Exhibit 10.3

 

EXECUTION VERSION

 

SUBORDINATION AGREEMENT

 

This Subordination Agreement (the “Agreement”) is made as of November 8, 2018,
by and between CANTOR FITZGERALD SECURITIES, as administrative agent and
collateral agent for the New Lenders (in such capacities, together with any
successor administrative agent and collateral agent, “Senior Agent”), the
signatories hereto under the heading “NEW LENDERS” (each a “New Lender” and each
in its capacity as a holder of New Senior Debt and the Roll Up Debt, as
applicable, together with the Senior Agent, collectively, the “Senior Lenders”),
and NOVELION THERAPEUTICS INC., a corporation organized under the laws of
British Columbia (“Novelion”) and NOVELION SERVICES USA, INC., a Delaware
corporation (“Novelion USA” and together with Novelion, solely in their
respective capacities as creditors of the Borrower (as defined below) and/or any
Subsidiary of the Borrower (but, for the avoidance of doubt, not in any capacity
as an equity holder of the Borrower), the “Junior Creditor”).

 

Recitals

 

A.                                    Aegerion Pharmaceuticals, Inc., a Delaware
corporation (“Borrower”) has obtained certain loans or other credit
accommodations from the Senior Lenders that are secured by assets and property
of Borrower.

 

B.                                    The Junior Creditor has previously
extended loans or other credit accommodations to Borrower.

 

C.                                    To induce the New Lenders to extend new
credit to Borrower and to make such other accommodations to or for the account
of Borrower as to such new credit, or to grant such renewals or extension of any
such loan, extension of credit, purchase, or other accommodation as the Senior
Lenders may deem advisable, the Junior Creditor is willing to subordinate:
(i) all of Borrower’s indebtedness and obligations to the Junior Creditor
(including, without limitation, principal, premium (if any), interest, fees,
charges, expenses, costs, professional fees and expenses, and reimbursement
obligations, and all obligations and indebtedness of Borrower to the Junior
Creditor) under, pursuant to, or in connection with, that certain Amended and
Restated Loan and Security Agreement, dated as of March 15, 2018, between the
Junior Creditor and Borrower (as amended by Amendment No. 1 and Consent, dated
as of the date hereof (the “Existing Debt Consent”) and as further amended,
modified, restated, replaced or supplemented from time to time, the “Existing
Loan Agreement”) and the other “Loan Documents” as therein defined, respectively
(together with the Existing Loan Agreement and as amended, modified, restated,
replaced or supplemented from time to time, the “Existing Loan Documents”),
whether presently existing or arising in the future pursuant to the Existing
Loan Documents (the “Existing Debt”) or any other documentation providing for
any payment obligation of Borrower or any Subsidiary of Borrower to the Junior
Creditor or any affiliate thereof, including, without limitation, under that
certain (x) Master Service Agreement, dated as of December 1, 2016, between
Borrower and Novelion, (y) Master Service Agreement, dated as of December 1,
2016, between Borrower and Novelion USA, and (z) Master Service Agreement, dated
as of December 1, 2016, between Borrower and Novelion (together with the
Existing Debt, the “Subordinated Obligations”) to all of Borrower’s indebtedness
and obligations to the Senior Lenders constituting New Senior Debt (as defined
below); and (ii) all of the Junior Creditor’s Liens (as

 

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defined below) in the Collateral (as defined below) to all of the Senior
Lenders’ Liens in the Collateral securing the New Senior Debt.

 

NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:

 

Section 1.                                           New Senior Debt
Subordination; Priority.

 

