any contingent
obligations to repay, redeem or repurchase any such interest or
principal prior to the date originally scheduled for the payment
thereof.
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Subsidiary means, with respect to any
specified Person:
(1) any corporation, association or other business entity
of which more than 50% of the total voting power of shares of
Capital Stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or
trustees of the corporation, association or other business
entity is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other
Subsidiaries of that Person (or a combination thereof); and
(2) any partnership (a) the sole general partner or
the managing general partner of which is such Person or a
Subsidiary of such Person or (b) the only general partners
of which are that Person or one or more Subsidiaries of that
Person (or any combination thereof).
Subsidiary Guarantee means each Guarantee of
the obligations with respect to the notes issued by a Subsidiary
of the Company pursuant to the terms of the Indenture.
Subsidiary Guarantor means any Subsidiary
that has issued a Subsidiary Guarantee.
Total Leverage Ratio means the ratio of
(i) total consolidated Indebtedness of Valeant and the
Restricted Subsidiaries, after giving effect to all incurrences
and repayments of Indebtedness on the transaction date, to
(ii) Consolidated Cash Flow for the most recent four
consecutive full fiscal quarters for which financial statements
are available ending on or prior to the transaction date.
Treasury Rate means the rate per annum equal
to the yield to maturity at the time of computation of United
States Treasury securities with a constant maturity most nearly
equal to the period from such date of redemption to
June 15, 2012; provided, however, that if the period from
such date of redemption to June 15, 2012 is not equal to
the constant maturity of a United States Treasury security for
which a weekly average yield is given, the Treasury Rate shall
be obtained by linear interpolation (calculated to the nearest
one-twelfth of a year) from the weekly average yields of United
States Treasury securities for which such yields are given,
except that if the period from such date of redemption to
June 15, 2012 is less than one year, the weekly average
yield on actually traded United States Treasury securities
adjusted to a constant maturity of one year shall be used.
Unrestricted Subsidiary means any Subsidiary
of Valeant that is designated by the Board of Directors as an
Unrestricted Subsidiary pursuant to a Board Resolution, but only
to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with Valeant or any Restricted Subsidiary of
Valeant unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to Valeant or
such Restricted Subsidiary than those that might be obtained at
the time from Persons who are not Affiliates of Valeant;
(3) is a Person with respect to which neither Valeant nor
any of its Restricted Subsidiaries has any direct or indirect
obligation (a) to subscribe for additional Equity Interests
or (b) to maintain or preserve such Persons financial
condition or to cause such Person to achieve any specified
levels of operating results; and
(4) has not guaranteed or otherwise directly or indirectly
provided credit support for any Indebtedness of Valeant or any
of its Restricted Subsidiaries.
Any designation of a Subsidiary of Valeant as an Unrestricted
Subsidiary will be evidenced to the trustee by filing with the
trustee a certified copy of the Board Resolution giving effect
to such designation and an officers certificate certifying
that such designation complied with the preceding conditions and
was permitted by the covenant described above under the caption
Certain Covenants Restricted
Payments. If, at any time, any Unrestricted Subsidiary
would fail to meet the preceding requirements as an Unrestricted
Subsidiary, it will thereafter cease to be an Unrestricted
Subsidiary for purposes of the indenture and any Indebtedness of
such Subsidiary will be deemed to be incurred by a Restricted
Subsidiary of Valeant as of such date and, if such Indebtedness
is not permitted to be incurred as of such date under the
covenant described under the caption Certain
Covenants Incurrence of Indebtedness and Issuance of
Preferred Stock, Valeant will be
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in default of such covenant. The Board of Directors of Valeant
may at any time designate any Unrestricted Subsidiary to be a
Restricted Subsidiary; provided that such designation will be
deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of Valeant of any outstanding Indebtedness of such
Unrestricted Subsidiary and such designation will only be
permitted if (1) such Indebtedness is permitted under the
covenant described under the caption Certain
Covenants Incurrence of Indebtedness and Issuance of
Preferred Stock, calculated on a pro forma basis as if
such designation had occurred at the beginning of the
four-quarter reference period; and (2) no Default or Event
of Default would be in existence following such designation.
