Pridemore v. Salix Phamaceuticals Welfare Benefit Plan, Erisa Plan Number 501, et al

MOTION for Summary Judgment

W.D. Tex.April 21, 2017

28122572.1 - 1 - IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION RYAN PRIDEMORE, Plaintiff, v. SALIX PHARMACEUTICALS WELFARE BENEFIT PLAN, ERISA PLAN NUMBER 501, KELLY WEBBER, and VALEANT PHARMACEUTICALS NORTH AMERICA, L.L.C., Defendants. § § § § § § § § § § § § § Case No. 5:16-CV-00532-DAE DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT NOW COME Defendants Salix Pharmaceuticals Welfare Benefit Plan, ERISA Plan Number 501, Kelly Webber, and Valeant Pharmaceuticals North America, L.L.C. (collectively “Defendants”) and file this their Motion for Summary Judgment, and in support of same respectfully show as follows: I. INTRODUCTION This is an ERISA plan dispute regarding whether it was appropriate to deny Plaintiff Ryan Pridemore benefits pursuant the Salix Pharmaceuticals, Inc. Amended Employee Retention Policy (the “Policy”) under Section 502(a)(1)(B) (29 U.S.C. § 1132(a)(1)(B)) of ERISA. The Policy is an ERISA plan that provides severance payments, reimbursement of applicable COBRA premiums, and a lump sum pro rata bonus payment under certain defined circumstances, including a resignation with “Good Reason” as defined in the Policy. Plaintiff is a covered employee under the Policy and claims that he was denied benefits under the Policy following his resignation. Under the terms of the Policy, Defendants maintained discretion to interpret the Policy’s terms, making any such interpretation subject to the highly deferential Case 5:16-cv-00532-DAE Document 20 Filed 04/21/17 Page 1 of 16 28122572.1 - 2 - arbitrary and capricious standard of review. Pursuant to that discretion, Defendants did not act arbitrarily or capriciously, but acted pursuant to their legitimately promulgated Policy criteria based on a fair reading of the Policy. Accordingly, Defendants properly acted within their discretion to deny benefits, and summary judgment should be granted. II. SUMMARY JUDGMENT STANDARDS Summary judgment is appropriate when, viewing the evidence in the light most favorable to the nonmoving party, the record reflects that no genuine issue of material fact exists, and that the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-24 (1986); FED. R. CIV. P. 56(c). Summary judgment is warranted if a plaintiff fails to make a showing sufficient to establish the existence of an element essential to his case. See Celotex, 477 U.S. at 322. “If the moving party meets the initial burden of showing there is no genuine issue of material fact, the burden shifts to the nonmoving party to produce evidence or designate specific facts showing the existence of a genuine issue for trial.” Allen v. Rapides Parish Sch. Bd., 204 F.3d 619, 621 (5th Cir. 2000) (internal quotations and citation omitted). Unsubstantiated assertions and opinions are never competent summary judgment evidence. VRV Dev. L.P. v. Mid-Continent Cas. Co., 630 F.3d 451, 455 (5th Cir. 2011); Forsyth v. Barr, 19 F.3d 1527, 1533 (5th Cir. 1994). “[M]ere conclusory allegations” are also “insufficient to defeat . . . a motion for summary judgment.” Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir. 1992); see also FED. R. CIV. P. 56(e). In other words, a nonmovant must do more than show some theoretical doubt as to the material facts to defeat a motion for summary judgment. Matsushita Elec. Industrial Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986). Instead, he must produce evidence upon which a jury reasonably could base a verdict in his favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). Particularly, the Case 5:16-cv-00532-DAE Document 20 Filed 04/21/17 Page 2 of 16 28122572.1 - 3 - nonmovant must produce, through competent evidence, specific facts showing that there remains a genuine issue for trial. Matsushita Elec., 475 U.S. at 586-87; see also Celotex, 477 U.S. at 324 (recognizing that the nonmoving party must then go beyond the pleadings and designate “specific facts showing that there is a genuine issue for trial”); Garcia v. Elf Atochem North America, 28 F.3d 446, 449 (5th Cir. 1994) (same). If Plaintiff fails in his burden, then summary judgment is mandated. III. BACKGROUND FACTS A. The Policy On February 4, 2014, Salix Pharmaceuticals, Inc., (“Salix”) adopted an Amended Employee Retention Policy, referred to herein as the “Policy.” See Exhibit 1, Policy at p. 1. The Policy was adopted with the goals of retaining critical employees, motivating Salix’s workforce, maintaining or increasing the value of the company, and treating Salix’s employees fairly and honestly. All employees below the level of Associate Vice President were covered by the Policy, except those employees covered by certain exclusions that are not relevant here. See Exhibit 1, Policy at p. 1. For purposes of obtaining benefits under the Policy, the Policy provided that such benefits “will only be triggered upon the occurrence of both of the following events: (1) A ‘Change in Control’ of Salix has occurred; and (2) A Covered Employee is terminated without ‘Reasonable Cause’ or terminates his or her employment with ‘Good Reason’ within 12 months after the date of the Change in Control.” See Exhibit 1, Policy at p. 1. The Policy further defined “Good Reason” as “the occurrence of any of the following events or conditions: (a) A material adverse change in, or the assignment to you of any duties or responsibilities which are inconsistent with, your status, title, position or responsibilities (including reporting responsibilities) with Salix; Case 5:16-cv-00532-DAE Document 20 Filed 04/21/17 Page 3 of 16 28122572.1 - 4 - (b) A reduction in your salary and/or benefits except to the extent such reduction is comparable to percentage reductions in salary and/or benefits of all other employees of Salix, or any failure to pay you any compensation or benefits to which you are entitled within five (5) days of the date due; or (c) Salix relocates your workplace more than fifty (50) miles from your current workplace.” See Exhibit 1, Policy at Exhibit A, p. 2. In addition, the Policy explicitly provided that “‘Good Reason’ shall not exist unless you notify Salix of the existence of the ‘Good Reason’ event or condition within ninety (90) days of its occurrence and unless Salix after such notification fails to remedy the event or condition within thirty (30) days of notice.” See Exhibit 1, Policy at Exhibit A, p. 2. If the events listed above occurred and upon execution of a separation agreement and general release, the Policy provided that covered employees would be entitled to the following benefits: (1) Severance pay in the form of continued payment of Covered Employee’s base salary for a predetermined number of months (based upon Covered Employee’s level of employment). (2) Reimbursement of premiums for COBRA continuation coverage for group health insurance for Covered Employee and his/her eligible dependents for the period of time that Covered Employee is receiving severance pay. (3) Payment in a lump sum of Covered Employee’s pro rata bonus based upon the target bonus percentage for the Covered Employee’s level of employment and the length of time employed during the current calendar year, calculated as of the date of termination…. See Exhibit 1, Policy at pp. 1-2. Finally, the Policy provided that “[n]o separation benefit will be paid if ... you resign or retire without ‘Good Reason.’” See Exhibit 1, Policy at Exhibit A, p. 1. The Policy designated Salix’s Senior Vice President of Human Resources as the Plan Administrator and allowed the Plan Administrator to “delegate any of its authority, including the authority to hear claims and appeals, to other Company officers or employees.” See Exhibit 1, Case 5:16-cv-00532-DAE Document 20 Filed 04/21/17 Page 4 of 16 28122572.1 - 5 - Policy at pp. 3-4. Critically, the Policy explicitly gave the Plan Administrator “full authority to administer the Policy, and in that connection he or she has full discretionary authority to interpret the Policy and to make decisions regarding eligibility for benefits under the Policy and the amount of benefits due under the Policy.” See Exhibit 1, Policy at p. 3. B. Pridemore’s Employment On August 22, 2005, Pridemore was offered employment with Salix in the position of Senior Territory Manager. As compensation, Salix offered Pridemore a yearly salary of $90,000.00 and benefits that included, but were not limited to, medical, dental, and vision insurance, as well as coverage under the Company’s long term disability and life insurance plan, and vacation and sick leave policy. Further, Pridemore was eligible to participate in the Senior Territory Manager Bonus Plan. As the position required relocation to San Antonio, Texas, from Phoenix, Arizona, Salix agreed to reimburse Pridemore for reasonable expenses incurred as a result of the relocation in an amount not to exceed $50,000.00. See Exhibit 2, Letter to Pridemore dated Aug. 22, 2005. Pridemore accepted Salix’s offer and began employment on October 3, 2005. See Exhibit 3, New Employee Information. On February 5, 2007, Pridemore was promoted to a District Sales Manager position. As part of the promotion, Pridemore’s salary was increased and he became eligible to participate in the field manager bonus program. As the position required another relocation, Salix agreed to cover the cost of such relocation, not to exceed $50,000.00. See Exhibit 4, Letter to Pridemore dated Feb. 5, 2007. Eventually, Pridemore was promoted to an Executive Regional Sales Manager position, ultimately reporting to Aleks Alacahan (Vice President of Sales for Salix). In this position, Pridemore was eligible to receive a “Composite Bonus” which was a 110% bonus paid quarterly Case 5:16-cv-00532-DAE Document 20 Filed 04/21/17 Page 5 of 16 28122572.1 - 6 - to Executive Territory Sales Managers who maintained a composite ranking in the top 50% of Salix’s Overall Composite Rankings in the applicable quarter. See Exhibit 5, Sales Force Inline Promotion Criteria dated Jan 1, 2015 at p. 12. On April 1, 2015, Valeant Pharmaceuticals North America, L.L.C. (“Valeant”) completed its acquisition of Salix. See Exhibit 6, Press Release dated April 1, 2015. This was a “Change of Control” as defined in the Policy. See Exhibit 1, Policy at Exhibit A. Following the acquisition, Pridemore became an employee of Valeant and received another increase in his base salary. See Exhibit 7, Letter on Appeal to Galo dated Apr. 15, 2016. In December 2015, Valeant moved to bring Salix’s job titles in line with Valeant’s structure, and Pridemore’s job title was changed to District Manager. See Exhibit 8, Email to Pridemore dated Dec. 7, 2015. This nomenclature change did not result in a change to any of Pridemore’s duties or responsibilities. See Exhibit 9, Alacahan Declaration. Further, following the acquisition, Pridemore and all other Salix employees became subject to Valeant’s bonus plans and were no longer subject to the bonus structure previously applied by Salix. As a result, the Composite Bonus previously available to eligible Salix employees was discontinued and a new bonus structure was put in place. See Exhibit 10, Q2 2015 Compensation Guide. The Salix Composite Bonus was last paid out for the 1st Quarter 2015. See Exhibit 9, Alacahan Declaration. The new Valeant bonus structure was effective beginning with the 2nd Quarter 2015. See Exhibit 10, Q2 2015 Compensation Guide. C. Pridemore’s Resignation On January 20, 2017, Pridemore notified Valeant that he was resigning his position. See Exhibit 11, Email from Pridemore dated Jan. 20, 2016 (4:03 pm). In his resignation notice, Pridemore claimed that his job title had been changed from Executive Regional Sales Manager to District Manager and that he did not receive the Composite Bonus to which he was allegedly Case 5:16-cv-00532-DAE Document 20 Filed 04/21/17 Page 6 of 16 28122572.1 - 7 - entitled. Pridemore accordingly claimed that he was resigning with “Good Reason” under the Policy and that he was therefore entitled to benefits under the Policy. See Exhibit 11, Email from Pridemore dated Jan. 20, 2016 (4:03 pm). Kelly Weber (Valeant’s Senior Vice President of Human Resources and Plan Administrator) delegated her authority under the Policy to interpret its terms and determine Pridemore’s eligibility for benefits to Aaron Kim (Valeant’s Assistant General Counsel). On February 3, 2016, Valeant notified Pridemore that his claim for benefits under the Policy was denied. See Exhibit 12, Letter to Pridemore dated Feb. 3, 2016. Exercising the discretion accorded him under the terms of the Policy, Kim determined that “[n]either the re- titling of your position from Executive Regional Sales Manager to District Manager, nor the transition from the applicable Salix compensation structure to the Company’s applicable compensation structure constitute ‘Good Reason’ under the Policy, as defined in Section 4(a) and (b) of Exhibit A to the Policy.” More specifically, regarding the change in job title, Kim determined that “there [were] no factors suggesting that this results in a material adverse change in your status, title, position or responsibilities that you previously held while at Salix, or an assignment to you of duties or responsibilities inconsistent with the role you held at Salix.” See Exhibit 12, Letter to Pridemore dated Feb. 3, 2016. Regarding the allegation that Plaintiff did not receive the Composite Bonus, Kim determined that the bonus did “not constitute salary or benefits” under the terms of the Policy. See Exhibit 12, Letter to Pridemore dated Feb. 3, 2016. In particular, Kim found that the term “salary” as under in the Policy meant an employee’s base salary, noting that the discussion of bonus payments is “separate and distinct” from the discussion of salary under the Policy. Further, Kim found that the term “benefits” under the Policy encompassed health insurance Case 5:16-cv-00532-DAE Document 20 Filed 04/21/17 Page 7 of 16 28122572.1 - 8 - benefits and that the Composite Bonus could not be considered a “benefit” under the Policy. Finally, Kim noted that even if the Composite Bonus could be considered “salary or benefits,” all Salix employee who were eligible for such bonus saw a comparable reduction in their salary and/or benefits since the bonus was eliminated for all employees following Valeant’s acquisition of Salix. See Exhibit 12, Letter to Pridemore date Feb. 3, 2016. As noted above, the last Composite Bonus was paid following the 1st Quarter 2015 as the acquisition was completed on April 1, 2015. See Exhibit 9, Alacahan Declaration. As a result, Defendants determined that Pridemore had not terminated his employment with Good Reason under the Policy and denied his claim for benefits. See Exhibit 12, Letter to Pridemore date Feb. 3, 2016. Plaintiff timely appealed the denial of Defendants’ determination. This appeal was denied on April 15, 2016. See Exhibit 7, Letter on Appeal to Galo dated Apr. 15, 2016. IV. ARGUMENTS AND AUTHORITIES A. The Abuse of Discretion Standard Applies to the Benefits Determination. Generally, a “denial of benefits challenged under § 1132(a)(1)(B) is to be reviewed under a de novo standard unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan.” Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). “If the administrator has discretionary authority, a reviewing court applies an abuse of discretion standard.” Wildbur v. ARCO Chem. Co., 974 F.2d 631, 636 (5th Cir. 1992). In applying the abuse of discretion standard, courts analyze whether the plan administrator acted “arbitrarily or capriciously.” Sweatman v. Commercial Union Ins. Co., 39 F.3d 594, 601 (5th Cir. 1994) (quoting Salley v. E.I. DuPont de Nemours & Co., 966 F.2d 1011, 1014 (5th Cir. 1992)). Case 5:16-cv-00532-DAE Document 20 Filed 04/21/17 Page 8 of 16 28122572.1 - 9 - Here, it is clear that the Policy gave the Plan Administrator complete “discretion and authority” to interpret its terms. As such, Valeant’s decision is reviewed for an abuse of discretion. See Zieche v. Burlington Resources Inc. Employee Change in Control Severance Plan, 506 F. App’x 320, 326 (5th Cir. 2013) (holding that the abuse of discretion standard applied where the plan stated “the Trustee shall, without direction from the Company ... make payments ... in the Trustee’s sole discretion directly to the Plan Participants”); Gomez v. Ericsson, Inc., 828 F.3d 367, 373-74 (5th Cir. 2016) (holding that the abuse of discretion standard applied where the plan provided “The Plan Administrator shall have complete discretion and authority to ... decide all questions concerning the eligibility of any person to participate in this Plan [and] the right to and amount of any benefit payable under this Plan ....”); Stone v. UNOCAL Termination Allowance Plan, 570 F.3d 252, 257 (5th Cir. 2009) (holding that the abuse of discretion standard applied where the plan gave the its administrator discretionary authority to construe its terms and apply its provisions). Accordingly, to avoid summary judgment, Pridemore must identify a genuine dispute of material fact that the denial of benefits was arbitrary or capricious. See Gomez, 828 F.3d at 373 (citing Burell v. Prudential Ins. Co. of Am., 820 F.3d 132, 138 (5th Cir. 2016)). B. The Benefit Determination was Legally Correct Under the Terms of the Policy. Under the abuse of discretion standard, a two-step inquiry is used to review the administrator’s determination regarding the interpretation and application of the terms of the plan. See Gomez, 828 F.3d at 373 (citing Stone, 570 F.3d at 257). First, the court examines whether the determination was legally correct, and if it is, no further inquiry is required. Gomez, 828 F.3d at 373. In making this determination, the court weighs three factors: “(1) whether the administrator has given the plan a uniform construction, (2) whether the interpretation is Case 5:16-cv-00532-DAE Document 20 Filed 04/21/17 Page 9 of 16 28122572.1 - 10 - consistent with a fair reading of the plan, and (3) any unanticipated costs resulting from different interpretations of the plan.” Id. (internal citations omitted). Of these factors, “[t]he most important factor to consider” is “whether the administrator’s interpretation is consistent with a fair reading of the plan.” Gosselink v. Am. Tel. & Tel., Inc., 272 F.3d 722, 727 (5th Cir. 2001). Here, there is no question that Valeant’s denial of Pridemore’s request for benefits was based on a fair reading of the Policy’s provisions. See Stone, 570 F.3d at 260 (noting that a ERISA plans are “interpreted in their ‘ordinary and popular sense as would a person of average intelligence and experience’”) (quoting Crowell v. Shell Oil Co., 541 F.3d 295, 314 (5th Cir. 2008)). As noted, Valeant determined that the change in job titles resulted in no change to Pridemore’s duties and responsibilities as required by the Policy. See Exhibit 12, Letter to Pridemore dated Feb. 3, 2016. In fact, the email to Pridemore announcing this change clearly states that the new job title change “means absolutely nothing more that remembering the new terminology.” See Exhibit 8, Email to Pridemore dated Dec. 7, 2015. As such, there is nothing in the record to suggest that Valeant’s determination is not legally correct regarding the change in job title. Furthermore, Valeant determined that the Salix Composite Bonus was not “salary or benefits” as provided under the Policy. See Exhibit 12, Letter to Pridemore dated Feb. 3, 2016. As Kim noted, “salary” under the Policy meant an employee’s base salary. See Exhibit 1, Policy at Exhibit A, p. 3. In contrast, the Plan’s discussion of bonus payments is “separate and distinct” from the discussion of salary under the Policy. See Exhibit 1, Policy at Exhibit A, p. 3; Exhibit 12, Letter to Pridemore dated Feb. 3, 2016. Giving the terms of the Policy a fair reading, Kim determined that the term “benefits” encompassed health insurance benefits and that the Composite Bonus could not be considered a such a “benefit.” See Exhibit 12, Letter to Case 5:16-cv-00532-DAE Document 20 Filed 04/21/17 Page 10 of 16 28122572.1 - 11 - Pridemore dated Feb. 3, 2016. There is absolutely no evidence in the record to establish that this determination is not legally correct. Moreover, as noted above, all Salix employees who were eligible for the Composite Bonus saw a comparable reduction in their salary and/or benefits since the bonus was eliminated for all employees following Valeant’s acquisition of Salix. See Exhibit 12, Letter to Pridemore date Feb. 3, 2016. There is simply no dispute that the last Composite Bonus was paid following the 1st Quarter 2015 as the Valeant acquisition was completed on April 1, 2015, and that all Valeant employees were treated equally in the elimination of this bonus. See Exhibit 9, Alacahan Declaration. As such, since “all Salix employees” who were eligible for the Composite Bonus did not receive the bonus after the Valeant acquisition, this is nothing to suggest that Valeant failed to give the Policy a uniform construction. See Stone, 570 F.3d at 259 (holding that the plan was given uniform construction where there was no evidence that any similarly situated individual was treated differently). Finally, the fact that Pridemore waited until January 20, 2016 to raise an issue with the elimination of the Composite Bonus further undermines his contention that he had “Good Reason” to resign as the Policy specifically required Pridemore to give notice to Valeant of the existence of the “Good Reason” event or condition within ninety (90) days of its occurrence. See Exhibit 1, Policy at Exhibit A. To the extent that the elimination of the Composite Bonus could be “salary or benefits” under the Policy, it was eliminated on April 1, 2015, and there is no dispute that Pridemore and all other Salix employees did not receive such bonus beginning with the 2nd Quarter 2015. Yet instead of giving notice that he believed the elimination of the Composite Bonus was “Good Reason” under the Policy within ninety (90) of its elimination, Pridemore waited until January 20, 2016, or over two-hundred ninety (290) days later, to raise Case 5:16-cv-00532-DAE Document 20 Filed 04/21/17 Page 11 of 16 28122572.1 - 12 - the issue. Under the clear terms of the Policy, without timely notice, “Good Reason” does not exist. See Exhibit 1, Policy at Exhibit A. In sum, there is no evidence to suggest that Defendants failed to consistently apply the terms of the Policy. And there is more than enough evidence to establish that Defendants determinations were consistent with a fair reading of the Policy’s provisions. As such, the benefit determination is legally correct and summary judgment for Defendants is proper. C. There is No Evidence That the Benefits Determination Was Arbitrary or Capricious. Even if Pridemore was able to raise a genuine issue of material fact on whether Valeant’s determination was legally correct, he cannot establish that such determination was arbitrary or capricious. Under the two-step analysis, if the administrator’s interpretation is not legally correct, the court must then decide whether the determination was an abuse of discretion. Stone, 570 F.3d at 257. An administrator abuses its discretion when the determination “is not based on evidence, even if disputable, that clearly supports the basis for its denial.” Holland v. Int'l Paper Co. Ret. Plan, 576 F.3d 240, 246 (5th Cir. 2009). “[O]nly where the plan administrator acted arbitrarily or capriciously” will such an abuse be found. Id. at 246. Further, a determination is “arbitrary when it is made ‘without a rational connection between the known facts and the decision or between the found facts and the evidence.’” Id.; see also Killen v. Reliance Standard Life Ins. Co., 776 F.3d 303, 307 (5th Cir. 2015) (“If the plan fiduciary’s decision is supported by substantial evidence and is not arbitrary and capricious, it must prevail.”) (internal citations omitted). To be upheld, the plan administrator’s determination need only “fall somewhere on a continuum of reasonableness—even if on the low end.” Burell, 820 F.3d at 140 (quoting Corry v. Liberty Life Assurance Co. of Boston, 499 F.3d 389, 398 (5th Cir. 2007)). Any potential conflict of interest on the part of the plan administrator is only considered if the court determines Case 5:16-cv-00532-DAE Document 20 Filed 04/21/17 Page 12 of 16 28122572.1 - 13 - that the decision was legally incorrect and reaches the second “abuse of discretion” stage of the analysis. Stone, 570 F.3d at 257. As the above discussion of Defendants’ determination demonstrates, there was certainly a rational connection between the facts known to the Plan Administrator and his determination on Pridemore’s request for benefits under the Policy. The record establishes that the change in job titles was not a “material change … in [Pridemore’s] duties or responsibilities.” See Exhibit 1, Policy at Exhibit A. Indeed, the nomenclature change required nothing more than remembering “new terminology.” See Exhibit 8, Email to Pridemore dated Dec. 7, 2015. Additionally, the determination that the Composite Bonus was not “salary and/or benefits” under the Policy is well supported by the terms of the Policy itself as it clearly differentiates between “salary” consisting of “base salary” and benefits consisting of health insurance benefits that are specifically referenced in the Policy. See Exhibit 1, Policy at Exhibit A, p. 3. Further, the elimination of the Composite Bonus applied to all former Salix employees and thus all employees sustained a “reduction [that was] comparable” in their salary and/or benefits. See Exhibit 1, Policy at Exhibit A, p. 2. Finally, aside from Valeant’s status as the employer and plan sponsor, there is no evidence that any type of conflict of interest played any role in the determination. As such, Defendants’ determination cannot be an abuse of discretion as a matter of law. Accordingly, summary judgment is proper. WHEREFORE, Defendants Salix Pharmaceuticals Welfare Benefit Plan, ERISA Plan Number 501, Kelly Webber, and Valeant Pharmaceuticals North America, L.L.C. respectfully request that this Court grant this Motion for Summary Judgment, that Plaintiff’s claims against them be dismissed with prejudice, and that they recover all costs of court and all other relief to which they may be entitled. Case 5:16-cv-00532-DAE Document 20 Filed 04/21/17 Page 13 of 16 28122572.1 - 14 - Respectfully submitted, NORTON ROSE FULBRIGHT US LLP /s/ Mario A. Barrera Mario A. Barrera State Bar No. 01805915 mario.barrera@nortonrosefulbright.com Stephen J. Romero State Bar No. 24046756 stephen.romero@nortonrosefulbright.com 300 Convent Street, Suite 2100 San Antonio, TX 78205-3792 Telephone: (210) 224-5575 Facsimile: (210) 270-7205 Counsel for Defendants Salix Pharmaceuticals Welfare Benefit Plan, ERISA Plan Number 501, and Valeant Pharmaceuticals North America, L.L.C. CERTIFICATE OF SERVICE I hereby certify that on this 21st day of April, 2017, I electronically filed the foregoing instrument with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following counsel of record: Michael V. Galo, Jr. Galo Law Firm, P.C. 4230 Gardendale, Building 401 San Antonio, Texas 78229 /s/ Mario A. Barrera Mario A. Barrera Case 5:16-cv-00532-DAE Document 20 Filed 04/21/17 Page 14 of 16 28237959.1 - 1 - IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS SAN ANTONIO DIVISION RYAN PRIDEMORE, Plaintiff, v. SALIX PHARMACEUTICALS WELFARE BENEFIT PLAN, ERISA PLAN NUMBER 501, KELLY WEBBER, and VALEANT PHARMACEUTICALS NORTH AMERICA, L.L.C., Defendants. § § § § § § § § § § § § § Case No. 5:16-CV-00532-DAE APPENDIX IN SUPPORT OF DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT In accordance with Fed. R. Civ. P. 56 and Local Rules CV 7(b) and (c) of the United States District Court for the Western District of Texas, Defendants