1.1                               Any Lien on the Collateral securing any
Subordinated Obligation or any other obligations or liabilities under the
Existing Loan Documents, as the case may be, now or hereafter held by or on
behalf of the Junior Creditor or any agent or trustee therefor, in each case,
regardless of how acquired, whether by grant, possession, statute, operation of
law or court order, subrogation or otherwise, shall be subordinated in all
respects to any Lien on the Collateral securing any New Senior Debt, under the
New Money Loan Documents (as defined below), as the case may be, now or
hereafter held by or on behalf of any of the Senior Lenders, but not, for the
avoidance of doubt, to any Lien on any Collateral securing Roll Up Debt (as
defined below).  Notwithstanding the respective dates of attachment or
perfection of the Liens of the Junior Creditor and the Liens of the Senior
Lenders, all now existing and hereafter arising Liens granted to, or purported
to be granted to any or all of the Senior Lenders on account of the New Senior
Debt (but not the Roll Up Debt) in any property of Borrower and its Subsidiaries
and all proceeds thereof to secure any New Senior Debt, including, without
limitation, the “Collateral”, as defined in that certain Bridge Credit
Agreement, dated as of the date hereof (as amended and restated, amended,
modified, restated, replaced or supplemented from time to time in accordance
with this Agreement, the “New Money Loan Agreement”) and the other “Loan
Documents” (collectively, together with the New Money Loan Agreement and, in
each case, as amended, modified, restated, replaced or supplemented from time to
time, the “New Money Loan Documents”) (the “Collateral”), shall at all times be
senior to the Liens of the Junior Creditor granted under any of the Existing
Loan Documents.  The Junior Creditor hereby (a) acknowledges and consents to
(i) Borrower and its Subsidiaries granting to the Senior Lenders a Lien in the
Collateral to secure the New Obligations (as defined below), (ii) the Senior
Lenders filing any and all financing statements and other documents as deemed
necessary by the Senior Lenders in order to perfect their Lien in the Collateral
to secure the New Obligations, and (iii) the entering into of the New Money Loan
Agreement and other New Money Loan Documents by Borrower and its Subsidiaries,
(b) acknowledges and agrees that the New Senior Debt and the Roll Up Debt
(together, the “New Obligations”), the entry into the New Money Loan Agreement
in the form existing on the date hereof and all other New Money Loan Documents
by Borrower and its Subsidiaries, and the Liens granted, or purported to be
granted, by Borrower and its Subsidiaries to the Senior Lenders in the
Collateral to secure the New Obligations shall be permitted under the provisions
of the Existing Loan Documents (notwithstanding any provision of the Existing
Loan Documents to the contrary), (c) acknowledges, agrees and covenants that the
Junior Creditor shall not contest, challenge or dispute the validity,
attachment, perfection, priority (to the extent securing New Senior Debt, or
lack of priority, with respect to the Liens securing the Roll Up Debt) or
enforceability of the Senior Lenders’ Lien in the Collateral, or the validity,
priority (or lack of priority, with respect to the Roll Up Debt) or
enforceability of the New Obligations, (d) acknowledges, agrees and covenants
that the Junior Creditor shall not contest, challenge or dispute the validity of
that certain Loan and Security Agreement, dated as of March 15, 2018, between
Borrower, Wilmington Savings Fund Society FSB, and the lenders party thereto, or
the obligations of Borrower arising thereunder, or any refinancing thereof

 

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pursuant to the New Money Loan Agreement, and (e) acknowledges and agrees that
the provisions of this Agreement will apply fully and unconditionally even in
the event that the Senior Lenders’ Lien in the Collateral to secure the New
Obligations (or any portion thereof) shall be unperfected or otherwise
avoidable.  Each of the Senior Lenders hereby (a) acknowledges and consents to
(i) Borrower’s and its Subsidiaries’ continuing grant to the Junior Creditor of
a Lien in the Collateral, and (ii) the Junior Creditor filing any and all
financing statements and other documents as deemed necessary by the Junior
Creditor in order to perfect or maintain the perfection of its Lien in the
Collateral, provided that such filings are made in accordance with the terms
hereof, and (b) acknowledges and agrees that the Existing Debt outstanding as of
the date hereof, the Existing Loan Documents as in effect on the date hereof,
and the Liens previously granted by Borrower and its Subsidiaries to the Junior
Creditor in the Collateral are permitted under the provisions of the New Money
Loan Documents (notwithstanding any provision of the New Money Loan Documents to
the contrary).

