Exhibit 10.69

 

EXECUTION VERSION   LOGO [g36819ex1069_pg01.jpg]

 

   May 27, 2010   To:    Salix Pharmaceuticals, Ltd.    1700 Perimeter Park
Drive    Morrisville, NC 27560    Attn:        Adam Derbyshire    Telephone:  
919-862-1025    Facsimile:   919-862-1095 From:    Bank of America, N.A.    c/o
Merrill Lynch, Pierce, Fenner & Smith Incorporated    One Bryant Park

New York, NY 10036

   Attn:        John Servidio    Telephone:   646-855-8900    Facsimile:  
704-208-2869 Re:    Base Capped Call Transaction

(Transaction Reference Number: NY-40305)

Ladies and Gentlemen:

The purpose of this communication (this “Confirmation”) is to set forth the
terms and conditions of the above-referenced transaction entered into on the
Trade Date specified below (the “Transaction”) between Bank of America, N.A.
(“BofA”) and Salix Pharmaceuticals, Ltd. (“Counterparty”). This communication
constitutes a “Confirmation” as referred to in the ISDA Master Agreement
specified below.

1. This Confirmation is subject to, and incorporates, the definitions and
provisions of the 2006 ISDA Definitions (the “2006 Definitions”) and the
definitions and provisions of the 2002 ISDA Equity Derivatives Definitions (the
“Equity Definitions”, and together with the 2006 Definitions, the
“Definitions”), in each case as published by the International Swaps and
Derivatives Association, Inc. (“ISDA”). In the event of any inconsistency
between the 2006 Definitions and the Equity Definitions, the Equity Definitions
will govern. Certain defined terms used herein have the meanings assigned to
them in the Indenture to be dated as of the closing date for the initial
issuance of the Convertible Securities described below between Counterparty and
U.S. Bank National Association as trustee (the “Indenture”) relating to the
USD300,000,000 principal amount of 2.75% convertible senior notes due 2015 (the
“Convertible Securities”). In the event of any inconsistency between the terms
defined in the Indenture and this Confirmation, this Confirmation shall govern.
For the avoidance of doubt, references herein to sections of the Indenture are
based on the draft of the Indenture most recently reviewed by the parties at the
time of execution of this Confirmation. If any relevant sections of the
Indenture are changed, added or renumbered following execution of this
Confirmation but prior to the execution of the Indenture, the parties will amend
this Confirmation in good faith to preserve the economic intent of the parties
based on the draft of the Indenture so reviewed. The parties further acknowledge
that references to the Indenture herein are references to the Indenture as in
effect on the date of its execution and if the Indenture is amended following
its execution, any such amendment will be disregarded for purposes of this
Confirmation (other than as provided in Section 8(a) below) unless the parties
agree otherwise in writing.

This Confirmation evidences a complete and binding agreement between BofA and
Counterparty as to the terms of the Transaction to which this Confirmation
relates. This Confirmation shall be subject to an agreement (the “Agreement”) in
the form of the ISDA 2002 Master Agreement (the “ISDA Form”) as if BofA and
Counterparty had executed an agreement in such form (without any Schedule but
with the elections set forth in this Confirmation). For the avoidance of doubt,
the Transaction shall be the only transaction under the Agreement.

All provisions contained in, or incorporated by reference to, the Agreement will
govern this Confirmation except as expressly modified herein. In the event of
any inconsistency between this Confirmation and either the Definitions or the
Agreement, this Confirmation shall govern.

 

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2. The Transaction constitutes a Share Option Transaction for purposes of the
Equity Definitions. The terms of the particular Transaction to which this
Confirmation relates are as follows:

General Terms:

 

Trade Date:

   May 27, 2010

Effective Date:

   The closing date of the initial issuance of the Convertible Securities.

Option Type:

   Call

Seller:

   BofA

Buyer:

   Counterparty

Shares:

   The common stock of Counterparty, par value USD0.001 per share (Ticker
Symbol: “SLXP”).

Number of Options:

   The number of Convertible Securities, other than Option Securities (as
defined in the Underwriting Agreement as defined below), in denominations of
USD1,000 principal amount issued by Counterparty to the Underwriters (as defined
below) on the closing date for the initial issuance of the Convertible
Securities.

Number of Shares:

   As of any date, the product of the Number of Options and the Conversion Rate.

Conversion Rate:

   As of any date, the “Conversion Rate” (as defined in the Indenture) as of
such date, but without regard to any adjustments to the “Conversion Rate”
pursuant to Sections 15.03 or 15.04(i) of the Indenture.

Strike Price:

   The “Conversion Price” (as defined in the Indenture), but without regard to
any adjustments to the “Conversion Rate” (as defined in the Indenture) pursuant
to Sections 15.03 or 15.04(i) of the Indenture.

Cap Price:

   As provided in Annex A to this Confirmation.

Premium:

   As provided in Annex A to this Confirmation.

Premium Payment Date:

   The Effective Date

Exchange:

   The NASDAQ Global Select Market

Related Exchange:

   All Exchanges Procedures for Exercise:   

Exercise Dates:

   Each Conversion Date.

Conversion Date:

   Each “Conversion Date”, as defined in the Indenture, occurring during the
period from and excluding the Trade Date to and including the Expiration Date,
for Convertible Securities, each in denominations of USD1,000 principal amount,
that are submitted for conversion on such Conversion Date in accordance with the
terms of the Indenture, excluding Convertible Securities (i) that are Excluded
Convertible Securities or (ii)(A) with respect to which Counterparty has elected
the “Exchange in Lieu of Conversion” option pursuant to Section 15.11 of the
Indenture and (B) that have been accepted by the designated financial
institution pursuant to Section 15.11 of the Indenture (such Convertible
Securities, other

 

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   than those excluded as set forth above, the “Relevant Convertible Securities”
for such Conversion Date).

Excluded Convertible Securities:

   Convertible Securities surrendered for conversion on any date prior to
January 13, 2015. Counterparty shall, within one Scheduled Trading Day of the
“Conversion Date” (as defined in the Indenture) relating to any Excluded
Convertible Securities, provide written notice to BofA specifying the number of
Excluded Convertible Securities converted on such “Conversion Date”.

Required Exercise on Conversion Dates:

   On each Conversion Date, a number of Options equal to the number of Relevant
Convertible Securities for such Conversion Date in denominations of USD1,000
principal amount shall be automatically exercised.

Expiration Date:

   The second “Scheduled Trading Day” immediately preceding the “Maturity Date”
(each as defined in the Indenture).

Automatic Exercise:

   As provided above under “Required Exercise on Conversion Dates”.

Exercise Notice Deadline:

   In respect of any exercise of Options hereunder on any Conversion Date, the
Exchange Business Day immediately following such Conversion Date.