Salix Pharmaceuticals Welfare Benefit Plan, ERISA Plan Number 501, Kelly Webber and Valeant Pharmaceuticals North America, L.L.C. (collectively “Defendants”), submit this Appendix in Support of their Motion for Summary Judgment. Ex. No. Description 1. Amended Employee Retention Policy Summary Plan Description and Plan dated February 4, 2014 2. Letter from Scott Plesha to Ryan Pridemore dated August 22, 2005 3. New Employee Information dated August 26, 2005 4. Letter from Brian Carlino to Ryan Pridemore dated February 5, 2007 5. Sales Force Inline Promotion Criteria dated Jan 1, 2015 (CONFIDENTIAL – Filed Under Seal) Case 5:16-cv-00532-DAE Document 20 Filed 04/21/17 Page 15 of 16 28237959.1 - 2 - Ex. No. Description 6. Press Release dated April 1, 2015 7. Letter on Appeal from Aaron Kim to Michael Galo dated April 15, 2016 8. Email from Aleks Alacahan to Ryan Pridemore dated December 7, 2015 9. Alacahan Declaration 10. Q2 2015 Compensation Guide (CONFIDENTIAL – Filed Under Seal) 11. Email from Pridemore dated January 20, 2016 (4:03 pm) 12. Letter from Aaron Kim to Pridemore dated February 3, 2016 Case 5:16-cv-00532-DAE Document 20 Filed 04/21/17 Page 16 of 16 EXHIBIT 1 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 1 of 49 8018-53-814429-v1 SALIX PHARMACEUTICALS, INC. Amended Employee Retention Policy Summary Plan Description and Plan Effective as amended: February 4, 2014 This is the summary plan description and plan document for the amended Employee Retention Policy (the “Policy”) for Salix Pharmaceuticals, Inc. (the “Company”). In connection with Company’s goals to retain critical employees, motivate our workforce, maintain or increase the value of the Company and treat our employees fairly and honestly, we have developed this Policy. The Policy provides severance benefits to certain groups of employees who lose their positions because of certain Company changes. This document describes who is eligible for severance payments under the Policy, the conditions that an eligible employee must meet to receive these benefits, and general information about the Policy and employees’ rights under it. ELIGIBILITY The employees who are subject to this Policy include all employees below the level of Associate Vice President (the “Covered Employees”). This Policy specifically excludes all employees above the level of Executive Director and those employees that have an employment contract with a severance provision. The benefits under this Policy will only be triggered upon the occurrence of both of the following events: (1) A “Change in Control” of Salix has occurred; and (2) A Covered Employee is terminated without “Reasonable Cause” or terminates his or her employment with “Good Reason” within 12 months after the date of the Change in Control. (For the purposes of this Policy, the terms “Change in Control,” “Reasonable Cause” and “Good Reason” are defined in the form of letter agreement attached as Exhibit A.) BENEFITS Each employee covered by this Policy will receive an individual letter in substantially the form of Exhibit A. Upon the occurrence of the events listed above, and proper execution of a separation agreement and general release, the Covered Employee will be entitled to the following benefits: (1) Severance pay in the form of continued payment of Covered Employee’s base salary for a predetermined number of months (based upon Covered Employee’s level of employment). VALEANT 000145 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 2 of 49 8018-53-814429-v1 2 (2) Reimbursement of premiums for COBRA continuation coverage for group health insurance for Covered Employee and his/her eligible dependents for the period of time that Covered Employee is receiving severance pay. (3) Payment in a lump sum of Covered Employee’s pro rata bonus based upon the target bonus percentage for the Covered Employee’s level of employment and the length of time employed during the current calendar year, calculated as of the date of termination. (4) For any employee who relocated within 18 months prior the date of termination, reimbursement of the employee’s relocation costs for return to the city or town from which he or she was relocated up to the amount received by the employee from the Company for the original relocation. (5) Outplacement assistance at a provider selected by the Company for a predetermined number of months (based upon Covered Employee’s level of employment). ADMINISTRATION OF THE PLAN The Senior Vice President of Human Resources is the Plan Administrator who will determine your eligibility for severance benefits and the amount of severance benefits. The Plan Administrator is responsible for administering the Policy and has discretion to interpret its terms. CLAIMS AND APPEALS PROCEDURES Claims Procedure If you believe that you are entitled to benefits under this Policy and have not received them, you or your authorized representative may file a claim for benefits by writing to the Plan Administrator at the following address: 8510 Colonnade Center Drive, Raleigh, N.C. 27615. Your letter must state the reason why you believe that you are entitled to benefits, and your letter must be received no later than 90 days after your termination of employment, or 90 days after a payment was due, whichever comes first. If your claim is denied, in whole or in part, you will receive a written response within 90 days. This response will include (i) the reason(s) for the denial, (ii) reference(s) to the specific plan provisions on which denial is based, (iii) a description of any additional information necessary to perfect the claim and an explanation of why it is needed, (iv) a description of the Policy’s claims and appeals procedures and the time limits that apply, and (v) a statement of your right to bring suit under Section 502(a) of Employee Retirement Income Security Act of 1974 (ERISA) following the denial of an appeal. In some cases more than 90 days may be needed to make a decision, in which case you will be notified prior to the expiration of the 90 days that more time is needed to review the claim and the date by which the Plan Administrator expects to render the decision. In no event will the extension be for more than an additional 90 days. VALEANT 000146 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 3 of 49 8018-53-814429-v1 3 Appeal of Denied Claim You or your authorized representative may appeal a denied claim by filing an appeal with the Plan Administrator within 60 days after your claim is denied. Your appeal must be sent to the Plan Administrator at the following address: 8510 Colonnade Center Drive, Raleigh, N.C. 27615. As part of the appeal process you will be given the opportunity to submit written comments and information and be provided, upon request and free of charge, with copies of documents and other information relevant to your claim. The review on appeal will take into account all information submitted on appeal, whether or not it was provided for in the initial benefit determination. A decision will be made on your appeal within 60 days, unless additional time is needed. If more time is needed, you will be notified prior to the expiration of the 60 days that up to an additional 60 days is needed and the date by which the Plan Administrator expects to render the decision. If your appeal is denied, in whole or in part, you will receive a written response which will include (i) the reason(s) for the denial, (ii) references to the specific plan provisions on which the denial is based, (iii) a statement that you are entitled to receive, upon request and free of charge, reasonable access to and copies of all documents and other information relevant to your claim on appeal, and (iv) a statement of your right to bring an action under Section 502(a) of ERISA. If your claim is denied on appeal, you have a right to bring an action under Section 502(a) of ERISA. You must pursue all claims and appeals procedures described in the Plan document before you seek any other legal recourse with respect to benefits under the Policy. In addition, any lawsuit must be filed within one year from the date of the final denial of your appeal. The Plan Administrator (or a designee) shall have sole absolute discretion over claims and appeals determinations. PLAN DOCUMENT, AMENDMENT AND TERMINATION The Company reserves the right to amend the Policy at any time, for any reason, and without prior notice. Amendments must be in writing and adopted by the Plan Administrator. PLAN ADMINISTRATION Plan Sponsor Salix Pharmaceuticals, Inc. is the Plan Sponsor. The Plan Sponsor’s Employer Identification Number is 77-0234925. The address of the Plan Sponsor is: 8510 Colonnade Center Drive, Raleigh, N.C. 27615. Plan Administrator The Plan Administrator is the Senior Vice President of Human Resources of Salix Pharmaceuticals, Inc. The Plan Administrator has full authority to administer the Policy, and in that connection he or she has full discretionary authority to interpret the Policy and to make decisions regarding eligibility for benefits under the Policy and the amount of benefits due under the Policy. The address and telephone number of the Plan Administrator is: VALEANT 000147 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 4 of 49 8018-53-814429-v1 4 Salix Pharmaceuticals, Inc. Attn: Jenifer Reynolds, Senior Vice President of Human Resources 8510 Colonnade Center Drive Raleigh, N.C. 27615 (919) 862-1027 The Plan Administrator may delegate any of its authority, including the authority to hear claims and appeals, to other Company officers or employees. Plan Identifying Information The Policy is a welfare benefit plan that provides severance benefits. The plan year is the calendar year. The Policy is considered a component plan under a plan named the Salix Pharmaceuticals Welfare Benefit Plan, ERISA Plan Number 501. Funding of Benefits The entire cost of the Policy is paid by the Company from its general assets. Service of Process, Limitation Period Legal service of process can be made upon the Secretary of the Company by directing service to that officer c/o Salix Pharmaceuticals, Inc., 8510 Colonnade Center Drive, Raleigh, N.C. 27615. Process may also be served upon the Plan Administrator. You must follow all claims procedures described in this document before you seek any other legal recourse with respect to benefits payable under the Policy. Further, if your claim is denied, any lawsuit must be filed within one year of the final denial on appeal of your claim. NO CONTRACT OF EMPLOYMENT Nothing in this Policy creates a vested right to benefits in any employee or any right to be retained in the employ of the Company. GOVERNING LAW The Policy is governed by Employee Retirement Income Security Act of 1974 (ERISA). ERISA is a federal law. To the extent that ERISA (or other federal law) relies upon state law for certain rules or guidance, the Policy shall be interpreted according to the laws of the State of North Carolina. EFFECTIVE DATE This document describes the Policy as in effect on February 4, 2014. VALEANT 000148 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 5 of 49 8018-53-814429-v1 5 STATEMENT OF ERISA RIGHTS The Policy is governed by ERISA, which guarantees certain rights and protections for employees who are eligible for benefits under the Policy (“Plan participants”). ERISA provides that all Plan participants shall be entitled to: (1) examine, without charge, at the Plan Administrator’s office and at other specified locations, Plan documents, and a copy of the latest annual report (Form 5500 series) for the Plan. The annual reports are also available for review at the Public Disclosure Room of the Employee Benefits Security Administration of the U.S. Department of Labor, and (2) obtain copies of the Plan document and summary plan description, and the latest annual report (Form 5500) series upon written request to the Plan Administrator. There may be a reasonable charge for such copies. In addition, ERISA imposes duties upon those who are responsible for the operations of employee benefit plans. The people who operate the Plan, called “fiduciaries” of the Plan, have a duty to do so prudently and in the interest of you and other Plan participants. No one, including the Company or any person, may fire you or otherwise discriminate against you to prevent you from obtaining a Plan benefit or exercising your rights under ERISA. If your claim for a Plan benefit is denied or ignored, in whole or in part, you have a right to know why this was done, to obtain copies of documents relating to the decision without charge and to appeal any denial, all within certain time schedules. Under ERISA, there are steps you can take to enforce the above rights. For instance, if you request a copy of the Plan document or the latest annual report from the Plan and do not receive them within 30 days, you may file suit in a federal court. In such a case, the court may require the plan administrator to provide the materials and pay you up to $110 a day until you receive the materials, unless the materials were not sent because of reasons beyond the control of the administrator. If you have a claim for benefits which is denied after final review, or is ignored in whole or in part, you may file suit in a state or federal court. If it should happen that Plan fiduciaries misuse the plan’s money, or if you are discriminated against for asserting your rights, you may seek assistance from the U.S. Department of Labor or you may file suit in a federal court. The court will decide who should pay court costs and legal fees. If you are successful, the court may order the person you have sued to pay these costs and fees. If you lose, the court may order you to pay these costs and fees, for example, if it finds your claim is frivolous. If you have any questions about the Policy, you should contact the Plan Administrator. If you have any questions about this statement, or about your rights under ERISA, or if you need assistance in obtaining documents from the Plan Administrator, you may contact the nearest office of the Employee Benefits Security Administration (formerly known as the Pension and Welfare Benefits Administration), U.S. Department of Labor, listed in your telephone directory or the Division of Technical Assistance and Inquiries, Employee Benefits Security Administration, U.S. Department of Labor, 200 Constitution Avenue, N.W., Washington, D.C. 20210. You may also obtain certain publications about your rights and responsibilities under ERISA by calling the publications hotline of the Employee Benefits Security Administration. VALEANT 000149 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 6 of 49 8018-53-814429-v1 EXHIBIT A EXAMPLE LETTER AGREEMENT: DO NOT SIGN In consideration of your services to Salix Pharmaceuticals, Inc. (hereinafter “Salix” or the “Company”), the Company is pleased to offer to you separation benefits in the event that your employment with Salix is terminated due to a change in control, subject to the terms and conditions set out in this letter. In order to qualify for these separation benefits, you will have to meet all of the following requirements: 1. You must sign and not revoke (if applicable) a general release in substantially the form attached hereto, releasing Salix from all claims occurring up to the date you sign the release. 