 

1.2                               All Subordinated Obligations are subordinated
in right of payment to all obligations and liabilities of Borrower and its
Subsidiaries to the Senior Lenders now existing or hereafter arising under,
pursuant to or in connection with the New Money Loan Agreement other than the
Roll Up Debt, including, without limitation, the Obligations (as defined in the
New Money Loan Agreement) in respect of or arising in connection with the New
Money Debt (and for the avoidance of doubt, other than the Obligations relating
to or arising in connection with the Roll Up Debt), together with all reasonable
and documented costs of collecting such Obligations in respect of or arising in
connection with the New Money Debt (including attorneys’ fees for one primary
and one local counsel and one financial advisor to the Senior Lenders, and one
primary and one local counsel to the Senior Agent (for all its capacities,
including as agent with respect to Roll Up Debt)) and all interest, reasonable
and documented costs and expenses, and all of the Senior Lenders’ post-petition
claims against Borrower and the estate of Borrower that constitute Obligations
under New Money Loan Agreement, accruing or incurred thereon or in connection
therewith after the commencement by or against Borrower and its Subsidiaries of
any bankruptcy, reorganization or similar proceeding (regardless of whether such
interest, costs, expenses, or post-petition claims are allowable in such
proceeding and even if any such interest, costs and expenses are disallowed in
such proceeding), but excluding the Roll Up Debt (and also excluding, for the
avoidance of doubt, Obligations relating to or arising in connection with the
Roll Up Debt) (such obligations, collectively, the “New Senior Debt”), which for
the avoidance of doubt includes, prior to the Payment in Full of the New Senior
Debt Obligations, all reasonable costs and expenses of collecting the Roll Up
Loan (including attorneys’ fees) (but excluding any costs and expenses of
defending any cause of action challenging the validity of the Roll Up Debt or
the Liens securing the Roll Up Debt, which such costs and expenses shall
constitute Roll Up Debt); provided that, in no event shall the principal amount
of the New Senior Debt exceed the New Senior Debt Cap (as defined below) (which,
for the avoidance of doubt is exclusive of fees and paid-in-kind interest
compounded and added to the principal amount of New Senior Debt pursuant to the
New Money Loan Agreement and reasonable and documented fees and expenses,
including reasonable fees and expenses of one primary and one local counsel and
one financial advisor to the Senior Lenders, and one primary and one local
counsel to the Senior Agent (for all its capacities, including as agent with
respect to Roll Up Debt), in accordance with the terms of the New Money Loan
Agreement).

 

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1.3                               Other than (a) Permitted Junior Securities,
(b) regularly scheduled payments of payment-in-kind interest (including at the
stated default rate, if applicable), (c) the Permitted Uses (as defined, as of
the date hereof, in the New Money Loan Agreement), (d) the Permitted Affiliate
Services Payments (as defined in the New Money Loan Agreement), (e) the
reasonable and documented fees and expenses of one local and one primary counsel
solely in connection with the documentation of this Agreement, the Existing Debt
Consent, the New Money Loan Documents and the transactions to be contemplated
thereunder on the closing date of the New Money Loan Agreement, (f) the
prepayments on the Existing Debt (i) to be made on the closing date of the New
Money Loan Agreement in an amount equal to $3.5 million which shall be applied
to the partial prepayment of $3.5 million in principal of the Existing Debt
comprising the Non-Contested Novelion Intercompany Loan Amount (as defined
below) and (ii) from a portion of the proceeds of the Permitted Licensing
Transaction (as defined, as of the date hereof, in the New Money Loan
Agreement), if and when consummated, in the amount as set forth, as of the date
hereof, in Schedule 1.01 of the New Money Loan Agreement, which such amount
shall be applied first to the remaining Existing Debt comprising the
Non-Contested Novelion Intercompany Loan Amount and second, if any such proceeds
remain, to prepay in part the remaining principal amount of the Existing Debt,
(g) the payment in kind of a consent fee of 0.50% of the outstanding principal
of the Existing Debt on the closing date of the New Money Loan Agreement, after
giving effect to the prepayment contemplated under the preceding clause
(f)(i) (which shall be compounded and added to the principal amount of the
Existing Debt), and (h) as provided in Sections 1.6 and 1.9 of this Agreement;
in each case, which the Junior Creditor may receive and Borrower and its
Subsidiaries may make in accordance with the terms of this Agreement and the
Existing Loan Documents, the Junior Creditor will not demand (except to
accelerate the Existing Debt solely in accordance with Section 1.10) or receive
from Borrower or any Subsidiary thereof (and Borrower will not pay, or permit
any of its Subsidiaries to pay, to the Junior Creditor) all or any part of the
Subordinated Obligations, by way of payment, prepayment, setoff, lawsuit or
otherwise, nor will the Junior Creditor exercise any remedy with respect to any
property of Borrower or any Subsidiary, nor will the Junior Creditor, except as
otherwise permitted pursuant to Section 1.10 hereof, take any Enforcement Action
(as hereinafter defined), unless and until, and subject to the terms of the
Existing Loan Documents, the earliest of (i) the Senior Lenders notify in
writing Borrower and the Junior Creditor that such payment may be made to and
received by the Junior Creditor, (ii) (1) the New Senior Debt has been paid in
full in cash, (2) the Senior Lenders have no commitment or obligation to lend
any further funds to Borrower, and (3) all financing agreements between the
Senior Lenders (other than with respect to the Roll Up Debt) and Borrower
pursuant to which the Senior Lenders could be required to advance funds to or
for the benefit of Borrower are terminated with respect to the Senior Lenders,
including the payment in full of any debtor-in-possession financing to the
extent permitted by the terms of this Agreement, the adequate protection claims
to the extent not contrary to the terms of this Agreement (regardless of whether
such financing or claims are allowable in such proceeding and even if any such
financing and/or claims are disallowed in such proceeding) (the date on which
each of subparts (1), (2) and (3) above have occurred is hereinafter the
“Payment in Full of the New Senior Debt Obligations”), or (iii) the expiration
of the Junior Standstill Period (defined below).  For the avoidance of doubt,
until the Payment in Full of the New Senior Debt Obligations, the Borrower shall
continue to elect that interest payable under the Existing Loan Agreement be
paid in kind pursuant to Section 2.2(d) of the Existing Loan Agreement.  In the
event that the Junior Creditor receives any such payment that