Notice of Exercise:

   Notwithstanding anything to the contrary in the Equity Definitions, BofA
shall have no obligation to make any payment or delivery in respect of any
exercise of Options hereunder unless Counterparty notifies BofA in writing prior
to 4:00 PM, New York City time, on the Exercise Notice Deadline in respect of
such exercise of the number of Options being exercised on the relevant Exercise
Date. Counterparty acknowledges its responsibilities under applicable securities
laws, and in particular Section 9 and Section 10(b) of the Exchange Act (as
defined below) and the rules and regulations thereunder, in respect of any
election of a settlement method with respect to the Convertible Securities. For
the avoidance of doubt, if Counterparty fails to give such notice when due in
respect of any exercise of Options hereunder, BofA’s obligation to make any
payment or delivery in respect of such exercise shall be permanently
extinguished, and late notice shall not cure such failure; provided that
notwithstanding the foregoing, such notice (and the related exercise of Options)
shall be effective if given after the Exercise Notice Deadline, but prior to
4:00 PM, New York City time, on the Exchange Business Day immediately preceding
the “Maturity Date” (as defined in the Indenture), in which event the
Calculation Agent shall have the right to adjust the Delivery Obligation as
appropriate to reflect the additional costs (including, but not limited to,
hedging mismatches and market losses) and expenses incurred by BofA in
connection with its hedging activities (including the unwinding of any hedge
position) as a result of BofA not having received such notice on or prior to the
Exercise Notice Deadline.

Notice of Convertible Security Settlement Method:

   Counterparty shall notify BofA in writing before 4:00 P.M. (New York City
time) on the “Scheduled Trading Day” (as defined in the Indenture) immediately
prior to January 13, 2015 of the

 

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   irrevocable election by the Counterparty, in accordance with Section 15.02(b)
of the Indenture, of the settlement method and, if applicable, the “Specified
Dollar Amount” (as defined in the Indenture) applicable to Relevant Convertible
Securities with a Conversion Date occurring on or after January 13, 2015. If
Counterparty fails timely to provide such notice, Counterparty shall be deemed
to have notified BofA of combination settlement with a “Specified Dollar Amount”
(as defined in the Indenture) of USD1,000 for all conversions occurring on or
after January 13, 2015. Counterparty agrees that it shall settle any Relevant
Convertible Securities with a Conversion Date occurring on or after January 13,
2015 in the same manner as provided in the Notice of Convertible Security
Settlement Method it provides or is deemed to have provided hereunder.

BofA’s Telephone Number and Telex and/or Facsimile Number and Contact Details
for purpose of Giving Notice:

   To be provided by BofA. Settlement Terms:   

Settlement Date:

   In respect of an Exercise Date occurring on a Conversion Date, the settlement
date for the cash and Shares (if any) to be delivered in respect of the Relevant
Convertible Securities converted on such Conversion Date pursuant to Section
15.02(e) of the Indenture; provided that the Settlement Date will not be prior
to the latest of (i) the date one Settlement Cycle following the final day of
the relevant “Cash Settlement Averaging Period”, (ii) the Exchange Business Day
immediately following the date on which Counterparty gives notice to BofA of
such Settlement Date prior to 4:00 PM, New York City time, and (iii) the
Exchange Business Day immediately following the date Counterparty provides the
Notice of Delivery Obligation prior to 4:00 PM, New York City time.

Delivery Obligation:

   In lieu of the obligations set forth in Sections 8.1 and 9.1 of the Equity
Definitions, and subject to “Notice of Exercise” above and “Dividends” (under
“Share Adjustments”) below, in respect of an Exercise Date occurring on a
Conversion Date, BofA will deliver to Counterparty, on the related Settlement
Date, a number of Shares and/or amount of cash in USD equal to the aggregate
number of Shares, if any, that Counterparty would be obligated to deliver to the
holder(s) of the Relevant Convertible Securities converted on such Conversion
Date pursuant to Section 15.02(b) of the Indenture and/or the aggregate amount
of cash, if any, in excess of USD1,000 per Convertible Security (in
denominations of USD1,000) that Counterparty would be obligated to deliver to
holder(s) pursuant to Section 15.02(b) of the Indenture (except that such
aggregate number of Shares shall be determined without taking into consideration
any rounding pursuant to Section 15.02(k) of the Indenture and shall be rounded
down to the nearest whole number) and cash in lieu of fractional Shares, if any,
resulting from such rounding, if Counterparty had elected to satisfy its
conversion obligation in respect of such Relevant Convertible Securities by the
Convertible Security Settlement Method, notwithstanding any different actual
election by Counterparty with

 

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   respect to the settlement of such Convertible Securities (the “Convertible
Obligation”); provided that (i) if the Convertible Obligation exceeds the Capped
Convertible Obligation, then the Delivery Obligation shall be the Capped
Convertible Obligation; and (ii) the Convertible Obligation (and, for the
avoidance of doubt, the Capped Convertible Obligation) shall be determined
excluding any Shares and/or cash that Counterparty is obligated to deliver to
holder(s) of the Relevant Convertible Securities as a result of any adjustments
to the “Conversion Rate” pursuant to Sections 15.03 or 15.04(i) of the Indenture
(and, for the avoidance of doubt, the Delivery Obligation shall not include any
interest payment on the Relevant Convertible Securities that the Counterparty is
(or would have been) obligated to deliver to holder(s) of the Relevant
Convertible Securities for such Conversion Date); provided, however, that if
such exercise relates to the conversion of Relevant Convertible Securities in
connection with which holders thereof are entitled to receive additional Shares
and/or cash pursuant to an adjustment to the “Conversion Rate” set forth in
Section 15.03 of the Indenture, then, notwithstanding the foregoing, the
Delivery Obligation shall include such additional Shares and/or cash, except
that the Delivery Obligation shall be capped so that the value of the Delivery
Obligation per Option (with the value of any Shares included in the Delivery
Obligation determined by the Calculation Agent using the VWAP Price on the last
day of the relevant “Cash Settlement Averaging Period”) does not exceed the
amount as determined by the Calculation Agent that would be payable by BofA
pursuant to Section 6 of the Agreement if such Conversion Date were an Early
Termination Date resulting from an Additional Termination Event with respect to
which the Transaction (except that, for purposes of determining such amount (x)
the Number of Options shall be deemed to be equal to the number of Options
exercised on such Exercise Date and (y) such amount payable will be determined
as if Section 15.03 of the Indenture were deleted) was the sole Affected
Transaction and Counterparty was the sole Affected Party (determined without
regard to Section 8(b) of this Confirmation), it being understood that the cap
described in this clause (ii) is in addition to, and cumulative with, clause (i)
of the immediately preceding proviso. Notwithstanding the foregoing, and in
addition to the caps described in clauses (i) and (ii) of the proviso to the
preceding sentence, in all events the Delivery Obligation shall be capped so
that the value of the Delivery Obligation does not exceed the value of the
Convertible Obligation (with the Convertible Obligation determined based on the
actual settlement method elected by Counterparty with respect to such Relevant
Convertible Securities instead of the Convertible Security Settlement Method and
with the value of any Shares included in either the Delivery Obligation or such
Convertible Obligation determined by the Calculation Agent using the VWAP Price
on the last day of the relevant “Cash Settlement Averaging Period”).