2. Your employment must be terminated by Salix or its successor without “Reasonable Cause” (as defined below), or you must terminate your employment for “Good Reason” (as defined below) (such effective date of termination the “Termination Date”), within twelve (12) months after a “Change in Control” (as defined below) of the Company or its parent, Salix Pharmaceuticals, Ltd. No separation benefits will be paid if you are terminated under any other circumstances, or if you are terminated for “Reasonable Cause,” if you resign or retire without “Good Reason” or if your employment is terminated due to death or disability. 3. “Reasonable Cause” shall mean: (a) You commit any act of gross negligence, fraud, dishonesty, or willful violation of any law or material violation of any significant written policy of Salix, that causes or is likely to cause material harm to Salix; (b) You are convicted of (i) a felony or (ii) a serious crime involving moral turpitude; (c) You are guilty of willful or gross failure to substantially perform the duties reasonably assigned to you, or any intentional refusal without compelling reason by you to discharge your job responsibilities and/or respond to Salix’s legitimate job-related requests, insofar as such duties, responsibilities and/or requests do not contravene law and are consistent with your position(s); (d) You fail to cooperate in an investigation conducted and/or undertaken by Salix or a governmental agency which has reasonable and legitimate objectives; or (e) You engage in any act of intentional conflict of interest related to Salix that results in or is likely to result in material economic and/or other material damage to Salix. VALEANT 000150 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 7 of 49 8018-53-814429-v1 2 4. “Good Reason” shall mean the occurrence of any of the following events or conditions: (a) A material adverse change in, or the assignment to you of any duties or responsibilities which are inconsistent with, your status, title, position or responsibilities (including reporting responsibilities) with Salix; (b) A reduction in your salary and/or benefits except to the extent such reduction is comparable to percentage reductions in salary and/or benefits of all other employees of Salix, or any failure to pay you any compensation or benefits to which you are entitled within five (5) days of the date due; or (c) Salix relocates your workplace more than fifty (50) miles from your current workplace. However, “Good Reason” shall not exist unless you notify Salix of the existence of the “Good Reason” event or condition within ninety (90) days of its occurrence and unless Salix after such notification fails to remedy the event or condition within thirty (30) days of notice. 5. A “Change in Control” shall mean a change in control of a nature that would be required to be reported in response to item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), as such Schedule, Regulation and Act were in effect on the date of this letter, assuming that such Schedule, Regulation and Act applied to Salix, provided that such a change in control shall be deemed to have occurred at such time as: (a) Any “person” (as that term is used in Section 13(d) and 14(d)(2) of the Exchange Act) (other than the Company, a subsidiary or an affiliate of the Company) becomes, directly or indirectly, the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act) of securities representing a 33-1/3% or more of the combined voting power for election of members of the Company’s Board of Directors (“Board”) of the then outstanding voting securities of the Company; (b) During any period of two consecutive years or less, individuals who at the beginning of such period constituted the Board of the Company cease, for any reason, to constitute at least a majority of the Board, unless the election of nomination for election of each new member of the Board was approved by a vote of at least two-thirds of the members of the Board then still in office who were members of the Board at the beginning of the period; (c) The equityholders of the Company approve any merger or consolidation to which the Company is a party as a result of which the persons who were equityholders of the Company immediately prior to the effective date of the merger or consolidation (and excluding, however, any shares held by any party to such merger or consolidation and their affiliates) shall have beneficial ownership of less than 50% of the combined voting VALEANT 000151 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 8 of 49 8018-53-814429-v1 3 power for election of members of the Board (or equivalent) of the surviving entity following the effective date of such merger or consolidation; or (d) The equityholders of the Company approve any merger or consolidation as a result of which the equity interests in the Company shall be changed, converted or exchanged (other than a merger with a wholly-owned subsidiary of the Company) or any liquidation of the Company or any sale or other disposition of all or substantially all of the assets of the Company. However, in no event shall a Change in Control be deemed to have occurred with respect to you, if you are part of a purchasing group that consummates the Change in Control transaction. You shall be deemed “part of a purchasing group” for purposes of the preceding sentence if you are either directly or indirectly an equity participant in the purchasing group (except for (i) passive ownership of less than 3% of the stock of the purchasing group, or (ii) ownership of equity participation in the purchasing group which is otherwise not significant, as determined prior to the Change in Control by the Company). Based upon your position with the Company, and following your execution of the general release referenced above and the expiration of any consideration and rescission periods mandated by law, your separation benefits will be as follows: (1) You will be entitled to receive a severance in the form of continued payment of your base salary for 18 months if you hold title of Director or above, or 12 months if you hold any other title (the “Benefit Period”). The severance payments will be semi- monthly cash payments (minus applicable federal, state and local payroll taxes, and other withholdings required by law or authorized by you) paid in accordance with the Company’s payroll procedures through the end of the Benefit Period; (2) If you properly and timely elect to continue your health insurance benefits under COBRA following the Termination Date, the Company will reimburse you for your applicable COBRA premiums necessary to continue the group health insurance coverages (medical and dental, but not disability or life) for the Benefit Period. Following this period, you may have the right to continue your health insurance coverage under COBRA at your own expense; (3) You will be entitled to receive a pro rata bonus payment based upon the target bonus percentage for your level of employment and the length of time employed during the calendar year prior to the Termination Date. The pro rata bonus payment will be paid in a lump sum (minus applicable federal, state and local payroll taxes, and other withholdings required by law or authorized by you); (4) If you relocated in connection with your employment with Salix within twelve (12) months prior to the Termination Date, you will be reimbursed for the relocation costs for your return to the city or town from which you were relocated up to the amount received by you from Salix for the original relocation. You must submit your reimbursement request and back-up documentation in accordance with Salix’s normal VALEANT 000152 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 9 of 49 8018-53-814429-v1 4 relocation policy within six (6) months after the Termination Date to receive the reimbursement. If you choose not to return to your city or town of origin, you will not be eligible to receive this benefit; and (5) You will be entitled to receive outplacement assistance for the duration of the Benefits Period from a provider selected by Salix. This letter agreement is governed by the laws of North Carolina, including the North Carolina Wage and Hour Act, N.C. Gen. Stat. § 95-25.1 et seq This letter agreement is binding upon Salix and its successors and assigns, including any parent, subsidiary and affiliate existing today or becoming such as a result of any Change in Control. Once again, we thank you for your past, present and future contributions to the success of the Company. Sincerely yours, SALIX PHARMACEUTICALS, INC. VALEANT 000153 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 10 of 49 8018-53-814429-v1 CONFIDENTIAL SEPARATION AND RELEASE AGREEMENT This CONFIDENTIAL SEPARATION AND RELEASE AGREEMENT (the “Agreement”) is hereby made and entered into this _____ day of ____________, 20__ by and between Salix Pharmaceuticals, Inc. (“Salix” or the “Company), a California corporation with its principal place of business in Wake County, North Carolina, and the undersigned employee, referred to in this Agreement as “you.” 1. Termination. Except as set out in this Confidential Separation and Release Agreement (the “Agreement”), as provided by the specific terms of a benefit plan or as required by law, upon the termination from your employment with the Company, effective as of ________________, 20__ (the “Termination Date”), all of your employee benefits with the Company are terminated. You hereby represent that you have returned to the Company all Company-owned equipment, keys or passes, software, files, programs and documents (including any copies). Your return of Company property is an express requirement under this Letter Agreement and a condition to your receipt of the Separation Benefits described below. You hereby agree not to seek reemployment by the Company. 2. Separation Benefits. The following compensation and benefits are hereinafter referred to as the “Separation Benefits.” (Additional terms are as defined by the Amended Employee Retention Policy and Letter Agreement issued to you in connection therewith.) (a) Severance Pay. If you sign and do not revoke this Agreement, the Company will pay you your regular base salary (minus applicable federal, state and local payroll taxes, and other withholdings required by law or authorized by you) for the Benefit Period (the “Severance Pay”). You will receive the Severance Pay in semi-monthly cash payments in accordance with the Company’s payroll procedures beginning on the first regular payday of the Company that follows the deadline for signing and returning Agreement plus any revocation period that may be mandated by federal or state law. The first payment will include any payments for the period beginning on the Termination Date and ending on that first payment date. Subsequent payments will be made on the Company’s normal pay days. (b) COBRA Premiums. If you sign and do not revoke this Agreement and properly and timely elect to continue your health insurance benefits under COBRA following the Termination Date, the Company will reimburse you for your applicable COBRA premiums necessary to continue the group health insurance coverages for you and your eligible dependents (medical and dental, but not disability or life) for the Benefit Period. Following this period, you may have the right to continue your health insurance coverage under COBRA at your own expense. (c) Pro Rata Bonus Payment. If you sign and do not revoke this Agreement, you will be entitled to receive a pro rata bonus payment based upon the target bonus percentage for your level of employment and the length of time employed during the calendar year prior to the Termination Date. The pro rata bonus payment will be paid in a lump sum (minus applicable federal, state and local payroll taxes, and other withholdings required by law or authorized by you). VALEANT 000154 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 11 of 49 8018-53-814429-v1 2 (d) Relocation Reimbursement. If you sign and do not revoke this Agreement, and if you relocated in connection with your employment with Salix within twelve (12) months prior to the Termination Date, you will be reimbursed for the relocation costs for your return to the city or town from which you were relocated up to the amount received by you from Salix for the original relocation. You must submit your reimbursement request and back- up documentation in accordance with Salix’s normal relocation policy within six (6) months after the Termination Date to receive the reimbursement. If you choose not to return to your city or town of origin, you will not be eligible to receive this benefit. (e) Outplacement Assistance. If you sign and do not revoke this Agreement, you will be entitled to receive outplacement assistance for the duration of the Benefits Period from a provider selected by Salix. If you do not sign this Agreement and return it to the Company by _________, 20__, or if you revoke it pursuant to Section 9 below, you will not be entitled to receive the Separation Benefits described above. 