 

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is not otherwise permitted under this Section 1.3, Section 1.6 or Section 1.9,
the provisions of Section 1.5 hereof shall apply.  Nothing in this Section 1.3
shall prohibit the Junior Creditor from converting all or any part of the
Existing Debt into equity securities of Borrower, provided that, if such
securities have any call, put or other conversion features that would obligate
Borrower to declare or pay dividends, make distributions, or otherwise pay any
money or deliver any other securities or consideration to the holder, the Junior
Creditor hereby agrees that Borrower may not declare, pay or make such
dividends, distributions or other payments with respect to such other securities
or consideration to such Junior Creditor, and such Junior Creditor shall not
accept any such dividends, distributions or other payments with respect to such
other securities or consideration.

 

1.4                               Nothing in Sections 1.2 or 1.3 hereof shall
prohibit the Junior Creditor from receiving Permitted Junior Securities in
exchange or satisfaction for all or any part of the Subordinated Obligations, in
accordance with the terms and conditions of the Existing Loan Documents as in
effect on the date hereof.  “Permitted Junior Securities” means securities
distributed in any Insolvency Proceeding (as defined below), consisting of debt
securities or equity securities that are subordinated in right of payment to the
New Senior Debt (or any debt securities issued in respect thereof), and in the
case of debt securities secured by Liens, such Liens shall be subordinated to
the Liens securing the New Senior Debt (or any debt securities issued in respect
thereof), in each case, to the same extent as set forth in this Agreement.

 

1.5                               The Junior Creditor shall promptly deliver to
the Senior Agent in the form received (except for endorsement or assignment by
the Junior Creditor where required by the Senior Lenders) for application to the
New Senior Debt any payment, distribution, security or proceeds received by such
Junior Creditor with respect to the Subordinated Obligations other than in
accordance with this Agreement including, without limitation the provisions of
Section 1.3; provided, however, that any such payment, distribution, security or
proceeds shall not be deemed applied to the New Senior Debt unless and until it
has been reduced to cash, which reduction to cash the Senior Lenders shall use
commercially reasonable efforts to accomplish promptly after receipt of such
non-cash distribution.

