WAIVER AND FIRST AMENDMENT TO CREDIT AGREEMENT

Exhibit 10.63

Execution Version

WAIVER AND FIRST AMENDMENT TO CREDIT AGREEMENT

THIS WAIVER AND FIRST AMENDMENT TO CREDIT AGREEMENT (as the same may from time to time be amended, restated or otherwise modified, this “ Agreement ”) is made as of August 4, 2008 and entered into by and among SALIX PHARMACEUTICALS, LTD. (the “ Borrower ”), BANK OF AMERICA, N.A., as Administrative Agent (in such capacity, the “ Administrative Agent ”), and the lenders party hereto (collectively, the “ Lenders ”).

RECITALS

A. The Borrower, the Lenders and the Administrative Agent have entered into that certain Credit Agreement dated as of February 22, 2007 (as amended hereby and as further amended, restated, supplemented or otherwise modified, the “ Credit Agreement ”), pursuant to which the Lenders have agreed to make the Loans (such term, together with each other capitalized term used in this Agreement but not defined in this Agreement, shall be defined in accordance with the Credit Agreement) and other extensions of credit, all upon the terms and conditions set forth in the Credit Agreement.

B. The Borrower has requested that the Administrative Agent and the Lenders agree to a waiver and certain amendments to the Credit Agreement.

C. Subject to the terms and conditions hereof, the Lenders are willing to grant the Borrower’s requests.

D. In consideration of the agreements hereinafter set forth, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

AGREEMENT

1. Waiver . Subject to the terms and conditions hereof, including, without limitation, the conditions to effectiveness set forth in Section 3 , the Administrative Agent and the Lenders hereby waive any Event of Default that may have arisen under Section 8.01(d) and/or Section 8.01(n) solely as a result of the approval by Office of Generic Drugs on December 28, 2007 of three generic balsalazide capsule products, as disclosed in the “Notes to Condensed Consolidated Financial Statements” in the Form 10-Q filed by the Borrower with the United States Securities and Exchange Commission on May 7, 2008 (the pertinent portion of which is set forth on Exhibit A hereto).

2. Amendments to the Credit Agreement . The Administrative Agent, the Lenders and the Borrower agree to amend, effective in accordance with Section 3 below, the Credit Agreement as follows:

(a) Section 1.01 of the Credit Agreement is hereby amended by amending and restating or adding (as applicable) the following definitions in their entirety:

“‘ Applicable Rate ’ means, from the effective date of the Waiver and First Amendment, for so long as all Outstanding Amounts are fully cash collateralized in accordance with Section 2.14 , and provided that no Default or Event of Default has occurred and is continuing, the following percentages per annum set forth for Level I. Otherwise, ‘Applicable

Rate’ means the following percentages per annum, based upon the Consolidated Leverage Ratio as set forth in the most recent Compliance Certificate received by the Administrative Agent pursuant to Section 6.02(a) :

Any increase or decrease in the Applicable Rate resulting from a change in the Consolidated Leverage Ratio shall become effective as of the first Business Day immediately following the date a Compliance Certificate is delivered pursuant to Section 6.02(a) ; provided , however , that if a Compliance Certificate is not delivered when due in accordance with such Section, then Pricing Level IV shall apply as of the first Business Day after the date on which such Compliance Certificate was required to have been delivered. The Applicable Rate in effect from the Closing Date until receipt by the Administrative Agent of the Borrower’s Compliance Certificate for the fiscal quarter ended June 30, 2007 shall be determined based upon Pricing Level I.

Notwithstanding anything to the contrary contained in this definition, the determination of the Applicable Rate for any period shall be subject to the provisions of Section 2.10(b) .”

“‘ Waiver and First Amendment ’ means that certain Waiver and First Amendment to Credit Agreement dated as of August 4, 2008 by and among the Borrower, the Administrative Agent and the lenders party thereto.”

(b) Article II is hereby amended by adding the following Section 2.14:

“ 2.14 Collateralization . Notwithstanding anything contained herein, or in any other Loan Document, to the contrary, the Borrower shall pledge and deposit with the Administrative Agent, for the benefit of the Secured Parties, an amount in cash equal to 100% of all Outstanding Amounts as cash collateral for the Obligations and pursuant to documentation in form and substance reasonably satisfactory to the Administrative Agent (which documents are hereby consented to by the Lenders). Such cash collateral shall be maintained in a blocked deposit account or certificate of deposit at Bank of America and shall be subject to the dominion

and control of the Administrative Agent. The Borrower hereby reaffirms the security interests granted under the Collateral Agreement, which such grants include a security interest in all cash, deposit accounts, certificates of deposit and all balances therein and all proceeds of the foregoing, including, without limitation, the cash collateral and related account contemplated hereby, all in favor of the Administrative Agent and for the benefit of the Secured Parties. In addition to the other conditions and requirements for Credit Extensions set forth herein, no further Credit Extension shall be permitted unless and until each such requested Credit Extension is fully cash collateralized in accordance herewith.”