3. Release of Claims. In exchange for the Company’s providing you with the Separation Benefits described in Section 2, above, by signing this Agreement, you release and forever discharge the Company, as well as its parent companies, affiliates, subsidiaries, divisions, officers, directors, stockholders, partners, associates, employees, agents, representatives, attorneys, lessors, lessees, licensors and licensees, and their respective successors, assigns, heirs, executors and administrators (collectively, the “Company Parties” ), from any and all claims, demands, and causes of action of every kind and nature, whether known or unknown, direct or indirect, accrued, contingent or potential, which you ever had or now have, including but not limited to any claims arising out of or related to your employment with the Company and the termination thereof (except where and to the extent that such a release is expressly prohibited or made void by law). This release includes, without limitation, your release of the Company and the Company Parties from any claims by you for lost wages or benefits, stock options, restricted stock, compensatory damages, punitive damages, attorneys’ fees and costs, equitable relief or any other form of damages or relief. In addition, this release is meant to release the Company and the Company Parties from all common law claims, including claims in contract or tort, including, without limitation, claims for breach of contract, wrongful or constructive discharge, intentional or negligent infliction of emotional distress, misrepresentation, tortious interference with contract or prospective economic advantage, invasion of privacy, defamation, negligence or breach of any covenant of good faith and fair dealing. You also specifically and forever release the Company and the Company Parties (except where and to the extent that such a release is expressly prohibited or made void by law) from any and all claims under North Carolina laws prohibiting discrimination, harassment and retaliation, [ADD HERE STATE LAWS] and all claims under federal law based on unlawful employment discrimination, harassment or retaliation, including, but not limited to, claims for violation of Title VII of the Civil Rights Act, the Americans with Disabilities Act, the Genetic Information and Discrimination Act, and the Federal Age Discrimination In Employment Act (29 U.S.C. § 621 et. seq.). You acknowledge that this release applies both to known and unknown claims that may exist between you and the Company and the Company Parties. You expressly waive and relinquish all VALEANT 000155 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 12 of 49 8018-53-814429-v1 3 rights and benefits which you may have under any state or federal statute or common law principle that would otherwise limit the effect of this Agreement to claims known or suspected prior to the date you execute this Agreement, and do so understanding and acknowledging the significance and consequences of such specific waiver. In addition, you hereby expressly understand and acknowledge that it is possible that unknown losses or claims exist or that present losses may have been underestimated in amount or severity, and you explicitly took that into account in giving this release. Notwithstanding the foregoing, nothing in this Agreement prohibits you from filing a charge with, or participating in any investigation or proceeding conducted by, the U.S. Equal Employment Opportunity Commission or a comparable state or federal fair employment practices agency; provided, however, that this Agreement fully and finally resolves all monetary matters between you and the Company and the Company Parties, and by signing this Agreement, you are waiving any right to monetary damages, attorneys’ fees and/or costs related to or arising from any such charge, complaint or lawsuit filed by you or on your behalf, individually or collectively. In addition, nothing in this Agreement extinguishes any claims you may have against the Company for breach of this Agreement or any claims arising from events that occur following the effective date of this Agreement. 4. No Admissions. You understand, acknowledge and agree that the release set out above in Section 3 is a final compromise of any potential claims by you against the Company and/or the Company Parties in connection with your employment by the Company, and is not an admission by the Company or the Company Parties that any such claims exist or that the Company or any of the Company Parties are liable for any such claims. By signing this Agreement, you agree and acknowledge that you have no cause to believe that any violation of any local, state or federal law has occurred with respect to your employment or separation of employment from the Company, including but not limited to any violation of any federal, state municipal, foreign or international whistleblower or fraud law, statute or regulation. In addition, you further agree and acknowledge that you are not aware of any conduct that would be unlawful under the False Claims Act, the Sarbanes-Oxley Act, the Dodd-Frank Act, or any other compliance obligation. 5. Confidentiality. You hereby represent and agree that you will not (except as required by law) disclose information regarding the specific terms of this Agreement, to anyone FOR CALIFORNIA EMPLOYEES ONLY: You hereby waive any and all rights under Calif. Civil Code § 1542, which provides that: A general release does not extend to claims which the [Employee] does not know or suspect to exist in his favor at the time of executing that release, which, if known by him, must have materially affected his settlement with the [Company]. VALEANT 000156 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 13 of 49 8018-53-814429-v1 4 except your immediate family, your attorney and accountant or financial advisor as reasonably necessary. You also hereby acknowledge and agree that your post-employment duties and obligations under the Employment, Confidential Information, Invention Assignment and Arbitration Agreement signed in connection with your employment with the Company will remain in full force and effect in accordance with its terms, and that a breach of that agreement will also constitute a breach of this present Agreement. Should the disclosure of any “Confidential Information” (as defined by the Employment, Confidential Information, Invention Assignment and Arbitration Agreement) be required of you (a) in response to any summons or subpoena, (b) in connection with any litigation, or (c) in order to comply with any law, order, regulation, request of any government or regulatory agency or ruling applicable to you, prior to making any disclosure you agree to inform the Company of any such request or compelled disclosure as soon as possible, and, to the extent possible, afford the Company the opportunity to contest such disclosure. 6. No Disparagement. You agree that following the Termination Date, you will not denigrate, defame, disparage or cast aspersions upon the Company, the Company Parties, their products, services, business and manner of doing business, and that you will use your reasonable best efforts to prevent any member of your immediate family from engaging in any such activity. Upon inquiry from any third party, the Company will release only your dates of employment and positions held, unless you provide written authorization and a release for the Company to provide additional information. 7. Relief and Enforcement. You understand and agree that if you violate the terms of Sections 5 or 6 of this Agreement, you will cause injury to the Company and/or one or more of the Company Parties) that will be difficult to quantify or repair, so that the Company (and/or the Company Parties) will have no adequate remedy at law. Accordingly, you agree that if you violate Sections 5 or 6 of this Agreement, the Company (or the Company Parties) will be entitled as a matter of right to obtain an injunction from a court of law, restraining you from any further violation of this Agreement. The right to an injunction is in addition to, and not in lieu of, any other remedies that the Company (or the Company Parties) has at law or in equity. 8. No Modifications; Governing Law; Entire Agreement. This Agreement cannot be changed or terminated verbally, and no modification or waiver of any of the provisions of this Agreement will be effective unless it is in writing and signed by both parties. The parties agree that this Agreement is to be governed by and construed in accordance with the laws of the State of North Carolina, and that any suit, action or charge arising out of or relating to this Agreement will be adjudicated in the state or federal courts in Wake County, North Carolina. This Agreement sets forth the entire and fully integrated understanding between the parties, and there are no representations, warranties, covenants or understandings, oral or otherwise, that are not expressly set out herein. 9. Right to Revoke. ONCE SIGNED BY YOU, THIS AGREEMENT IS REVOCABLE IN WRITING FOR A PERIOD OF SEVEN (7) DAYS (THE “REVOCATION PERIOD”). IN ORDER TO REVOKE YOUR ACCEPTANCE OF THIS AGREEMENT, YOU MUST DELIVER WRITTEN NOTICE TO JENIFER REYNOLDS, AND SUCH WRITTEN NOTICE MUST ACTUALLY BE RECEIVED WITHIN THE SEVEN (7) DAY REVOCATION PERIOD. VALEANT 000157 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 14 of 49 8018-53-814429-v1 5 10. Miscellaneous. (a) Should any portion, term or provision of this Agreement be declared or determined by any court to be illegal, invalid or unenforceable, the validity or the remaining portions, terms and provisions shall not be affected thereby, and the illegal, invalid or unenforceable portion, term or provision shall be deemed not to be part of this Agreement. (b) The parties agree that the failure of a party at any time to require performance of any provision of this Agreement shall not affect, diminish, obviate or void in any way the party’s full right or ability to require performance of the same or any other provision of this Agreement at any time thereafter. (c) This Agreement shall inure to the benefit of and shall be binding upon you, your heirs, administrators, representatives, executors, successors and assigns and upon the successors and assigns of the Company. (d) The headings of the paragraphs of this Agreement are for convenience only and are not binding on any interpretation of this Agreement. This Agreement may be executed in counterparts. (e) Counterparts may be transmitted and/or signed by facsimile or electronic mail. The effectiveness of any such documents and signatures shall have the same force and effect as manually signed originals and shall be binding on the parties to the same extent as a manually signed original thereof. YOU HEREBY ACKNOWLEDGE THAT YOU HAVE BEEN GIVEN A PERIOD OF AT LEAST TWENTY-ONE (21) DAYS TO CONSIDER WHETHER TO EXECUTE THIS AGREEMENT, AND THAT CHANGES TO THIS AGREEMENT, WHETHER MATERIAL OR IMMATERIAL, WILL NOT RESTART THE RUNNING OF THE 21 DAY PERIOD. YOU ALSO ACKNOWLEDGE THAT YOU WERE ADVISED BY THE COMPANY IN WRITING TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS AGREEMENT. [Signature page follows.] VALEANT 000158 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 15 of 49 8018-53-814429-v1 6 SALIX PHARMACEUTICALS, INC. By: ________________________________ Carolyn J. Logan President and Chief Executive Officer DATE: ________________________________ EMPLOYEE: ____________________________ (SEAL) [EMPLOYEE NAME] DATE: _____________________________ VALEANT 000159 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 16 of 49 EXHIBIT 2 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 17 of 49 Salix PHARMACEUTICALS, INC. August 22, 2005 Ryan C. Pridemore 16411 South 38th Place Phoenix, AZ 85048 Dear Ryan, It is with great pleasure that I would like to offer you the position of Senior Territory Manager for Salix Pharmaceutical, Inc. (the "Company"). Your proven success, hard work and dedication to InKine Pharmaceutical have demonstrated that you have the potential to be an outstanding Territory Manager for Salix. In fact, the distinction of being a Senior Territory manager is a privilege you have earned. We are looking forward to having you become a member of the Salix Team. This letter is an offer of employment between you and the Company and is contingent upon the closing of the acquisition of InKine Pharmaceutical. As Senior Territory Manager you will report to the District Sales Manager. Your responsibilities and duties will include those normally associated with a Senior Territory Manager and, additionally, you will be responsible for performing such other duties consistent with your position which may be assigned to you from time to time by your manager. In this position, your salary will be $3,750.00 per pay period, which equates to an annual salary of $90,000, paid on a semi-monthly basis after withholding of applicable taxes and other items as required by law. You will also receive a Company car. You will be eligible for benefits including, but not limited to, medical, dental and vision insurance, as well as coverage under the Company's long term disability and life insurance plan, and vacation and sick leave policy as applicable to employees. Additionally, management will recommend to the Board of Directors that you be granted an incentive stock option to purchase 10,000 shares of its Common Stock (vesting over 48 months) pursuant to the Salix Pharmaceuticals, Ltd. 1996 Stock Plan, a copy of which will be provided to you. You will be eligible to participate in the Senior Territory Manager Bonus Plan. In connection with your move to the San Antonio area, Salix will reimburse you for the following reasonable expenses incurred by you, the total not to exceed $50,000: 1. Real estate commission payable upon the sale of your residence in Arizona. 