 

1.6                               In the event of the commencement of any case
or proceeding under any bankruptcy or insolvency law or laws relating to the
relief of debtors, including, without limitation, any voluntary or involuntary
bankruptcy, insolvency, receivership or other similar statutory or common law
proceeding or arrangement involving Borrower or any Subsidiary, the readjustment
of its liabilities, any assignment for the benefit of any creditor or any
marshalling of its assets or liabilities (each, an “Insolvency Proceeding”),
(a) this Agreement shall remain in full force and effect and enforceable in
accordance with Section 510(a) of Title 11 of the United States Code (as
amended, the “United States Bankruptcy Code”), (b) the Collateral shall include,
without limitation, all Collateral arising during or after any such Insolvency
Proceeding, and (c) no payment may be made to the Junior Creditor on account of
the Subordinated Obligations (other than Permitted Junior Securities,
payment-in-kind interest (including at the stated default rate, if applicable),
and adequate protection payments approved by the applicable bankruptcy court
overseeing the Insolvency Proceeding paid in kind, except for out of pocket fees
and expenses of counsel and one financial advisor to the Junior Creditor (or its
counsel), which may be paid in cash) until the Payment in Full of the New Senior
Debt Obligations has occurred.

 

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1.7                               The Junior Creditor shall, simultaneously with
giving any notice of default to Borrower, provide the Senior Lenders with a copy
of any notice of default given to Borrower.  The Junior Creditor acknowledges
and agrees that any event of default under the Existing Loan Documents shall be
deemed to be a default and an event of default under the New Money Loan
Documents.  Each Senior Lender shall, simultaneously with giving any notice of
default to Borrower, provide the Junior Creditor with a copy of any notice of
default given to Borrower.  Each Senior Lender acknowledges and agrees that any
event of default under the New Money Loan Documents shall be deemed to be a
default and an event of default under the Existing Loan Documents.

 

1.8                               Prior to Payment in Full of the New Senior
Debt Obligations, the Junior Creditor agrees: (a) to execute, verify, deliver
and file any proofs of claim in respect of the Subordinated Obligations
requested by the Senior Lenders in connection with any such Insolvency
Proceeding and hereby irrevocably authorizes, empowers and appoints the Senior
Lenders its agent and attorney-in-fact to prepare, execute, verify, deliver and
file proofs of claim on account of the Existing Debt upon the failure of the
Junior Creditor to promptly do so (in any event prior to twenty (20) days before
the expiration of the time to file such proof of claim); provided that the
Senior Lenders shall have no obligation to execute, verify, deliver and/or file
any such proof of claim and/or vote any such claim; and (b) that the Junior
Creditor will not (1) propose or support in any way any plan of reorganization
in an Insolvency Proceeding that does not provide for the Payment in Full of the
New Senior Debt Obligations or (2) propose or support in any manner any filing,
argument, motion or any action that challenges, directly or indirectly, the
validity, priority, perfection or enforceability of the New Obligations, the
Liens securing the New Obligations or otherwise, or the priority of the New
Obligations.

 

1.9                               In addition to and without limiting the
foregoing: (x) until Payment in Full of the New Senior Debt Obligations, the
Junior Creditor shall not commence or join in any involuntary bankruptcy
petition or similar judicial proceeding against Borrower and its Subsidiaries,
and (y) if an Insolvency Proceeding occurs, until Payment in Full of the New
Senior Debt Obligations has occurred (i) without seeking or obtaining the
consent of any Junior Creditor, the Senior Lenders may consent to the use of
cash collateral and may provide debtor-in-possession financing, and any third
party, with the consent of the Senior Lenders, may provide debtor-in-possession
financing on such terms as are consistent with and do not violate this
Agreement, including the relative rights hereunder of the Junior Creditor and
the Senior Lender with respect to the Roll Up Debt hereunder, in an amount no
greater than $30,000,000, as the Senior Lenders and the Borrower shall in good
faith determine, (ii) if use of cash collateral by Borrower, or the provision of
debtor-in-possession financing is consented to by the Senior Lenders not in
violation of this Agreement, the Junior Creditor shall not oppose such use of
cash collateral or such debtor-in-possession financing on the basis that the
Junior Creditor’s interest in the Collateral (if any) is impaired by such use or
financing or inadequately protected by such use or financing, provided that the
Liens securing the Subordinated Obligations shall be subordinate to the Liens
securing such debtor-in-possession financing in the same priorities as in place
prior to the borrowing of such debtor-in-possession financing and the Junior
Creditor is permitted to seek, and the Senior Lenders shall not oppose, the
adequate protection described in clauses (D) and (E) of the next sentence of
this Section 1.9, (iii) the Junior Creditor shall not object to, or oppose, any
sale or other disposition of any assets comprising all or part of the
Collateral, free and clear of Liens and claims of any party, including the
Junior Creditor, under Section 363 of