Capped Convertible Obligation:

   In respect of an Exercise Date occurring on a Conversion Date, the
Convertible Obligation that would apply if the “Daily VWAP” for each “Trading
Day” in the “Cash Settlement Averaging Period” (each as defined in the
Indenture) or, if applicable, the assumed “Cash Settlement Averaging Period”
specified in clause (ii) of

 

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   “Convertible Security Settlement Method” below, were the lesser of (x) the
Cap Price and (y) the actual “Daily VWAP” for such “Trading Day”.
Convertible Security Settlement Method:    For any Relevant Convertible
Securities, if Counterparty has notified BofA in the Notice of Convertible
Security Settlement Method that it has elected to satisfy its conversion
obligation in respect of such Relevant Convertible Securities in cash or in a
combination of cash and Shares in accordance with Section 15.02(b) of the
Indenture (a “Cash Election”) with a “Specified Dollar Amount” (as defined in
the Indenture) of at least USD1,000, the Convertible Security Settlement Method
shall be the settlement method actually so elected by Counterparty in respect of
such Relevant Convertible Securities; otherwise, the Convertible Security
Settlement Method shall (i) assume Counterparty made a Cash Election with
respect to such Relevant Convertible Securities with a “Specified Dollar Amount”
(as defined in the Indenture) of USD1,000 per Relevant Convertible Security and
(ii) be calculated as if the relevant “Cash Settlement Averaging Period” (as
defined in the Indenture) pursuant to Section 15.02(b) of the Indenture
consisted of 80 “Trading Days” (as defined in the Indenture) commencing on the
82nd “Scheduled Trading Day” prior to the “Maturity Date” (each as defined in
the Indenture), with the “Daily Conversion Value”, “Daily Measurement Value”,
“Daily Settlement Amount” (each as defined in the Indenture) and related terms
adjusted accordingly. Notice of Delivery Obligation:    No later than the
Exchange Business Day immediately following the last day of the relevant “Cash
Settlement Averaging Period”, Counterparty shall give BofA notice of the
aggregate number of Shares and/or cash comprising the Convertible Obligations
for all Relevant Convertible Securities (it being understood, for the avoidance
of doubt, that the requirement of Counterparty to deliver such notice shall not
limit Counterparty’s obligations with respect to Notice of Exercise or Notice of
Convertible Security Settlement Method or BofA’s obligations with respect to
Delivery Obligation, each as set forth above, in any way).
Other Applicable Provisions:    To the extent BofA is obligated to deliver
Shares hereunder, the provisions of Sections 9.1(c), 9.8, 9.9, 9.10 and 9.11
(except that the Representation and Agreement contained in Section 9.11 of the
Equity Definitions shall be modified by excluding any representations therein
relating to restrictions, obligations, limitations or requirements under
applicable securities laws arising as a result of the fact that Counterparty is
the Issuer of the Shares) of the Equity Definitions will be applicable as if
“Physical Settlement” applied to the Transaction.
Restricted Certificated Shares:    Notwithstanding anything to the contrary in
the Equity Definitions, BofA may, in whole or in part, deliver Shares required
to be delivered to Counterparty hereunder in certificated form in lieu of
delivery through the Clearance System. With respect to such certificated Shares,
the Representation and Agreement contained in Section 9.11 of the Equity
Definitions shall be modified by deleting the remainder of the provision after
the word “encumbrance” in the fourth line thereof.

 

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Share Adjustments:   

Method of Adjustment:

   Notwithstanding Section 11.2 of the Equity Definitions, upon the occurrence
of any event or condition set forth in Sections 15.04(a) – (e) of the Indenture
that results in an adjustment under the Indenture, the Calculation Agent (i)
shall make a corresponding adjustment to the terms relevant to the exercise,
settlement, payment or other terms of the Transaction and (ii) may adjust the
Cap Price as appropriate to account for the economic effect on the Transaction
of such event or condition; provided that the Cap Price shall not be adjusted so
that it is less than the Strike Price. Promptly upon the occurrence of any event
that Counterparty reasonably expects to result in an adjustment to the
“Conversion Rate” (as defined in the Indenture), Counterparty shall notify the
Calculation Agent of such event; and once the adjustments to be made to the
terms of the Indenture and the Convertible Securities in respect of such event
have been determined, Counterparty shall promptly notify the Calculation Agent
in writing of the details of such adjustments. Extraordinary Events:   

Merger Events:

   Notwithstanding Section 12.1(b) of the Equity Definitions, a “Merger Event”
means the occurrence of any event or condition set forth in Section 15.06 of the
Indenture

Tender Offers:

   Notwithstanding Section 12.1(d) of the Equity Definitions, a “Tender Offer”
means the occurrence of any event or condition set forth in the definition of
“Fundamental Change” in the Indenture.

Consequences of Merger Events and Tender Offers:

   Notwithstanding Sections 12.2 and 12.3 of the Equity Definitions, (i) upon
the occurrence of a Merger Event that results in an adjustment under the
Indenture, the Calculation Agent shall make a corresponding adjustment to the
terms relevant to the exercise, settlement, payment or other terms of the
Transaction; provided that such adjustment shall be made without regard to any
adjustment to the “Conversion Rate” pursuant to Sections 15.03 or 15.04(i) of
the Indenture; and provided further that if, with respect to a Merger Event, the
consideration for the Shares includes (or, at the option of a holder of Shares,
may include) shares (or depositary receipts with respect to shares) of an entity
or person not organized under the laws of the United States, any State thereof
or the District of Columbia, and the Calculation Agent determines that (x)
treating such Shares as “Reference Property” (as defined in the Indenture) will
have a material adverse effect on BofA’s rights or obligations in respect of the
Transaction, on its Hedging Activities in respect of the Transaction or on the
costs (including, without limitation, due to any increase in tax liability,
decrease in tax benefit or other adverse effect on its tax position) of engaging
in any of the foregoing and (y) BofA cannot promptly avoid the occurrence of
each such material adverse effect by (I) transferring or assigning its rights
and obligations under this Confirmation and the Agreement pursuant to Section
8(f) or (II) amending the terms of this Confirmation (whether because amendments
would not avoid such occurrence or because Counterparty fails to agree promptly
to such amendments), no such adjustment shall be made and Cancellation and
Payment (Calculation Agent Determination)

 

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   shall apply; and (ii) upon the occurrence of a Merger Event or a Tender
Offer, the Calculation Agent may adjust the Cap Price as appropriate to account
for the economic effect on the Transaction of such event; provided that the Cap
Price shall not be adjusted so that it is less than the Strike Price.

Notice of Merger Consideration:

   Upon the occurrence of a Merger Event that causes the Shares to be converted
into the right to receive more than a single type of consideration (determined
based in part upon any form of stockholder election), Counterparty shall
reasonably promptly (but, in any event prior to the relevant merger date) notify
the Calculation Agent of (i) the weighted average of the types and amounts of
consideration to be received by the holders of Shares entitled to receive cash,
securities or other property or assets with respect to or in exchange for such
Shares in any Merger Event who affirmatively make such an election and (ii) the
details of the adjustment to be made under the Indenture in respect of such
Merger Event.

Nationalization, Insolvency

or Delisting:

   Cancellation and Payment (Calculation Agent Determination); provided that, in
addition to the provisions of Section 12.6(a)(iii) of the Equity Definitions, it
shall also constitute a Delisting if the Exchange is located in the United
States and the Shares are not immediately re-listed, re-traded or re-quoted on
any of the New York Stock Exchange, The NASDAQ Global Select Market or The
NASDAQ Global Market (or their respective successors); if the Shares are
immediately re-listed, re-traded or re-quoted on any such exchange or quotation
system, such exchange or quotation system shall thereafter be deemed to be the
Exchange.

