20.

Subsequent Event

On July 8, 2014 the Company announced a definitive agreement and plan of merger and reorganization, or merger agreement, under which Salix will combine with Cosmo Tech, which is a subsidiary of Cosmo. Under the terms of the agreement, Salix will merge with a wholly-owned subsidiary of Irish domiciled Cosmo Tech, with Salix surviving. In connection with the merger, Cosmo Tech will change its name to Salix Pharmaceuticals, plc, or Salix plc, and Salix shareholders will receive one ordinary share of Salix plc in exchange for each share of Salix common stock they own at closing. Salix plc is expected to have its ordinary shares listed and traded on the NASDAQ Global Select Market. The transaction, which will be taxable to Salix’s shareholders, is expected to close in the fourth quarter of 2014. Upon completion of the merger, shareholders of Salix are expected to own slightly less than 80% of the ordinary shares of Salix plc and Cosmo is expected to own slightly more than 20%.

Following the consummation of the merger, Salix plc will own Cosmo’s U.S. patents for rifamycin MMX^®, methylene blue MMX^® and Uceris^®, and have specified rights of negotiation with respect to all products in the gastroenterology field that Cosmo or its affiliates seek to develop or commercialize in the U.S. In addition, Salix plc will hold Cosmo’s patents for rifamycin MMX in Canada, specified Latin American countries, India, China, Japan and the rest of the Far East, excluding Australia and New Zealand, and Cosmo’s patents for Uceris in Japan. Prior to the merger, Cosmo Tech will distribute certain assets to be retained by Cosmo pursuant to an internal reorganization. Notwithstanding the consummation of this internal reorganization, Salix plc is expected to continue to hold certain assets as of the closing of the merger which subsequently will be transferred to Cosmo or one of its subsidiaries, without charge, following the receipt of certain consents. In the meantime, the economic rights and benefits of such assets will remain with Cosmo and pending their transfer, Cosmo has agreed to continue to perform the obligations under the various license and supply agreements related to such assets pursuant to a payments and supply agreement to be entered into between Cosmo and Salix plc upon the consummation of the merger.

The merger agreement also requires Cosmo to effect, prior to the closing of the merger, a number of restructuring steps involving the creation of certain subsidiaries of Cosmo Tech and the entry into certain transactions by and among Cosmo Tech and such subsidiaries to facilitate the transactions contemplated by the merger agreement.

The obligation of each party to consummate the merger is subject to certain conditions, including receipt of the approval of the merger by an affirmative vote of the holders of a majority of the Company’s common stock. Cosmo will not require shareholder approval for the merger. In addition, the merger is subject to satisfaction of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, as well as other customary conditions, including securities law clearances and the approval for listing on NASDAQ of the Salix plc ordinary shares.

In addition to the conditions described above, the Company’s obligation to consummate the merger is also subject to (i) receipt of certain consents, waivers and amendments under existing financing arrangements, (ii) receipt of certain consents, waivers, amendments, terminations or modifications to certain derivatives and hedge contracts to which it is a party, and (iii) there having been no (1) change in law or official interpretation thereof (whether or not such change in law or official interpretation is yet effective) with respect to section 7874 of the Internal Revenue Code of 1986, as amended or (2) passage of any bill that would implement such a change in substantially identical form by both the United States House of Representatives and the United States Senate, that, in either case, in the opinion of Cadwalader, Wickersham and Taft LLP, could be expected to increase the risk that Cosmo Tech would be treated as a U.S. domestic corporation for U.S. federal tax purposes immediately after the effective time of the merger.

On October 2, 2014, the Company entered into a termination agreement with Cosmo, Cosmo Tech, Merger Sub and Cosmo Holding S.p.A. wherein the parties mutually agreed to terminate, effective immediately upon execution of the termination agreement, the merger agreement. In consideration of the termination of the merger agreement, the Company paid Cosmo Tech $25 million, and the parties agreed to mutually release each other and certain related persons in respect of matters relating to the merger agreement and the transactions contemplated thereby.

The foregoing descriptions of the termination agreement and merger agreement are not complete and are qualified in their entirety by the terms and conditions of the full text of the termination agreement, filed as an exhibit to Salix’s Current Report on Form 8-K filed on October 6, 2014, and the merger agreement, filed as an exhibit to Salix’s Current Report on Form 8-K filed on July 9, 2014, which are incorporated herein by reference.

On February 22, 2015 the Company announced that it had entered into a definitive agreement with Valeant Pharmaceuticals International, Inc., under which Valeant will acquire all of the outstanding common stock of the Company. The acquisition is structured as an all-cash tender offer at a price of $158.00 per share followed by a merger in which each remaining untendered share of Salix common stock would be converted into the right to receive the same $158.00 cash per share consideration as in the tender offer. The transaction, which is expected to close in the second quarter of 2015, is subject to customary closing conditions and regulatory approval.