Voting Stock of any Person as of any date
means the Capital Stock of such Person that is at the time
entitled to vote in the election of the Board of Directors of
such Person.
Weighted Average Life to Maturity means, when
applied to any Indebtedness at any date, the number of years
obtained by dividing:
(1) the sum of the products obtained by multiplying
(a) the amount of each then remaining installment, sinking
fund, serial maturity or other required payments of principal,
including payment at final maturity, in respect of the
Indebtedness, by (b) the number of years (calculated to the
nearest one twelfth) that will elapse between such date and the
making of such payment; by
(2) the then outstanding principal amount of such
Indebtedness.
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CERTAIN
MATERIAL UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS
The following discussion summarizes the material
U.S. federal income tax considerations relating to the
exchange of old notes for exchange notes pursuant to the
exchange offer. This discussion does not purport to deal with
all aspects of U.S. federal income taxation that may be
relevant to a particular holder in light of the holders
circumstances. This summary applies only to those persons
holding old notes and exchange notes as capital assets and does
not address considerations that may be relevant to you if you
are an investor that is subject to special tax rules, such as a
bank, thrift, real estate investment trust, regulated investment
company, insurance company, dealer in securities or currencies,
trader in securities or commodities that elects mark to market
treatment, a person that holds old notes or exchange notes as a
position in a straddle, conversion or other
integrated transaction, tax-exempt organization, partnership or
other entity classified as a partnership for U.S. federal
income tax purposes, certain former citizens and residents, a
person who is liable for the alternative minimum tax, or a
person whose functional currency is not the
U.S. dollar. If an entity that is treated as partnership
for U.S. federal income tax purposes holds the notes, the
tax treatment of a partner generally will depend on the status
of the partner and the activities of the partnership. If you own
an interest in such an entity, you should consult your tax
advisor. In addition, this discussion does not describe any tax
consequences arising out of the tax laws of any state, local or
foreign jurisdiction, or any possible applicability of
U.S. federal gift or estate tax.
This summary is based on laws, regulations, rulings and
decisions now in effect, all of which may change. Any change
could apply retroactively and could affect the continued
validity of this summary. We have not sought a ruling from the
IRS with respect to the U.S. federal income tax
consequences of acquiring, holding or disposing of a note. There
can be no assurance that the IRS will not challenge one or more
of the conclusions described herein.
You should consult your tax advisor about the tax consequences
of purchasing or holding old notes and exchange notes, including
the relevance to your particular situation of the considerations
discussed below, as well as the relevance to your particular
situation of state, local, foreign or other tax laws (such as
those relating to debt instruments issued with original issue
discount.)
The following is a summary of the material U.S. federal
income tax considerations relating to the exchange of the old
notes for exchange notes in the exchange offer. It does not
contain a complete analysis of all the potential tax
considerations relating thereto. This summary is limited to
holders of old notes who hold the old notes as capital
assets (in general, assets held for investment).
Consequences
of Tendering Old Notes
We believe the exchange of old notes for exchange notes in the
exchange offer will generally not constitute a taxable event to
holders for U.S. federal income tax purposes. Consequently,
no gain or loss will be recognized by a holder upon receipt of
an exchange note, the holding period of the exchange note will
include the holding period of the old note exchanged therefor,
and the tax basis of the exchange note will be the same as the
tax basis of the old note exchanged therefor immediately before
the exchange.
This information is provided for your information only and
not as tax advice for any holder of old notes. Each holder
should consult its own tax adviser as to the particular tax
consequences that would bear on its exchange of old notes for
exchange notes, including the applicability and effect of any
state, local or foreign tax laws and of any proposed changes in
applicable laws. Furthermore, each holder should consult its own
tax adviser as to the particular tax consequences that would
bear on its holding of exchange notes, including the
applicability and effect of any state, local or foreign tax
laws, and of any proposed changes in applicable laws.