Additional Disruption Events:

  

(a)    Change in Law:

   Applicable

(b)    Failure to Deliver:

   Applicable

(c)    Insolvency Filing:

   Applicable

(d)    Hedging Disruption:

   Applicable

(e)    Increased Cost of Hedging:

   Applicable

Hedging Party:

   For all applicable Potential Adjustment Events and Extraordinary Events, BofA

Determining Party:

   For all applicable Extraordinary Events, BofA

Non-Reliance:

   Applicable

Agreements and Acknowledgments Regarding Hedging Activities:

   Applicable

Additional Acknowledgments:

   Applicable

 

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3.      Calculation Agent:

   BofA. Following any determination or calculation by the Calculation Agent
hereunder, upon a written request by Counterparty, the Calculation Agent will
use its reasonable efforts to promptly (but in any event within three Scheduled
Trading Days) provide to Counterparty, by e-mail to the e-mail address provided
by Counterparty in such written request, a report (in a commonly used file
format for the storage and manipulation of financial data without disclosing
BofA’s proprietary models) displaying in reasonable detail the basis for such
determination or calculation, as the case may be.

4.      Account Details:

  

BofA Payment Instructions:

   Bank of America    New York, NY    SWIFT: BOFAUS65    Bank Routing:
026-009-593    Account Name: Bank of America    Account No.: 0012333-34172

Counterparty Payment Instructions:

   To be provided by Counterparty.

5.      Offices:

  The Office of BofA for the Transaction is: New York

 

  The Office of Counterparty for the Transaction is: Not applicable

 

6.      Notices: For purposes of this Confirmation:

 

  Address for notices or communications to Counterparty:

 

To:    Salix Pharmaceutical, Ltd.    1700 Perimeter Park Drive    Morrisville,
NC 27560 Attn:    Adam Derbyshire Telephone:    919-862-1025 Facsimile:   
919-862-1095

Address for notices or communications to BofA:

 

To:    Bank of America, N.A.    c/o Merrill Lynch, Pierce, Fenner & Smith
Incorporated    One Bryant Park    New York, NY 10036 Attn:    John Servidio
Telephone:    646-855-8900 Facsimile:    704-208-2869

 

  7. Representations, Warranties and Agreements:

(a) In addition to the representations and warranties in the Agreement and those
contained elsewhere herein, Counterparty represents and warrants to and for the
benefit of, and agrees with, BofA as follows:

(i) On the Trade Date, and as of the date of any election by Counterparty of the
Share Termination Alternative under (and as defined in) Section 8(b) below,
(A) none of Counterparty and its officers and directors is aware of any material
nonpublic information regarding Counterparty or the Shares and (B) all reports
and other documents filed by Counterparty with the Securities and Exchange
Commission pursuant to

 

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the Securities Exchange Act of 1934, as amended (the “Exchange Act”) when
considered as a whole (with the more recent such reports and documents deemed to
amend inconsistent statements contained in any earlier such reports and
documents), do not contain any untrue statement of a material fact or any
omission of a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances in which they were
made, not misleading.

(ii) During (x) the relevant “Cash Settlement Averaging Period” applicable to
the Relevant Convertible Securities and (y) in the event an Early Termination
Date is designated due to an Additional Termination Event as a result of an
Excluded Conversion Event, a period starting on or about such Early Termination
Date as reasonably determined by BofA and notified to Counterparty (an “Early
Termination Period”), Counterparty shall not engage in a “distribution,” as such
term is defined in Regulation M under the Exchange Act (other than a
distribution described in Rule 101(b)(7) or 102(c) of Regulation M), of Shares,
or securities that are convertible into, or exchangeable or exercisable for,
Shares.

(iii) On the Trade Date and on each day during the relevant “Cash Settlement
Averaging Period” applicable to the Relevant Convertible Securities and any
Early Termination Period, neither Counterparty nor any “affiliate” or
“affiliated purchaser” (each as defined in Rule 10b-18 under the Exchange Act
(“Rule 10b-18”)) shall directly or indirectly (including, without limitation, by
means of any cash-settled or other derivative instrument) purchase, offer to
purchase, place any bid or limit order that would effect a purchase of, or
commence any tender offer relating to, any Shares (or an equivalent interest,
including a unit of beneficial interest in a trust or limited partnership or a
depository share) or any security convertible into or exchangeable or
exercisable for Shares, except through BofA; provided that the foregoing shall
not limit Counterparty’s ability, pursuant to any plan (as defined in Rule
10b-18) of Counterparty, to re-acquire Shares in connection with any equity
transaction related to such plan or limit Counterparty’s ability to withhold
Shares to cover tax liabilities associated with such equity transactions or
otherwise restrict Counterparty’s ability to repurchase Shares under privately
negotiated transactions with any of its employees, officers, directors or
affiliates, so long as any re-acquisition, withholding or repurchase does not
constitute a “Rule 10b-18 purchase” (a defined in Rule 10b-18).

(iv) Without limiting the generality of Section 13.1 of the Equity Definitions,
Counterparty acknowledges that BofA is not making any representations or
warranties or taking any position or expressing any view with respect to the
treatment of the Transaction under any accounting standards including, without
limitation, ASC Topic 260, Earnings Per Share, ASC Topic 815, Derivatives and
Hedging, or ASC Topic 480, Distinguishing Liabilities from Equity and ASC
815-40, Derivatives and Hedging – Contracts in Entity’s Own Equity (or any
successor issue statements).

(v) Without limiting the generality of Section 3(a)(iii) of the Agreement, the
Transaction will not violate Rule 13e-1 or Rule 13e-4 under the Exchange Act.

(vi) Prior to the Trade Date, Counterparty shall deliver to BofA a resolution of
Counterparty’s board of directors authorizing the Transaction and such other
certificate or certificates as BofA shall reasonably request.

(vii) Counterparty is not entering into this Confirmation or making any election
hereunder or under the Convertible Securities to create actual or apparent
trading activity in the Shares (or any security convertible into or exchangeable
for Shares) or to raise or depress or otherwise manipulate the price of the
Shares (or any security convertible into or exchangeable for Shares) or
otherwise in violation of the Exchange Act.

(viii) Counterparty is not, and after giving effect to the transactions
contemplated hereby will not be, required to register as an “investment company”
as such term is defined in the Investment Company Act of 1940, as amended.

(ix) On each of the Trade Date and the Premium Payment Date, Counterparty is
not, or will not be, “insolvent” (as such term is defined under Section 101(32)
of the U.S. Bankruptcy Code (Title 11 of the United States Code) (the
“Bankruptcy Code”)) and Counterparty would be able to purchase the Number of
Shares hereunder in compliance with the laws of the jurisdiction of its
incorporation.

(x) No state or local (including non-U.S. jurisdictions) law, rule, regulation
or regulatory order applicable to the Shares would give rise to any reporting,
consent, registration or other requirement (including

 

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without limitation a requirement to obtain prior approval from any person or
entity) as a result of BofA or its affiliates owning or holding (however
defined) Shares.