 

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the United States Bankruptcy Code or otherwise, on the basis that the interest
of the Junior Creditor in the Collateral (if any) is impaired by such sale or
inadequately protected as a result of such sale, and the Junior Creditor, solely
in its capacity as a junior secured lender, waives its rights under Section 363
of the United States Bankruptcy Code (excluding the right for the Junior
Creditor to credit bid so long as such credit bid results in the Payment in Full
of the New Senior Debt Obligations at closing) and shall be deemed to have
consented to such sale or other disposition of such assets in its capacity as a
secured creditor, if the Senior Lenders have consented to, or support, such sale
or disposition; provided the Junior Creditor shall retain any objection rights
in its capacity as an unsecured creditor or shareholder subject to the terms of
this Agreement; provided further that Liens of the parties hereto attach to the
proceeds of such sale, and the proceeds of such sale are used to pay the
Obligations of the parties hereto, in each case, in accordance with the relative
priorities of such obligations, (iv) the Junior Creditor shall not object to,
protest or oppose, and shall be deemed to consent to, any adequate protection
that the Senior Lenders may seek in respect of the New Senior Debt, and (v) the
Junior Creditor shall not propose or provide, or join, direct, support or
encourage a third party in proposing or providing, any debtor-in-possession
financing that does not result, upon any initial borrowing thereunder, in
Payment in Full of the New Senior Debt Obligations and payment in full in cash
of the Roll Up Debt; provided, however, that so long as the Junior Creditor does
not otherwise join, direct, support or encourage any third party in providing
debtor-in-possession financing that results in Payment in Full of the New Senior
Debt obligations and Payment in Full of the Junior Obligations (subject to
customary challenge rights) and primes the Roll Up Debt (and Senior Lenders
expressly reserve all of their rights to oppose any such debtor-in-possession
financing), the Junior Creditor’s receipt of such Payment in Full of Junior
Obligations, in and of itself, shall not constitute a breach of this clause (v);
provided, further that the Senior Lenders shall retain any objection rights in
their capacity as unsecured creditors subject to the terms of this Agreement. 
Consistent with the terms of this Agreement and acting in accordance with the
terms of this Agreement, the Junior Creditor shall be entitled (A) to file any
necessary responsive or defensive pleadings in opposition to any motion, claim,
adversary proceeding or other pleading made by any person objecting to, or
otherwise seeking the disallowance of, or the treatment of, the claims of the
Junior Creditor, including without limitation any claims secured by the
Collateral, or challenging the perfection, enforceability or unavoidability of
any Lien of the Junior Creditor, (B) file a proof of claim, vote on a plan of
reorganization and make other filings, arguments and motions with respect to the
Subordinated Obligations in accordance with this Agreement, (C) exercise any
right or remedy available to an unsecured creditor unless such exercise violates
this Agreement, (D) if the Senior Lenders (or any subset thereof) are granted
adequate protection in the form of a Lien on additional or replacement
collateral and/or a superpriority administrative claim in connection with any
debtor-in-possession financing or use of cash collateral under Section 363 or
364 of the United States Bankruptcy Code or any similar provision of law
applicable in an Insolvency Proceeding, then the Junior Creditor may seek or
request adequate protection in the form of a Lien on such additional or
replacement collateral and/or a superpriority administrative claim (as
applicable), which Lien and/or superpriority administrative claim is
subordinated to the Liens (including any replacement Liens) securing, and claims
with respect to, all New Senior Debt and such debtor-in-possession financing
(and all obligations relating thereto) on the same basis as the other Liens
securing, and claims with respect to, the Subordinated Obligations are so
subordinated to the Liens securing New Senior Debt under this Agreement, and
(E) to the extent that the Senior Lenders are granted adequate