74
PLAN OF
DISTRIBUTION
Each broker-dealer that receives exchange notes for its own
account pursuant to the exchange offer must acknowledge that it
will deliver a prospectus in connection with any resale of the
exchange notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer
in connection with resales of exchange notes received in
exchange for old notes where such old notes were acquired as a
result of market making activities or other trading activities.
We have agreed that, for a period of 180 days after the
completion of the exchange offer, we will make this prospectus,
as amended or supplemented, available to any broker-dealer for
use in connection with any such resale. During this period, we
will send copies of this prospectus, as amended or supplemented,
to those broker-dealers that check the box on the letter of
transmittal accompanying this prospectus requesting additional
copies of this prospectus.
We will not receive any proceeds from any sale of exchange notes
by broker-dealers. Exchange notes received by broker-dealers for
their own account pursuant to the exchange offer may be sold
from time to time in one or more transactions:
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in the
over-the-counter
market;
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in negotiated transactions;
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through the writing of options on the exchange notes; or
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a combination of such methods of resale.
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These resales may be made:
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at market prices prevailing at the time of resale;
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at prices related to such prevailing market prices; or
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at negotiated prices.
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Any resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of
commissions or concessions from any such broker-dealer
and/or the
purchasers of any such exchange notes. Any broker-dealer that
resells exchange notes that were received by it for its own
account pursuant to the exchange offer and any broker or dealer
that participates in a distribution of exchange notes may be
deemed to be an underwriter within the meaning of
the Securities Act, and any profit on any such resale of
exchange notes and any commission or concessions received by any
such persons may be deemed to be underwriting compensation under
the Securities Act. The letter of transmittal states that, by
acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it
is an underwriter within the meaning of the
Securities Act.
Furthermore, any broker-dealer that acquired any of the old
notes directly from us but not as a result of market making
activities or other trading activities:
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may not rely on the applicable interpretation of the staff of
the SECs position contained in Exxon Capital Holdings
Corp., SEC no-action letter (April 13, 1988),
Morgan, Stanley and Co. Inc., SEC no-action letter
(June 5, 1991) and Shearman &
Sterling, SEC no-action letter (July 2, 1993) and
Brown & Wood LLP, SEC no-action letter
(February 7, 1997); and
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must comply with the registration and prospectus delivery
requirements of the Securities Act relating to any resale
transaction (it being understood that this prospectus may not be
used by such broker-dealers), in the absence of an exemption
from such requirements.
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We have agreed to pay all expenses incident to the performance
of our obligations in relation to the exchange offer other than
commissions or concessions of any broker-dealer. We have also
agreed, pursuant to the terms of the exchange and registration
rights agreement, to indemnify the holders of the old notes
(including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
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LEGAL
MATTERS
The validity of the exchange notes and the related guarantees
will be passed upon for us and the subsidiary guarantors by
Morgan, Lewis & Bockius LLP.
EXPERTS
The consolidated financial statements, financial statement
schedule and managements assessment of the effectiveness
of internal control over financial reporting (which is included
in Managements Report on Internal Control over Financial
Reporting) incorporated in this prospectus by reference to the
Annual Report on
Form 10-K
for the year ended December 31, 2009 have been so
incorporated by reliance on the report, which contains an
explanatory paragraph on the effectiveness of internal control
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.
(PFI), EMO-FARM sp. z o.o. (Emo-Farm),
Tecnofarma S.A. de C.V. (Tecnofarma), and
Laboratoire Dr. Renaud (Dr. Renaud)
businesses the registrant acquired as of December 31, 2009,
of PricewaterhouseCoopers LLP, an independent registered public
accounting firm, given on the authority of said firm as experts
in auditing and accounting.
76
$365,000,000
VALEANT PHARMACEUTICALS
INTERNATIONAL
EXCHANGE OFFER FOR
8.375% SENIOR NOTES DUE 2016
PROSPECTUS