(xi) The representations and warranties of Counterparty set forth in Section 3
of the Agreement and Section 1 of the Underwriting Agreement dated as of May 27,
2010, between the Counterparty and Merrill Lynch, Pierce, Fenner & Smith
Incorporated as representative of the Underwriters party thereto (the
“Underwriting Agreement”) are true and correct and are hereby deemed to be
repeated to BofA as if set forth herein.

(xii) Counterparty understands no obligations of BofA to it hereunder will be
entitled to the benefit of deposit insurance and that such obligations will not
be guaranteed by any affiliate of BofA or any governmental agency.

(b) Each of BofA and Counterparty agrees and represents that it is an “eligible
contract participant” as defined in Section 1a(12) of the U.S. Commodity
Exchange Act, as amended.

(c) Each of BofA and Counterparty acknowledges that the offer and sale of the
Transaction to it is intended to be exempt from registration under the
Securities Act of 1933, as amended (the “Securities Act”), by virtue of
Section 4(2) thereof. Accordingly, Counterparty represents and warrants to BofA
that (i) it has the financial ability to bear the economic risk of its
investment in the Transaction and is able to bear a total loss of its
investment, (ii) it is an “accredited investor” as that term is defined in
Regulation D as promulgated under the Securities Act, (iii) it is entering into
the Transaction for its own account and without a view to the distribution or
resale thereof and (iv) the assignment, transfer or other disposition of the
Transaction has not been and will not be registered under the Securities Act and
is restricted under this Confirmation, the Securities Act and state securities
laws.

(d) Counterparty agrees and acknowledges that BofA is a “financial institution,”
“swap participant” and “financial participant” within the meaning of Sections
101(22), 101(53C) and 101(22A) of the Bankruptcy Code. The parties hereto
further agree and acknowledge that it is the intent of the parties that (A) this
Confirmation is (i) a “securities contract,” as such term is defined in
Section 741(7) of the Bankruptcy Code, with respect to which each payment and
delivery hereunder or in connection herewith is a “termination value,” “payment
amount” or “other transfer obligation” within the meaning of Section 362 of the
Bankruptcy Code and a “settlement payment,” within the meaning of Section 546 of
the Bankruptcy Code and (ii) a “swap agreement,” as such term is defined in
Section 101(53B) of the Bankruptcy Code, with respect to which each payment and
delivery hereunder or in connection herewith is a “termination value,” “payment
amount” or “other transfer obligation” within the meaning of Section 362 of the
Bankruptcy Code and a “transfer,” as such term is defined in Section 101(54) of
the Bankruptcy Code and a “payment or other transfer of property” within the
meaning of Sections 362 and 546 of the Bankruptcy Code, (B) the Agreement is a
“master netting agreement” and each of the parties thereto is a “master netting
agreement participant”, each as defined in the Bankruptcy Code, (C) a party’s
right to liquidate a Transaction and to exercise any other remedies upon the
occurrence of any Event of Default under the Agreement with respect to the other
party to constitute a “contractual right … to cause the liquidation, termination
or acceleration” of the Transaction as described in the Bankruptcy Code and
(D) BofA is entitled to the protections afforded by, among other sections,
Sections 362(b)(6), 362(b)(17), 362(b)(27), 362(o), 546(e), 546(g), 546(j),
548(d)(2), 555, 560 and 561 of the Bankruptcy Code.

(e) Counterparty shall deliver to BofA an opinion of counsel, dated as of the
Effective Date and reasonably acceptable to BofA in form and substance, with
respect to the matters set forth in Section 3(a) of the Agreement and such other
matters as BofA may reasonably request.

8. Other Provisions:

(a) Additional Termination Events. The occurrence of (i) an “Event of Default”
with respect to Counterparty under the terms of the Convertible Securities as
set forth in Section 7.01 of the Indenture, (ii) an Amendment Event or (iii) an
Excluded Conversion Event shall be an Additional Termination Event with respect
to which the Transaction is the sole Affected Transaction and Counterparty is
the sole Affected Party, and BofA shall be the party entitled to designate an
Early Termination Date pursuant to Section 6(b) of the Agreement; provided that,
in the case of an Excluded Conversion Event, the Transaction shall be subject to
termination only in respect of a number of Options equal to the number of
Convertible Securities that cease to be outstanding in connection with or as a
result of such Excluded Conversion Event. For the avoidance of doubt, in
determining the amount payable in respect of such Affected Transaction pursuant
to Section 6 of the Agreement in connection with an Excluded Conversion Event,
the

 

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Calculation Agent shall assume that (x) the relevant Excluded Convertible
Securities shall not have been converted and remain outstanding, and (y) in the
case of an Induced Conversion, any adjustments, agreements, additional payments,
deliveries or acquisitions by or on behalf of Counterparty or any affiliate of
Counterparty in connection therewith had not occurred.

“Amendment Event” means that Counterparty amends, modifies, supplements, waives
or obtains a waiver in respect of any term of the Indenture or the Convertible
Securities governing the principal amount, coupon, maturity, repurchase
obligation of Counterparty, redemption right of Counterparty, any term relating
to conversion of the Convertible Securities (including changes to the conversion
price, conversion settlement dates or conversion conditions), or any term that
would require consent of the holders of not less than 100% of the principal
amount of the Convertible Securities to amend, in each case without the consent
of BofA (such consent not to be unreasonably withheld or delayed).

“Excluded Conversion Event” means any conversion of any Excluded Convertible
Securities.

“Induced Conversion” means a conversion of any Excluded Convertible Securities
(A) in connection with (x) an adjustment to the “Conversion Rate” (as defined in
the Indenture) effected by Counterparty (whether pursuant to Section 15.04(i) of
the Indenture or otherwise) that is not required under the terms of the
Indenture or (y) an agreement by Counterparty with the holder(s) of such
Convertible Securities whereby, in the case of either (x) or (y), the holder(s)
of such Convertible Securities receive upon conversion or pursuant to such
agreement, as the case may be, a payment of cash or delivery of Shares or any
other property or item of value that was not required under the terms of the
Indenture or (B) after having been acquired from a holder of Convertible
Securities by or on behalf of Counterparty or any of its affiliates other than
pursuant to a conversion by such holder and thereafter converted by or on behalf
of Counterparty or any affiliate of Counterparty.