(c) Section 4.02 of the Credit Agreement is hereby amended by adding the following item (d):

“(d) The Administrative Agent shall have received cash collateral in an amount equal to 100% of each such Credit Extension in accordance with Section 2.14 .”

(d) Section 6.02(a) of the Credit Agreement is hereby amended and restated as follows:

“(a) subject to the limitation set forth in Section 7.12(d) , concurrently with the delivery of the financial statements referred to in Sections 6.01(a) and (b) , a duly completed Compliance Certificate signed by the chief executive officer, chief financial officer, treasurer or controller of the Borrower;”

(e) Section 7.12 is hereby amended and restated in its entirety to read as follows:

“7.12 Financial Covenants.

(a) Consolidated Leverage Ratio . Except as provided in subsection (d) below, permit the Consolidated Leverage Ratio at any time during any period of four fiscal quarters of the Borrower to be greater than 2.75 to 1.00;

(b) Consolidated Fixed Charge Coverage Ratio . Except as provided in subsection (d) below, permit the Consolidated Fixed Charge Coverage Ratio as of the end of any fiscal quarter of the Borrower to be less than 1.25 to 1.00;

(c) Minimum Cash Balance . At all times maintain a cash balance on the balance sheet of the Borrower of not less than $23,000,000.

(d) From the effective date of the Waiver and First Amendment, so long as all Outstanding Amounts are fully cash collateralized in accordance with Section 2.14 , and provided that no Default or Event of Default has occurred and is continuing, compliance by the Borrower and its Subsidiaries with the financial covenants set forth in subsection (a) and subsection (b) above shall be suspended. In furtherance thereof, during such period neither the Borrower nor any of its Subsidiaries shall be required to complete a Compliance Certificate pursuant to Section 6.02(a) with respect to Sections 7.12(a) and 7.12(b) ; provided that nothing in this subsection (d) shall be deemed to limit or otherwise restrict the scope or type of information that the Administrative Agent and Lenders may request from the Borrower and its Subsidiaries under this Agreement, including, without limitation, Compliance Certificates showing financial covenant calculations.”

(f) Schedule 2.01 of the Credit Agreement is hereby amended and restated in its entirety to read as set forth on Schedule 2.01 hereto.

(g) Exhibit D of the Credit Agreement is hereby amended and restated in its entirety to read as set forth on Exhibit D hereto.

(h) All references to “RBC Centura Bank” in the Credit Agreement and all other applicable Loan Documents are hereby amended to read “RBC Bank (USA) (formerly known as RBC Centura Bank).”

3. Effectiveness; Conditions Precedent . This Agreement shall be effective when all of the conditions set forth in this Section 3 shall have been satisfied in form and substance satisfactory to the Administrative Agent:

(a) The Administrative Agent shall have received duly executed counterparts of this Agreement from each of the Borrower, its Subsidiaries, the Administrative Agent and each Lender consenting to the terms hereof (each such Lender, a “ Consenting Lender ”) and acknowledged by each Lender not consenting to this Agreement and exiting the credit facility concurrently with the effectiveness hereof (each such Lender, an “ Exiting Lender ”).

(b) The Borrower shall have paid all reasonable professional fees and expenses of the Administrative Agent in connection with this Agreement, the Loan Documents and the transactions contemplated hereby (including all reasonable fees and expenses of Winston & Strawn LLP in its capacity as counsel to the Administrative Agent) pursuant to wire transfer instructions to be provided by the Administrative Agent.

(c) In addition to any amounts previously paid or owing to the Administrative Agent or Lenders, the Borrower shall have paid to the Administrative Agent for the benefit of each Consenting Lender a consent fee in an amount equal to 25 basis points times the sum of each Consenting Lender’s Commitment (after giving effect to the Commitment Reduction set forth in Section 2(f) above).

(d) The Administrative Agent shall have received a favorable opinion of counsel to the Borrower, addressed to the Administrative Agent and each Lender, in form and substance satisfactory to th