COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company leases certain facilities, vehicles and equipment principally under operating leases. Rental expense related to operating lease agreements was $84 million, $85 million and $75 million for 2016, 2015 and 2014, respectively. Minimum future rental payments under non-cancelable operating and capital leases for each of the five succeeding years ending December 31 and thereafter are as follows:



(in millions)	Operating Lease Obligations		Capital Lease Obligations
2017	$	87	$	3
2018	67		4
2019	58		3
2020	45		3
2021	36		4
Thereafter	147		9
Total	$	440	$	26

Other Commitments

The Company has commitments related to capital expenditures of approximately $65 million as of December 31, 2016. In addition, in connection with the Sprout Acquisition, the merger agreement contains a contractual term (which term is in dispute, as further described below) for expenditures of no less than $200 million with respect to Addyi® for selling, general and administrative, marketing and research and development expenses from the period commencing January 1, 2016 through June 30, 2017. In November 2016, the shareholder representative of the former shareholders of Sprout filed a lawsuit against the Company and Valeant alleging, among other things, breach of contract with respect to certain terms of the merger agreement relating to the Sprout Acquisition, including the disputed contractual term to spend no less than $200 million in certain expenditures. Refer to Note 3 and Note 20 for additional information regarding the Sprout Acquisition and this lawsuit.

Under certain agreements, the Company may be required to make payments contingent upon the achievement of specific developmental, regulatory, or commercial milestones. In connection with certain business combinations, including the Salix Acquisition and the Sprout Acquisition, among others, the Company may make contingent consideration payments, as further described in Note 3 and Note 6. In addition to these contingent consideration payments, as of December 31, 2016, the Company estimates that it may pay other potential milestone payments and license fees, including sales-based milestones, of up to approximately $1,040 million over time, in the aggregate, to third parties, primarily consisting of the following:

•

Under the terms of the October 2015 license agreement with AstraZeneca for brodalumab, described in Note 3, the Company may pay up to $150 million (of which $130 million became payable as a result of the FDA's approval on February 15, 2017 of the BLA for Siliq™ (brodalumab)) in pre-launch milestones and up to another $175 million in sales-related milestones. After approval, AstraZeneca and the Company will share profits.


•	In connection with certain agreements assumed in the Salix Acquisition which was consummated in April 2015, the Company estimates that it may pay to third parties potential milestones of up to approximately $250 million over time (the majority of which relates to sales-based milestones), in the aggregate.

•

Under the terms of a March 2010 development and licensing agreement between B&L and NicOx, the Company has exclusive worldwide rights to develop and commercialize, for certain indications, products containing latanoprostene bunod, a nitric oxide donating compound for the treatment of glaucoma and ocular hypertension. The Company may be required to make potential regulatory, commercialization and sales-based milestone payments over time up to $163 million, in the aggregate, as well as royalties on future sales.


•	Under the terms of amendments entered into in August 2014 to the agreements with Spear with respect to the authorized generic for Retin-A® and the authorized generic for Carac®, respectively, the Company may be required to make uncapped sales-based milestones over time, which the Company currently estimates will not exceed $50 million, in the aggregate, within the next five years.

Due to the nature of these arrangements, the future potential payments related to the attainment of the specified milestones over a period of several years are inherently uncertain.

Indemnification Provisions

In the normal course of business, the Company enters into agreements that include indemnification provisions for product liability and other matters. These provisions are generally subject to maximum amounts, specified claim periods, and other conditions and limits. As of December 31, 2016 or 2015, no material amounts were accrued for the Company’s obligations under these indemnification provisions. In addition, the Company is obligated to indemnify its officers and directors in respect of any legal claims or actions initiated against them in their capacity as officers and directors of the Company in accordance with applicable law. Pursuant to such indemnities, the Company is indemnifying certain former officers and directors in respect of certain litigation and regulatory matters.