(b) Alternative Calculations and Payment on Early Termination and on Certain
Extraordinary Events. If BofA shall owe Counterparty any amount pursuant to
“Consequences of Merger Events” above or Sections 12.6, 12.7 or 12.9 of the
Equity Definitions or pursuant to Section 6(d)(ii) of the Agreement (a “Payment
Obligation”), Counterparty shall have the right, in its sole discretion, to
require BofA to satisfy any such Payment Obligation by the Share Termination
Alternative (as defined below) by giving irrevocable telephonic notice to BofA,
confirmed in writing within one Scheduled Trading Day, no later than 9:30 A.M.
New York City time on the relevant merger date, Announcement Date, Early
Termination Date or date of cancellation or termination in respect of an
Extraordinary Event, as applicable (“Notice of Share Termination”); provided
that if Counterparty does not elect to require BofA to satisfy its Payment
Obligation by the Share Termination Alternative, BofA shall have the right, in
its sole discretion, to elect to satisfy its Payment Obligation by the Share
Termination Alternative, notwithstanding Counterparty’s failure to elect or
election to the contrary; and provided further that Counterparty shall not have
the right to so elect (but, for the avoidance of doubt, BofA shall have the
right to so elect) in the event of (i) an Insolvency, a Nationalization or a
Merger Event, in each case, in which the consideration or proceeds to be paid to
holders of Shares consists solely of cash or (ii) an Event of Default in which
Counterparty is the Defaulting Party or a Termination Event in which
Counterparty is the Affected Party, which Event of Default or Termination Event
resulted from an event or events within Counterparty’s control. Upon such Notice
of Share Termination, the following provisions shall apply on the Scheduled
Trading Day immediately following the relevant merger date, Announcement Date,
Early Termination Date or date of cancellation or termination in respect of an
Extraordinary Event, as applicable:

 

Share Termination Alternative:    Applicable and means that BofA shall deliver
to Counterparty the Share Termination Delivery Property on the date on which the
Payment Obligation would otherwise be due pursuant to “Consequences of Merger
Events” above, Section 12.7 or 12.9 of the Equity Definitions or Section
6(d)(ii) of the Agreement, as applicable, or such later date as the Calculation
Agent may reasonably determine (the “Share Termination Payment Date”), in
satisfaction of the Payment Obligation. Share Termination Delivery Property:   
A number of Share Termination Delivery Units, as calculated by the Calculation
Agent, equal to the Payment Obligation divided by the Share Termination Unit
Price. The Calculation Agent shall adjust the Share Termination Delivery
Property by replacing any fractional portion of the aggregate amount of a
security therein with an amount of cash equal to the value of such fractional
security based on the values used to calculate the Share Termination Unit Price.

 

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Share Termination Unit Price:    The value of property contained in one Share
Termination Delivery Unit on the date such Share Termination Delivery Units are
to be delivered as Share Termination Delivery Property, as determined by the
Calculation Agent in its discretion by commercially reasonable means and
notified by the Calculation Agent to BofA at the time of notification of the
Payment Obligation. Share Termination Delivery Unit:    In the case of a
Termination Event, Event of Default, Delisting or Additional Disruption Event,
one Share or, in the case of an Insolvency, Nationalization or Merger Event, one
Share or a unit consisting of the number or amount of each type of property
received by a holder of one Share (without consideration of any requirement to
pay cash or other consideration in lieu of fractional amounts of any securities)
in such Insolvency, Nationalization or Merger Event, as applicable. If such
Insolvency, Nationalization or Merger Event involves a choice of consideration
to be received by holders, such holder shall be deemed to have elected to
receive the maximum possible amount of cash. Failure to Deliver:    Applicable
Other applicable provisions:    If Share Termination Alternative is applicable,
the provisions of Sections 9.8, 9.9, 9.10 and 9.11 (except that the
Representation and Agreement contained in Section 9.11 of the Equity Definitions
shall be modified by excluding any representations therein relating to
restrictions, obligations, limitations or requirements under applicable
securities laws arising as a result of the fact that Counterparty is the issuer
of the Shares or any portion of the Share Termination Delivery Units) of the
Equity Definitions will be applicable as if “Physical Settlement” applied to the
Transaction, except that all references to “Shares” shall be read as references
to “Share Termination Delivery Units.”

(c) Disposition of Hedge Shares. Counterparty hereby agrees that if, in the good
faith reasonable judgment of BofA, any Shares (the “Hedge Shares”) acquired by
BofA or any of its affiliates (BofA and its affiliates collectively for the
purposes of this Section 8(c) only, “BofA”) for the purpose of hedging its
obligations pursuant to the Transaction cannot be sold in the public market by
BofA without registration under the Securities Act, Counterparty shall, at its
election: (i) in order to allow BofA to sell the Hedge Shares in a registered
offering, make available to BofA an effective registration statement under the
Securities Act to cover the resale of such Hedge Shares and (A) enter into an
agreement, in form and substance satisfactory to BofA, substantially in the form
of an underwriting agreement for a registered offering, (B) provide accountant’s
“comfort” letters in customary form for registered offerings of equity
securities, (C) provide disclosure opinions of Wyrick Robbins Yates & Ponton LLP
or other nationally recognized outside counsel to Counterparty reasonably
acceptable to BofA, (D) provide other customary opinions, certificates and
closing documents customary in form for registered offerings of equity
securities and (E) afford BofA a reasonable opportunity to conduct a “due
diligence” investigation with respect to Counterparty customary in scope for
underwritten offerings of equity securities; provided, however, that if BofA, in
its reasonable judgment, is not satisfied with access to due diligence
materials, the results of its due diligence investigation, or the procedures and
documentation for the registered offering referred to above, then clause (ii) or
clause (iii) of this Section 8(c) shall apply at the election of Counterparty;
(ii) in order to allow BofA to sell the Hedge Shares in a private placement,
enter into a private placement agreement substantially similar to private
placement purchase agreements customary for private placements of equity
securities, in form and substance satisfactory to BofA, including customary
representations, covenants, blue sky and other governmental filings and/or
registrations, indemnities to BofA, due diligence rights (for BofA or any
designated buyer of the Hedge Shares from BofA), opinions and certificates and
such other documentation as is customary for private placements agreements, all
reasonably acceptable to BofA (in which case, the Calculation Agent shall make
any adjustments to the terms of the Transaction that are necessary, in its
reasonable judgment, to compensate BofA for any discount from the public market
price of the Shares incurred on the sale of Hedge Shares in a private
placement); or (iii) purchase the Hedge Shares from BofA at the VWAP Price on
such Exchange Business Days, and in the amounts, requested by BofA. “VWAP Price”
means, on any Exchange Business Day, the per Share volume-weighted average price
as displayed under the heading “Bloomberg VWAP” on Bloomberg page “SLXP <equity>
VAP” (or any successor thereto) in respect of the period from 9:30 a.m. to 4:00
p.m. (New York City time) on such Exchange Business Day (or if such
volume-weighted average price is unavailable or is manifestly incorrect, the
market value of one Share on such Exchange Business Day, as determined by the
Calculation Agent using a volume-weighted method).

 

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(d) Amendment to Equity Definitions. The following amendment shall be made to
the Equity Definitions:

Section 12.6(a)(ii) of the Equity Definitions is hereby amended by (1) deleting
from the fourth line thereof the word “or” after the word “official” and
inserting a comma therefor, and (2) deleting the semi-colon at the end of
subsection (B) thereof and inserting the following words therefor “or (C) at
BofA’s option, the occurrence of any of the events specified in
Section 5(a)(vii) (1) through (9) of the ISDA Master Agreement with respect to
that Issuer, provided that the period for dismissal, discharge, stay or
restraint therein shall be increased from within 15 days to within 60 days.”