2. Moving expenses for the move of your household goods. We ask that you obtain at least three (3) separate estimates, and please let us know in advance what the cost will be. 3. Expenses incurred in connection with two residence search trips. 1700 Perimeter Park Drive, Morris/Me, NC 27560 www.salix.com T • 919.862.1000 F • 919.862.1095 VALEANT 000138 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 18 of 49 Agreed to and Accepted: C. yan C. Pride ore Date: , 2005 Human Resources: 4. Closing costs for the purchase of a home in the San Antonio area. In addition, you represent that your employment with the Company will not conflict with, and will not be constrained by, any prior employment or consulting agreement or relationship. You represent that you have not, and will not, bring with you to the Company, and will not use in the performance of your responsibilities for the Company, any confidential information, materials or documents of a former employer that are not generally available to the public, unless you have obtained the express written consent of such former employer. You represent that your performance of services for the Company does not and will not breach any agreement or relationship of trust or confidence you may have with any third party, whether oral, written or implied. It is understood that you will begin in this position upon closing the acquisition of InKine Pharmaceutical. Please note that this is an offer for "at will" employment, which does not constitute an offer or guarantee of employment for any period of time. In fact, employment-at- will permits the Company or the employee to terminate the employment relationship at any time, with or without cause or notice. This offer is contingent upon a negative drug screen and background check. This offer constitutes the full and entire understanding and agreement between the parties with respect to the subject hereof, and supersedes any prior discussions with respect thereto. This offer is contingent upon your execution of an Employee Confidential Disclosure and Assignment of Inventions Agreement, completion of an accurate Employment Application, verification of eligibility to work in the U.S., additional state and federal employment forms, as well as a drug screening test reflecting no use of illegal substances, and a criminal records check which reflects no conviction for crimes involving theft, fraud, dishonesty, or embezzlement. We are looking forward to your acceptance of this offer and to working together with you to meet the Company's goals. If you agree to the above terms of your employment, please sign and date your acceptance below and return one copy to Human Resources. Sincerely, 5c,_40agseetp Scott Plesha Executive Director, Sales 1700 Perimeter Park Drive, Morrisville, NC 27560 www.salix.com T • 919.862.1000 F • 919.862.1095 VALEANT 000139 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 19 of 49 EXHIBIT 3 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 20 of 49 EMERGENCY CONTACT INFORMATION: NAME: EMERGENCY PHONE NUMBER: gg I RELATIONSHIP: 10) Sil 36N9 SA IX PHARMACEUTICAL., INC. NEW EMPLOYEE INFORMATION Employment Data- To be Completed by the Human Resources Department VNew Hire CA CkeOaier JOB TITLE: '51i TM Rehire (previous ieif.any DATE OF HIRE: DEPARTMENT: git LE-5 EMPIKOYEE NUMBER: RATE OF PAY: q1 0 (16 - HOURLY SALARY GRADE: vr-FULL TIME PART-TIME SCHEDULED HOURS: Lid Personal Data- To be Completed by Employeel T NAME 704 STREET ADDRESS: ibqii 5eifk /' , LAST NAME M. INITIAL APARTMENT / PO BOX CITY: evtiX STATE: 2- ZIP CODE: 5-0 c COUNTY OF RESIDENCE Ale (l(/l HOME PHONE0150 3 Or."' 709-0 DATE OF BIRTH SOCIAL SE /URI TY NUMBER: SEX: MALE FEMALE OIL E SI NATURE 05 DATE VALEANT 000115 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 21 of 49 EXHIBIT 4 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 22 of 49 Salix PHARMACEUTICALS, INC. February 5, 2007 Ryan Pridemore 115 East Oakview Place San Antonio, TX 78024 Dear Ryan, We are extremely pleased to offer you a promotion to District Sales Manager for Salix Pharmaceuticals, Inc. ("Salix" or the "Company"). Your dedication, work ethic, perseverance and success at Salix have demonstrated that you have the potential to be an excellent contributor in field management. We are looking forward to your continued success in this new position. As District Sales Manager you will report to the Sales Director, West. Your responsibilities and duties will include those normally associated with a District Sales Manager and, additionally, you will be responsible for performing such other duties consistent with your position which may be assigned to you from time to time by your manager. Effective as of the date of this promotion (February 5, 2007), your annual salary will be adjusted to $130,000, paid on a semi-monthly basis after withholding of applicable taxes and other items as required by law. You will be eligible to participate in the Salix field manager bonus program. In connection with your move to the Orange County, CA area, Salix will reimburse you for reasonable expenses incurred by you. We expect the total will not exceed $50,000. Details regarding acceptable expenses are enclosed. Some of these expenses are: 1. Real estate commission payable upon the sale of your residence in Texas. 2. Moving expenses for the move of your household goods. 3. Expenses incurred in connection with two (2) residence search trips. 4. Corporate housing for up to 9 months. Salix uses RELO Direct®, a relocation management service, to handle all relocations. You must use RELO Direct® and their approved vendors for your relocation. Please contact Michelle Snelling as soon as possible so that she may get some information from you regarding your relocation. Once she has this information a Relocation Counselor from RELO Direct® will contact you. 1700 Perimeter Park Drive, Morrisville, NC 27560 www.satix.com I • 919.862.1000 F ■ 919.862.1095 VALEANT 000032 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 23 of 49 Congratulations to you on this promotion! We are looking forward to working together with you to help reach the Company's goals. If you agree to the above terms of your promotion, please sign and date your acceptance below and return one copy to me. Sincerely, Brain Carlino Sales Director, West Agreed to and Accepted: ;(.(1/1-.. r ih Date: (:Aviti (9--, 2007 yan Pridemore Human Resources: AX5 1700 Perimeter Park Orive, Morrisville, NC 27560 www.salix.com T • 919.862.1000 F • 919.862.1095 VALEANT 000033 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 24 of 49 EXHIBIT 5 DOCUMENT FILED UNDER SEAL Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 25 of 49 EXHIBIT 6 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 26 of 49 VALEANT 000252 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 27 of 49 EXHIBIT 7 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 28 of 49 IVPharmaceuticals North America LLC VAL EAN T April 15, 2016 Via FedEx Michael V. Galo The Galo Law Firm P.C. 4230 Gardendale, Building 401 San Antonio, TX 78229 RE: Salix Pharmaceuticals, Inc. Amended Employee Retention Policy – Ryan Pridemore Appeal Dear Mr. Galo: The Plan Administrator for the Salix Pharmaceuticals, Inc. (“Salix”) Amended Employee Retention Policy (the “Policy”) received your letter dated February 18, 2016 on behalf Ryan Pridemore, which appealed for a review of the previous adverse benefit determination against Mr. Pridemore under the Policy (the “Appeal”). The Plan Administrator reviewed the Appeal in light of the terms of the Policy and the information in the administrative record before the Plan Administrator, including the written comments and attached information submitted with the Appeal. Based upon this review, the Plan Administrator has decided to deny the Appeal. Procedural History On January 20, 2016, Mr. Pridemore e-mailed certain Valeant Pharmaceuticals North America LLC (the “Company”) employees to request twelve (12) months of severance payments, reimbursement of applicable COBRA premiums (provided COBRA coverage is elected), and a lump sum pro rata bonus payment, which are separation benefits identified in the Policy under qualifying circumstances. The Plan Administrator regarded this January 20, 2016 correspondence as a claim for benefits under the Policy (the “Claim”). On February 3, 2016, the Plan Administrator advised Mr. Pridemore of its decision to deny the Claim, informed him that he had a right to request a review of the denial of this Claim by filing an appeal, and informed him that he had the opportunity to submit written comments and information for consideration in the Plan Administrator’s review. Description of the Claim on Appeal The Plan Administrator understands that Mr. Pridemore requests on appeal the finding that he terminated his employment for “Good Reason” as defined in the Policy, and that he is VALEANT 000186 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 29 of 49 Michael Galo April 15, 2016 Page 2 of 5 therefore eligible for separation benefits identified in the Policy. The Appeal claims that “Good Reason” for Mr. Pridemore’s termination exists because (a) the composite bonus to which he was previously entitled constitutes a benefit; (b) the composite bonus was not paid within five (5) days of its due date; and (c) that Mr. Pridemore’s change from Executive Regional Sales Manager to District Manager constitutes a material adverse change in his status, title, position or responsibilities. In support of the Appeal, you submitted the Salix Sales Force Inline Promotion Criteria. You also asked that the Plan Administrator include certain documents, or categories of documents, in the administrative record: (1) Mr. Pridemore’s personnel file, (2) payroll history, (3) performance evaluations, (4) records pertaining to all bonuses Mr. Pridemore received while employed by Salix and the Company, and (5) records showing that sales personnel were re-titled as District Managers by the Company. The Appeal, however, does not specify any portion of those documents that you would like the Plan Administrator to consider in support of the contentions you raise in your Appeal. In accordance with the Policy, the review on appeal takes into account all information submitted on appeal, whether or not it was provided for in the initial benefit determination. Background Facts Based on the information made available to the Company, the following are relevant facts: 1. Mr. Pridemore was a participant in the Policy. 2. On April 1, 2015, the Company completed its acquisition of Salix. At the time of the acquisition, Mr. Pridemore was an Executive Regional Sales Manager with Salix. 3. Immediately prior to the acquisition, Mr. Pridemore’s base salary was $186,300. 4. Following the acquisition, Mr. Pridemore became an employee of the Company. 5. Following the acquisition, the terms of Mr. Pridemore compensation were set by the Company, including a base salary of $190,957. 6. Following the acquisition, Mr. Pridemore was subject to the Company’s bonus plan, and was no longer subject to the Salix bonus structure. 7. In December 2015, Mr. Pridemore’s title became District Manager pursuant to a standardization of nomenclature to align with other divisions within the Company. 8. On January 20, 2016, Mr. Pridemore submitted the Claim, requesting twelve (12) months of severance payments, reimbursement of applicable COBRA premiums (if applicable), and a lump sum pro rata bonus payment, which are separation benefits identified in the Policy under qualifying circumstances; in the alternative, Mr. Pridemore requested that the Company redress the issues raised in the Claim. 9. Mr. Pridemore based his Claim on assertion that (a) he was advised that his job position had been re-titled from Executive Regional Sales Manager to District Manager, and (b) that consequently he was precluded from earning the additional ten percent (10%) quarterly “composite” bonus” that he received with Salix. VALEANT 000187 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 30 of 49 Michael Galo April 15, 2016 Page 3 of 5 10. In an e-mail dated January 28, 2016, Mr. Pridemore submitted his letter of resignation to Bill Borland. Reasons for Denial of Appeal Neither the re-titling of Mr. Pridemore’s position from Executive Regional Sales Manager to District Manager, nor change in compensation from the applicable Salix compensation structure to the Company’s applicable compensation structure constitute Good Reason under the Policy, as defined in Section 4(a) and (b) of Exhibit A to the Policy. First, the Appeal asserts that Mr. Pridemore’s prior title of Executive Regional Sales Manager carried more status and prestige than the District Manager title, and that the former title was achieved by performance and tenure. However, based on the Sales Force Inline Promotion Criteria submitted in support of the Appeal, the transition to District Manager does not reflect a reduction in status or prestige, as the District Manager position did not exist within the sales structure outlined therein. Thus, there is nothing in the record suggesting this is a negative change in his status, title or position. The Appeal references Mr. Pridemore’s understanding that a greater number of employees share the same District Manager title. However, following Salix’s acquisition and integration into the Company, a position as District Manager represents a position within a much larger overall organization. As noted, the Executive Regional Sales Manager position and title do not exist within the Company’s sales hierarchy, and the Company does not use the stratification or nomenclature described in the Sales Force Inline Promotion Criteria. And even as Mr. Pridemore’s title was standardized to align with the nomenclature used throughout the Company, his reporting structure remained exactly the same. Thus, characterizing Mr. Pridemore’s role as that of a District Manager does not indicate a demotion or move downward within the Company’s structure. Finally, even until his final day at the Company, Mr. Pridemore continued to use the Executive Regional Sales Manager title in his e- mail communications. To the extent the Appeal contends there was a reduction in status or prestige as a result of the District Manager title, the fact that Mr. Pridemore continued to represent himself as an Executive Regional Sales Manager in work-related communications would have prevented any arguable or perceived reduction in status and prestige from even materializing. Second, neither the Claim nor the Appeal contends that Mr. Pridemore experienced a change in responsibilities, including reporting responsibilities. A review of Mr. Pridemore’s personnel file similarly does not reflect either a material change in job duties or responsibilities, or in reporting responsibilities. With respect to the composite bonus, under the Policy, Good Reason is not triggered where “such reduction is comparable to percentage reductions in salary and/or benefits of all other employees of Salix.” Following the Company’s acquisition of Salix, this change the composite bonus affected all employees that were eligible for the composite bonus, and indeed no employees are now eligible for the ten percent (10%) composite bonus. In other words, all employees of Salix were thereafter ineligible for the composite bonus. The Appeal does not dispute the applicability of the exception set forth in Exhibit A, Section 4(b) of the Policy. VALEANT 000188 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 31 of 49 Michael Galo April 15, 2016 Page 4 of 5 Because the elimination of the composite bonus was applied to all employees eligible for a composite bonus, the Appeal’s dispute regarding whether the composite bonus constitutes a “benefit” is moot. Finally, even if the Appeal’s characterization of the composite bonus as a “benefit” were not moot, it nonetheless is not reasonable. Section 5(1)-(3) of the Policy clearly distinguishes between salary, benefits and bonuses. The definition of “Good Cause” only includes the former two categories, and not the bonus category. In addition, in referring to benefits, the Policy specifically references health insurance benefits; thus the Appeal’s interpretation that a composite bonus is a benefit is not reasonable when viewed in the context of the Policy’s language. Thus, the composite bonus was neither salary nor benefits. As such, a change in his eligibility for a composite bonus does not satisfy the “Good Reason” requirement. For the above reasons, the Plan Administrator concluded in its sole discretion that Mr. Pridemore is not entitled to severance benefits under the Policy. Specific Plan Provisions on Which the Denial Is Based The following excerpts from the Policy are relevant to the resolution of the Appeal: The benefits under this Policy will only be triggered upon the occurrence of both of the following events: (1) A “Change in Control” of Salix has occurred; and (2) A Covered Employee is terminated without “Reasonable Cause” or terminates his or her employment with “Good Reason” within 12 months after the date of the Change in Control. See Policy at “Summary Plan Description and Plan.” 4. “Good Reason” shall mean the occurrence of any of the following events or conditions: (a) A material adverse change in, or the assignment to you of any duties or responsibilities which are inconsistent with, your status, title, position or responsibilities (including reporting responsibilities) with Salix; (b) A reduction in your salary and/or benefits except to the extent such reduction is comparable to percentage reductions in salary and/or benefits of all other employees of Salix, or any failure to pay you any compensation or benefits to which you are entitled within five (5) days of the date due; or (c) Salix relocates your workplace more than fifty (50) miles from your current workplace. However, “Good Reason” shall not exist unless you notify Salix of the existence of the “Good Reason” event or condition within ninety (90) days of its occurrence and unless Salix after such notification fails to remedy the event or condition within thirty (30) days of notice. VALEANT 000189 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 32 of 49 Michael Galo April 15, 2016 Page 5 of 5 See Policy, Exhibit A at Section 4. Upon the occurrence of the events listed above, and proper execution of a separation agreement and general release, the Covered Employee will be entitled to the following benefits: (I) Severance pay in the form of continued payment of Covered Employee's base salary for a predetermined number of months (based upon Covered Employee's level of employment). (2) Reimbursement of premiums for COBRA continuation coverage for group health insurance for Covered Employee and his/her eligible dependents for the period of time that Covered Employee is receiving severance pay. (3) Payment in a lump sum of Covered Employee's pro rata bonus based upon the target bonus percentage for the Covered Employee's level of employment and the length of time employed during the current calendar year, calculated as of the date of termination.... See Policy at "Summary Plan Description and Plan"; Exhibit A at Section 5. No separation benefit will be paid if ... you resign or retire without "Good Reason".... See Policy, Exhibit A at Section 2. Right to Review Relevant Documents. At any time during the review process, Mr. Pridemore has the right to request to review or receive, free of charge, copies of all documents, records and other information relevant to his claim for benefits under the Plan. Right to Bring Legal Action. Please note that, pursuant to the Plan's claims procedure, this decision is final and Mr. Pridemore has exhausted the right to appeal under the claims procedures of the Plan. Mr. Pridemore has the right to bring a civil action under section 502(a) of the Employee Retirement Income Security Act of 1974. In addition, any lawsuit must be filed within one year from the date of the final denial of the Appeal. If you have questions regarding the Company's denial of the Appeal for payment under the Policy, please contact me at Aaron.Kim@valeant.com. Sincerely, /AL— Aaron Kim Assistant General Counsel cc: Kelly Webber VALEANT 000190 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 33 of 49 EXHIBIT 8 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 34 of 49 1 Catania, Denise A. From: Pridemore, Ryan Sent: Friday, January 29, 2016 12:08 AM To: Kim, Aaron Subject: FW: Nomenclature Changes - Q1 2016 Hi Aaron, Here is the email I referenced in my letter. Thanks Ryan Pridemore Executive Regional Sales Manager, GI San Antonio Cell: (210)857-2698 From: Alacahan, Aleks Sent: Monday, December 07, 2015 7:39 PM To: DL-Salix-GI-AllSales Cc: Blum, Jorge; Tay, Debbie; Jorn, Deb; RDU#Dept-Sales_Training; Bentley, Jonathan; Monahan, Suzanne; Martins, Angelina; Kurzeja, Steve; Gumkowski, Michal; Barton, Nicholas; Webber, Kelly; Supetran, Myralyn; Crombie Tamirah; Geary, Elizabeth Subject: Nomenclature Changes - Q1 2016 Hi Everyone, I hope that you are all off to a great start this week and are well. As we approach 2016, which is less than a month away, I wanted to remind everyone that Q4, 2015 is scheduled to close on Christmas day. If you recall, awhile back, we shifted to use weekly versus monthly data for IC purposes, and this is the last full week in 2015. The new year and quarter will begin Monday, December 28, 2015. The analytics team is working diligently to deliver the call-plan data prior to the beginning of the new sales year and will keep you posted on the timing. I also wanted to notify you of one minor change and this is a standardization of our nomenclature, helping to align with all of Valeant’s other divisions. As many of you have seen or experienced in other organizations, starting in 2016, we will go from referring to:  Area as Region  Region as District  Territory will remain unchanged Some of you might wonder, “what does this mean to me?”, and it means absolutely nothing more than remembering the new terminology. For some of us that have been around for some time, like myself, it might take a little getting used to but its ultimately just semantics. As mentioned before, it was to help standardize with the other business units and help increase efficiencies with reporting etc… VALEANT 000160 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 35 of 49 2 As of Monday, December 28th 2015. All Rosters, Systems, Call Plans and communications will reflect these changes. Thanks and let me know if you have any questions. Aleks Alacahan Salix Pharmaceuticals, Inc. Cell: 201-615-1521 Fax: 919-447-3479 VALEANT 000161 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 36 of 49 EXHIBIT 9 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 37 of 49 28188207.1 - 1 - DECLARATION OF ALEKS ALACAHAN I, Aleks Alacahan, do hereby swear and affirm as follows: 1. “I am of sound mind, over 21 years of age, and capable of making this declaration. The facts herein stated are true and correct based on my personal knowledge gained in my position as Vice President of Sales for Salix Pharmaceuticals, Inc., (“Salix”). In this capacity, I am a custodian of records for Salix and Valeant Pharmaceuticals North America, L.L.C. (“Valeant”). 2. As an Executive Regional Sales Manager for Salix, Ryan Pridemore (“Pridemore”) was eligible for a “Composite Bonus” which was a 110% bonus paid quarterly to Executive Territory Sales Managers who maintained a composite ranking in the top 50% of Salix’s Overall Composite Rankings in the applicable quarter. 3. On April 1, 2015, Valeant completed its acquisition of Salix. Following the acquisition, Pridemore became an employee of Valeant. In December 2015, Valeant moved to bring Salix’s job titles in line with Valeant’s structure and Pridemore’s job title was changed to District Manager. This nomenclature change did not result in a change to any of Pridemore’s duties or responsibilities. In addition, following the acquisition, Pridemore and all other Salix employees became subject to Valeant’s bonus plans and were no longer subject to the bonus structure previously applied by Salix. As a result, the Composite Bonus previously available to eligible Salix employees was discontinued and a new bonus structure was put in place. The Salix Composite Bonus was last paid out following the 1st Quarter 2015. The new Valeant bonus structure was effective beginning with the 2nd Quarter 2015. As with all former Salix employees who were previously eligible, Pridemore did not receive a Composite Bonus for the remainder of 2015. 4. Attached as Exhibits 1-8 and 10-12 to Defendants’ Motion for Summary Judgment are various pages of records from Salix and/or Valeant. The pages attached as Exhibits 1-8 and 10-12 to Defendants’ Motion for Summary Judgment are records kept by Salix and/or Valeant in the regular course of business, and it was the regular course of business of Salix and/or Valeant for an employee or representative of Salix and/or Valeant with knowledge of the acts, events, or conditions recorded in the records to make the records or to transmit the information to be included in such records, and the records were made at or near, or reasonably soon after, the time of the acts, events, or conditions recorded. The sources of information of, and the method and circumstances of the preparation of, the attached records were in all respects trustworthy. The records attached are exact duplicates of the originals. Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing is true and correct. Executed on _______4/20/2017 Aleks Alacahan Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 38 of 49 EXHIBIT 10 DOCUMENT FILED UNDER SEAL Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 39 of 49 EXHIBIT 11 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 40 of 49 1 Catania, Denise A. From: Kim, Aaron Sent: Wednesday, February 03, 2016 4:09 PM To: Pridemore, Ryan Cc: Webber, Kelly Subject: RE: Attachments: Ryan Pridemore (2-3-2016).pdf Ryan, Please see the attached letter in response to your claim under the Salix retention policy. Separately, we received your letter of resignation via e-mail on January 28, which we accepted via Bill Borland’s e-mail on January 29 indicating February 5 as your last day. I understand you had concern about not receiving a response from me on your severance question before then, but we can stay with the February 5 end date. We wish you well, Aaron From: Pridemore, Ryan [mailto:Ryan.Pridemore@Salix.com] Sent: Monday, February 01, 2016 8:25 PM To: Kim, Aaron Cc: Webber, Kelly Subject: RE: Actually when I spoke with my supervisor Bill Borland he mentioned February 12th as my end date which gives you all your 30 days to respond to my letter. I let him know that I would work on annual reviews during that time frame and fulfill my normal job duties and he said that would be greatly appreciated. So not sure where the February 5th date came from but that is not accurate and is different from what my supervisor and I discussed we only discussed February 12th. Ryan Pridemore Executive Regional Sales Manager, GI San Antonio Cell: (210)857-2698 From: Kim, Aaron Sent: Monday, February 01, 2016 3:11 PM To: Pridemore, Ryan Cc: Webber, Kelly Subject: RE: Ryan, I received the additional information you forwarded this morning, thanks for that. VALEANT 000163 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 41 of 49 2 I understand you have resigned and your last day is this Friday, February 5. I’ll make every effort to have a written response to your severance question to you before then, hopefully by Wednesday. Aaron Kim Vice President, Assistant General Counsel (949) 398-5715 (office) Aaron.Kim@valeant.com 50 Technology Drive | Irvine, CA 92618 From: Pridemore, Ryan [mailto:Ryan.Pridemore@Salix.com] Sent: Thursday, January 28, 2016 3:59 PM To: Webber, Kelly Subject: FW: Hi Kelly, I never heard back from anyone on this. I realize you all have a timeframe to respond but I would appreciate a prompt response. Has a decision been made? Thanks Ryan Pridemore Executive Regional Sales Manager, GI San Antonio Cell: (210)857-2698 From: Pridemore, Ryan Sent: Wednesday, January 20, 2016 4:03 PM To: Alacahan, Aleks; 'Jorn, Deb'; Borland, Bill; Webber, Kelly Subject: Dear Colleagues, I write to you regarding concerns that I have related to my job classification, duties, compensation, and benefits. As you know, I was recently advised that my job position has been reclassified from Executive Regional Sales Manager to District Manager. As I understand the current situation, all Regional Sales Manager, Senior Regional Sales Manager, and Executive Regional Sales Managers have all been reclassified as District Managers. Moreover, new hires who lack my tenure and experience are being hired into the same position, District Manager. Thus, despite my many years of excellent performance, I have essentially been lumped into a job classification with many others. Additionally, this job re-classification precludes me from earning the additional ten-percent quarterly “composite” bonus that I was promised and received with Salix. Indeed, I previously inquired about the Company’s failure to include this bonus as a part of the incentive compensation plan, but I have not received a satisfactory response. I also would like to take this opportunity to advise you that I was recently denied a promotion to a Director position for discriminatory reasons. Although I had the support and approval of Vice President Alex Alacahan, and even though I had already been required to perform Director duties, I was denied the position as a result of the intervention of Deb Jorn, Group Company Chairman. Deb stated: “I know people want to hire who they know (a reference to Alex Alacahan’s desire to promote me), but being a female myself, I would like to see more women like Jen Huus and Amanda VALEANT 000164 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 42 of 49 3 Williamson, and we need to hire for more diversity. “ Later, when Alex told me that I had been denied the position, I asked why I was not selected. Alex commented that Kelly Webber and Deb Jorn had said I need a “more diverse background.” Under these circumstances, it certainly appears that I have been the victim of reverse discrimination by managers employed at the highest level of this organization. This is very disappointing to me, as I am led to believe that I have no opportunity for growth in this Company because I am a white male. Promotion and other employment decisions should be based on merit, and not on meeting diversity quotas. Under the Salix Pharmaceuticals Amended Employee Retention Policy, I may terminate my employment for “Good Cause” and receive certain enumerated benefits, including base salary continuation for twelve months, payment of COBRA benefits, and a pro-rated bonus. I request that you immediately redress the issues raised in this letter, or in the alternative, make arrangements to pay me the benefits I am entitled to under the Salix Pharmaceuticals Amended Employee Retention Policy. I look forward to hearing from you as soon as possible. Ryan Pridemore Executive Regional Sales Manager, GI San Antonio Cell: (210)857-2698 VALEANT 000165 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 43 of 49 EXHIBIT 12 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 44 of 49 February 3, 2016 Via E-mail (Ryan.Pridemore@salix.com) RE: Salix Pharmaceuticals, Inc. Amended Employee Retention Policy – Request for Severance Mr. Pridemore: Valeant Pharmaceuticals North America LLC (the “Company”) is in receipt of your e-mail correspondence of January 20, 2016. The Company will regard your correspondence as a claim for benefits under the Salix Pharmaceuticals, Inc. Amended Employee Retention Policy (the “Policy”). In accordance with that Policy, the Plan Administrator has delegated authority to me to respond to your claim. In your e-mail correspondence of January 20, 2016, you request 12 months of severance payments, reimbursement of applicable COBRA premiums (should you elect COBRA coverage), and a lump sum pro rata bonus payment, which are separation benefits identified in the Policy under qualifying circumstances. This letter discusses the facts underlying your claim, analyzes the relevant provision of the Policy and notifies you of the Company’s decision regarding your claim. Background Facts. Based on the information made available to the Company, we have established the following relevant facts: 1. You were a participant in the Policy. 2. On April 1, 2015, the Company completed its acquisition of Salix Pharmaceuticals, Inc., (“Salix”). 3. Following the acquisition, you became an employee of the Company. 4. Following the acquisition, your title became District Manager. 5. Following the acquisition, the terms of your compensation were set by the Company. 6. Following the acquisition, you were subject to the Company’s bonus plan, and were no longer subject to the bonus structure applied to you by Salix. 7. On January 20, 2016, you requested twelve (12) months of severance payments, reimbursement of applicable COBRA premiums (should you elect COBRA coverage), and a lump sum pro rata bonus payment, which are separation benefits identified in the Policy under qualifying circumstances. VALEANT 000166 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 45 of 49 Ryan Pridemore February 3, 2016 Page 2 of 5 Relevant Provisions of the Policy. The following excerpts from the Policy are relevant to the resolution of your claim: The benefits under this Policy will only be triggered upon the occurrence of both of the following events: (1) A “Change in Control” of Salix has occurred; and (2) A Covered Employee is terminated without “Reasonable Cause” or terminates his or her employment with “Good Reason” within 12 months after the date of the Change in Control. See Policy at “Summary Plan Description and Plan.” 4. “Good Reason” shall mean the occurrence of any of the following events or conditions: (a) A material adverse change in, or the assignment to you of any duties or responsibilities which are inconsistent with, your status, title, position or responsibilities (including reporting responsibilities) with Salix; (b) A reduction in your salary and/or benefits except to the extent such reduction is comparable to percentage reductions in salary and/or benefits of all other employees of Salix, or any failure to pay you any compensation or benefits to which you are entitled within five (5) days of the date due; or (c) Salix relocates your workplace more than fifty (50) miles from your current workplace. However, “Good Reason” shall not exist unless you notify Salix of the existence of the “Good Reason” event or condition within ninety (90) days of its occurrence and unless Salix after such notification fails to remedy the event or condition within thirty (30) days of notice. See Policy, Exhibit A at Section 4. Upon the occurrence of the events listed above, and proper execution of a separation agreement and general release, the Covered Employee will be entitled to the following benefits: (1) Severance pay in the form of continued payment of Covered Employee’s base salary for a predetermined number of months (based upon Covered Employee’s level of employment). (2) Reimbursement of premiums for COBRA continuation coverage for group health insurance for Covered Employee and his/her eligible dependents for the period of time that Covered Employee is receiving severance pay. (3) Payment in a lump sum of Covered Employee’s pro rata bonus based upon the target bonus percentage for the Covered Employee’s level of VALEANT 000167 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 46 of 49 Ryan Pridemore February 3, 2016 Page 3 of 5 employment and the length of time employed during the current calendar year, calculated as of the date of termination…. See Policy at “Summary Plan Description and Plan”. No separation benefit will be paid if ... you resign or retire without “Good Reason”…. See Policy, Exhibit A at Section 2. Decision, and Reasons for Decision. Neither the re-titling of your position from Executive Regional Sales Manager to District Manager, nor the transition from the applicable Salix compensation structure to the Company’s applicable compensation structure constitute “Good Reason” under the Policy, as defined in Section 4(a) and (b) of Exhibit A to the Policy. First, while your claim asserts your concern that other employees share your new title of District Manager, there are no factors suggesting that this results in a material adverse change in your status, title, position or responsibilities that you previously held while at Salix, or an assignment to you of duties or responsibilities inconsistent with the role you held at Salix. Second, your transition to the Company’s compensation system from the Salix compensation and bonus structure applicable to you as an Executive Regional Sales Manager does not constitute a reduction in your salary and/or benefits. Your claim references the elimination of the 10% “composite” bonus that you were eligible for at Salix (provided that other qualifying criteria were met, including your remaining an employee at the time of payout to receive the bonus, and maintaining a composite ranking in the top 50% of the Overall Composite Rankings in the applicable quarter). To qualify as “Good Reason,” you must experience a “reduction in your salary and/or benefits.” However, the composite bonus described in your claim does not constitute salary or benefits. • The Policy addresses “salary” in terms of employee base salary. See Policy, Exhibit A at Section 5(1). Additionally, the Policy’s discussion of bonus payments is separate and distinct from any discussion of salary. See Policy, Exhibit A at Section 5(3). Thus, in determining whether there has been a salary reduction under the Policy, the incentive compensation described in your claim does not fall within the Policy’s definition of “salary.”1 • It likewise does not fall within the meaning of “benefits,” which encompass those health insurance benefits specifically referenced in the policy. See Policy, Exhibit A at Section 5(2). Finally, even assuming that the bonus at issue in your claim was considered “salary,” and even if you experienced a reduction in your salary or benefits, “Good Reason” is not triggered where 1 We also note that you have received a base salary increase. VALEANT 000168 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 47 of 49 Ryan Pridemore February 3, 2016 Page 4 of 5 “such reduction is comparable to percentage reductions in salary and/or benefits of all other employees of Salix.” Following the Company’s acquisition of Salix, this change to the composite bonus affected all employees that were eligible for the composite bonus, and indeed no employees are now eligible for the composite bonus. Thus, this change was applicable to all other employees of Salix. For the reasons set forth above, the Company has determined that you have not terminated your employment for Good Reason. Therefore, in accordance with the terms of the Policy, the Company must deny your request for payment of severance, reimbursement of applicable COBRA premiums, and a lump sum pro rata bonus payment under the Policy. At this time, the Company is unaware for any additional information necessary to perfect your claim for payment of your vested benefit under the Policy. Right to Review. If you disagree with the Company’s adverse determination of your claim, you have the right to request a review of your claim by filing an appeal with the Plan Administrator within 60 days after your claim is denied. While the Policy states that appeals are to be sent to the Plan Administrator, because review of your claim has been delegated to me, any appeal may be sent to: Valeant Pharmaceuticals North America LLC Attention: Aaron Kim 50 Technology Drive Irvine, CA 92618 As part of the appeal process you will be given the opportunity to submit written comments and information and be provided, upon request and free of charge, with copies of documents and other information relevant to your claim. The review on appeal will take into account all information submitted on appeal, whether or not it was provided for in the initial benefit determination. A decision will be made on your appeal within 60 days, unless additional time is needed. If more time is needed, you will be notified prior to the expiration of the 60 days that up to an additional 60 days is needed and the date by which the Plan Administrator expects to render the decision. Determination on Review. If your appeal is denied, in whole or in part, you will receive a written response which will include (i) the reason(s) for the denial, (ii) references to the specific plan provisions on which the denial is based, (iii) a statement that you are entitled to receive, upon request and free of charge, reasonable access to and copies of all documents and other information relevant to your claim on appeal, and (iv) a statement of your right to bring an action under Section 502(a) of ERISA. The Plan Administrator (or a designee) shall have sole absolute discretion over claims and appeals determinations. VALEANT 000169 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 48 of 49 VALEANT 000170 Case 5:16-cv-00532-DAE Document 20-1 Filed 04/21/17 Page 49 of 49