(e) Repurchase and Conversion Rate Adjustment Notices. Counterparty shall, at
least 10 Scheduled Trading Days prior to effecting any repurchase of Shares or
consummating or otherwise executing or engaging in any transaction or event
other than a stock split, reverse stock split or a stock dividend (a “Conversion
Rate Adjustment Event”) that would lead to an increase in the Conversion Rate
(as such term is defined in the Indenture), give BofA a written notice of such
repurchase or Conversion Rate Adjustment Event (a “Repurchase Notice”) if,
following such repurchase or Conversion Rate Adjustment Event, the Notice
Percentage as determined on the date of such Repurchase Notice is (i) greater
than 4.5% and (ii) greater by 0.5% than the Notice Percentage included in the
immediately preceding Repurchase Notice (or, in the case of the first such
Repurchase Notice, greater than the Notice Percentage as of the date hereof),
and, if such repurchase or Conversion Rate Adjustment Event, or the intention to
effect the same, would constitute material non-public information with respect
to Counterparty or the Shares, Counterparty shall make public disclosure thereof
at or prior to delivery of such Repurchase Notice. The “Notice Percentage” as of
any day is the fraction, expressed as a percentage, the numerator of which is
the Number of Shares and the denominator of which is the number of Shares
outstanding on such day. In the event that Counterparty fails to provide BofA
with a Repurchase Notice on the day and in the manner specified in this
Section 8(e) then Counterparty agrees to indemnify and hold harmless BofA, its
affiliates and their respective directors, officers, employees, agents and
controlling persons (BofA and each such person being an “Indemnified Party”)
from and against any and all losses (including losses relating to BofA’s hedging
activities as a consequence of becoming, or of the risk of becoming, a
Section 16 “insider”, including, without limitation, any forbearance from
hedging activities or cessation of hedging activities and any losses in
connection therewith with respect to this Transaction), claims, damages and
liabilities (or actions in respect thereof), joint or several, to which such
Indemnified Party may become subject under applicable securities laws, including
without limitation, Section 16 of the Exchange Act or any federal, state or
local (including non-U.S.) law, regulation or regulatory order, relating to or
arising out of such failure. If for any reason the foregoing indemnification is
unavailable to any Indemnified Party or insufficient to hold harmless any
Indemnified Party, then Counterparty shall contribute, to the maximum extent
permitted by law, to the amount paid or payable by the Indemnified Party as a
result of such loss, claim, damage or liability. In addition, Counterparty will
reimburse any Indemnified Party for all reasonable expenses (including
reasonable counsel fees and expenses) as they are incurred (after notice to
Counterparty) in connection with the investigation of, preparation for or
defense or settlement of any pending or threatened claim or any action, suit or
proceeding arising therefrom, whether or not such Indemnified Party is a party
thereto and whether or not such claim, action, suit or proceeding is initiated
or brought by or on behalf of Counterparty. This indemnity shall survive the
completion of the Transaction contemplated by this Confirmation and any
assignment and delegation of the Transaction made pursuant to this Confirmation
or the Agreement shall inure to the benefit of any permitted assignee of BofA.

(f) Transfer and Assignment. Either party may transfer any of its rights or
obligations under the Transaction with the prior written consent of the
non-transferring party, such consent not to be unreasonably withheld or delayed.
For the avoidance of doubt, (A) BofA may condition its consent on any of the
following, without limitation: (i) the receipt by BofA of opinions and documents
reasonably satisfactory to BofA in connection with such assignment, (ii) such
assignment being effected on terms reasonably satisfactory to BofA with respect
to any legal and regulatory requirements relevant to BofA, and
(iii) Counterparty continuing to be obligated to provide notices hereunder
relating to the Convertible Securities and continuing to be obligated with
respect to “Disposition of Hedge Shares” and “Repurchase and Conversion Rate
Adjustment Notices” above and (B) Counterparty may condition its consent on,
without limitation, whether such transfer or assignment would, in the sole
discretion of Counterparty, result in the termination of the Transaction, or
otherwise result in adverse consequences to Counterparty, for U.S. federal
income tax purposes. In addition, BofA may transfer or assign without any
consent of the Counterparty its rights and obligations hereunder and under the
Agreement, in whole or in part, to (i) any of its affiliates, (ii) any entities
sponsored or organized by, or on behalf of or for the benefit of BofA or
(iii) any person that is (or whose guarantor is) of credit quality equivalent to
BofA; provided that BofA shall provide Counterparty with five Scheduled Trading
Days’ prior notice of such assignment. At any time at which any Excess Ownership
Position or a Hedging Disruption exists, if BofA, in its discretion, is unable
to effect a transfer or assignment to a third party in accordance with the
requirements set forth above

 

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after using its commercially reasonable efforts on pricing terms and within a
time period reasonably acceptable to BofA such that an Excess Ownership Position
or a Hedging Disruption, as the case may be, no longer exists, BofA may
designate any Scheduled Trading Day as an Early Termination Date with respect to
a portion (the “Terminated Portion”) of the Transaction, such that such Excess
Ownership Position or Hedging Disruption, as the case may be, no longer exists.
In the event that BofA so designates an Early Termination Date with respect to a
portion of the Transaction, a payment or delivery shall be made pursuant to
Section 6 of the Agreement and Section 8(b) of this Confirmation as if (i) an
Early Termination Date had been designated in respect of a Transaction having
terms identical to the Terminated Portion of the Transaction, (ii) Counterparty
shall be the sole Affected Party with respect to such partial termination and
(iii) such portion of the Transaction shall be the only Terminated Transaction.
“Excess Ownership Position” means any of the following: (i) the Equity
Percentage exceeds 9.0%, (ii) BofA or any “affiliate” or “associate” of BofA
would own in excess of 13% of the outstanding Shares for purposes of Section 203
of the Delaware General Corporation Law or (iii) BofA, BofA Group (as defined
below) or any person whose ownership position would be aggregated with that of
BofA or BofA Group (BofA, BofA Group or any such person, a “BofA Person”) under
any federal, state or local (including non-U.S.) laws, regulations or regulatory
orders applicable to ownership of Shares (“Applicable Laws”), owns, beneficially
owns, constructively owns, controls, holds the power to vote or otherwise meets
a relevant definition of ownership in excess of a number of Shares equal to
(x) the number of Shares that would give rise to reporting or registration
obligations or other requirements (including obtaining prior approval by a state
or federal regulator) of a BofA Person under Applicable Laws and with respect to
which such requirements have not been met or the relevant approval has not been
received or that would give rise to any consequences under the constitutive
documents of Counterparty or any contract or agreement to which Counterparty is
a party, in each case minus (y) 1% of the number of Shares outstanding on the
date of determination. The “Equity Percentage” as of any day is the fraction,
expressed as a percentage, (A) the numerator of which is the number of Shares
that BofA and any of its affiliates or any other person subject to aggregation
with BofA, for purposes of the “beneficial ownership” test under Section 13 of
the Exchange Act, or any “group” (within the meaning of Section 13) of which
BofA is or may be deemed to be a part (BofA and any such affiliates, persons and
groups, collectively, “BofA Group”), beneficially owns (within the meaning of
Section 13 of the Exchange Act), without duplication, on such day (or, to the
extent that, as a result of a change in law, regulation or interpretation after
the date hereof, the equivalent calculation under Section 16 of the Exchange Act
and the rules and regulations thereunder results in a higher number, such
number) and (B) the denominator of which is the number of Shares outstanding on
such day.

(g) Staggered Settlement. BofA may, by notice to Counterparty on or prior to any
Settlement Date (a “Nominal Settlement Date”), elect to deliver the Shares on
two or more dates (each, a “Staggered Settlement Date”) or at two or more times
on the Nominal Settlement Date as follows:

(i) in such notice, BofA will specify to Counterparty the related Staggered
Settlement Dates (each of which will be on or prior to such Nominal Settlement
Date, but not prior to the beginning of the relevant “Cash Settlement Averaging
Period”) or delivery times and how it will allocate the Shares it is required to
deliver under “Delivery Obligation” (above) among the Staggered Settlement Dates
or delivery times; and

(ii) the aggregate number of Shares that BofA will deliver to Counterparty
hereunder on all such Staggered Settlement Dates and delivery times will equal
the number of Shares that BofA would otherwise be required to deliver on such
Nominal Settlement Date.

(h) Right to Extend. BofA may postpone any Exercise Date or Settlement Date or
any other date of valuation or delivery by BofA with respect to some or all of
the relevant Options (in which event the Calculation Agent shall make
appropriate adjustments to the Delivery Obligation), such postponement or
extension not to exceed 20 Scheduled Trading Days in the aggregate, if BofA
determines, in its reasonable discretion, that such extension is reasonably
necessary or appropriate to (i) preserve BofA’s hedging or hedge unwind activity
hereunder in light of existing liquidity conditions in the cash market, the
stock loan market or any other relevant market or (ii) to enable BofA to effect
purchases of Shares in connection with its hedging, hedge unwind or settlement
activity hereunder in a manner that would, if BofA were Counterparty or an
affiliated purchaser of Counterparty, be in compliance with applicable legal,
regulatory or self-regulatory requirements, or with related policies and
procedures applicable to BofA.

(i) Adjustments. For the avoidance of doubt, whenever the Calculation Agent is
called upon to make an adjustment pursuant to the terms of this Confirmation or
the Definitions to take into account the effect of an event, the Calculation
Agent shall make such adjustment by reference to the effect of such event on the
Hedging Party, assuming that the Hedging Party maintains a commercially
reasonable hedge position.

 

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(j) Disclosure. Effective from the date of commencement of discussions
concerning the Transaction, Counterparty and each of its employees,
representatives, or other agents may disclose to any and all persons, without
limitation of any kind, the tax treatment and tax structure of the Transaction
and all materials of any kind (including opinions or other tax analyses) that
are provided to Counterparty relating to such tax treatment and tax structure.

(k) Designation by BofA. Notwithstanding any other provision in this
Confirmation to the contrary requiring or allowing BofA to purchase, sell,
receive or deliver any Shares or other securities to or from Counterparty, BofA
may designate any of its affiliates to purchase, sell, receive or deliver such
Shares or other securities and otherwise to perform BofA’s obligations in
respect of the Transaction and any such designee may assume such obligations.
BofA shall be discharged of its obligations to Counterparty to the extent of any
such performance.

(l) No Netting and Set-off. Each party waives any and all rights it may have to
set off obligations arising under the Agreement and the Transaction against
other obligations between the parties, whether arising under any other
agreement, applicable law or otherwise.

(m) Equity Rights. BofA acknowledges and agrees that this Confirmation is not
intended to convey to it rights with respect to the Transaction that are senior
to the claims of common stockholders in the event of Counterparty’s bankruptcy.
For the avoidance of doubt, the parties agree that the preceding sentence shall
not apply at any time other than during Counterparty’s bankruptcy to any claim
arising as a result of a breach by Counterparty of any of its obligations under
this Confirmation or the Agreement. For the avoidance of doubt, the parties
acknowledge that this Confirmation is not secured by any collateral that would
otherwise secure the obligations of Counterparty herein under or pursuant to any
other agreement.

(n) Early Unwind. In the event the sale by Counterparty of the Convertible
Securities is not consummated with the Underwriters pursuant to the Underwriting
Agreement for any reason by the close of business in New York on June 3, 2010
(or such later date as agreed upon by the parties, which in no event shall be
later than ten business days following June 3, 2010) (June 3, 2010 or such later
date being the “Early Unwind Date”), the Transaction shall automatically
terminate (the “Early Unwind”), on the Early Unwind Date and (i) the Transaction
and all of the respective rights and obligations of BofA and Counterparty
thereunder shall be cancelled and terminated and (ii) if such Early Unwind is
the result of a breach by Counterparty under the Underwriting Agreement,
Counterparty shall pay to BofA an amount in cash equal to the aggregate amount
of costs and expenses relating to the unwinding of BofA’s hedging activities in
respect of the Transaction (including market losses incurred in reselling any
Shares purchased by BofA or its affiliates in connection with such hedging
activities). Following such termination, cancellation and payment, each party
shall be released and discharged by the other party from and agrees not to make
any claim against the other party with respect to any obligations or liabilities
of either party arising out of and to be performed in connection with the
Transaction either prior to or after the Early Unwind Date. BofA and
Counterparty represent and acknowledge to the other that upon an Early Unwind
and following the payment referred to above, all obligations with respect to the
Transaction shall be deemed fully and finally discharged.

(o) Waiver of Trial by Jury. EACH OF COUNTERPARTY AND BOFA HEREBY IRREVOCABLY
WAIVES (ON ITS OWN BEHALF AND, TO THE EXTENT PERMITTED BY APPLICABLE LAW, ON
BEHALF OF ITS STOCKHOLDERS) ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THE TRANSACTION OR THE ACTIONS OF BOFA OR ITS AFFILIATES IN THE
NEGOTIATION, PERFORMANCE OR ENFORCEMENT HEREOF.

(p) Governing Law; Jurisdiction. THIS CONFIRMATION AND ANY CLAIM, CONTROVERSY OR
DISPUTE ARISING UNDER OR RELATED TO THIS CONFIRMATION SHALL BE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK. THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE UNITED
STATES COURT FOR THE SOUTHERN DISTRICT OF NEW YORK IN CONNECTION WITH ALL
MATTERS RELATING HERETO AND WAIVE ANY OBJECTION TO THE LAYING OF VENUE IN, AND
ANY CLAIM OF INCONVENIENT FORUM WITH RESPECT TO, THESE COURTS.

 

16

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Counterparty hereby agrees (a) to check this Confirmation carefully and
immediately upon receipt so that errors or discrepancies can be promptly
identified and rectified and (b) to confirm that the foregoing (in the exact
form provided by BofA) correctly sets forth the terms of the agreement between
BofA and Counterparty with respect to the Transaction, by manually signing this
Confirmation or this page hereof as evidence of agreement to such terms and
providing the other information requested herein and immediately returning an
executed copy to John Servidio, Facsimile No. 704-208-2869.

 

Yours faithfully, BANK OF AMERICA, N.A. By:  

/s/ Christopher A. Hutmaker

  Name:   Christopher A. Hutmaker   Title:   Managing Director

 

Agreed and Accepted By: SALIX PHARMACEUTICALS, LTD. By:  

/s/ Adam C. Derbyshire

  Name:   Adam C. Derbyshire   Title:   EVP Finance & Administration, CFO

Base Capped Call Confirmation

Signature Page