 

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protection in the form of payments in the amount of current post-petition
reasonable and documented fees, expenses, and/or other cash payments, then the
Junior Creditor shall not be prohibited from seeking and accepting adequate
protection in the form of payments in the amount of its reasonable and
documented fees and expenses and/or cash payments (as applicable), provided any
such adequate protection, other than with regards to out of pocket fees and
expenses of counsel and one financial advisor to the Junior Creditor, shall not
be paid in cash until the Payment in Full of the New Senior Obligations. 
Furthermore, in the event that the Junior Creditor actually receives any payment
of (or through) adequate protection in any Insolvency Proceeding (including any
payment in respect of a claim granted under Section 507(b) of the United States
Bankruptcy Code, but excluding out of pocket fees and expenses of Junior
Creditor’s counsel and financial advisor), the same shall be segregated and held
in trust and promptly paid over to the Senior Agent, in the same form as
received, with any necessary endorsements, to be held or applied by the Senior
Agent in accordance with the terms of the New Money Loan Documents until the
Payment in Full of the New Senior Debt Obligations shall have occurred and all
of the Senior Lenders’ post-petition claims against Borrower and the estate of
Borrower, or any Subsidiary and its estate, shall be indefeasibly paid in full
in cash, and any financing commitments of the Senior Lenders shall have been
terminated before any of the same may be retained by the Junior Creditor.  The
Junior Creditor irrevocably authorizes, empowers and directs any debtor, debtor
in possession, receiver, trustee, liquidator, custodian, conservator or other
Person having authority to pay or otherwise deliver all such payments to the
Senior Lenders.

 

1.10                        Until the Payment in Full of the New Senior Debt
Obligations, the Junior Creditor agrees not to take any Enforcement Action
during any Junior Standstill Period, except that: (A) the Junior Creditor may
accelerate the Existing Debt if the Senior Lenders have accelerated the New
Senior Debt or if an Insolvency Proceeding is pending (but if the Senior Lenders
rescind such acceleration by the Senior Lenders, then the Junior Creditor, as
applicable, shall also rescind their acceleration); (B) the Junior Creditor may
join (but not exercise control over) a judicial foreclosure or Lien enforcement
proceeding with respect to the Collateral initiated by the Senior Lenders, to
the extent such action could not reasonably be expected to interfere materially
with the actions of the Senior Lenders; (C) the Junior Creditor may bid for or
purchase Collateral at any public, private or judicial foreclosure upon any
Collateral initiated by the Senior Lenders or any sale of Collateral during an
Insolvency Proceeding, provided such bid provides for the Payment in Full of the
New Senior Debt Obligations at closing, and (D) enforce this Agreement and the
rights granted hereunder.

 

Section 2.                                           Roll Up Lien Priority.

 

2.1                               For the avoidance of doubt, (i) the Liens on
the Collateral securing the Roll Up Debt under the New Money Loan Agreement
shall be junior in priority to the Liens held by or on behalf of the Junior
Creditor, or any agent or trustee therefor, securing the Existing Loan Documents
(subject to Section 2.5 of this Agreement), but (ii) the Roll Up Debt shall not
be subordinated in right of payment to the Subordinated Obligations.

 

2.2                               Other than (a) Permitted Junior Roll Up
Securities and (b) regularly scheduled payments of payment-in-kind interest
(including at the stated default rate, if applicable) and the accrual of fees
and expenses with respect to the Roll Up Debt; in each case, which the New

 

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Lenders may receive on account of the Roll Up Debt and Borrower may make in
accordance with the terms hereof, following the Payment in Full of the New
Senior Debt Obligations, the New Lenders will not demand or receive from
Borrower or any Subsidiary (and Borrower will not pay, or cause any Subsidiary
to pay, to any Senior Lender) any Collateral, distributions in respect thereof
or proceeds thereof, including any such Collateral constituting proceeds, in
each case with respect to the Roll Up Debt, by way of payment, prepayment,
setoff, lawsuit or otherwise, nor will any New Lender exercise any remedy with
respect to any property of Borrower and its Subsidiaries in respect of the Roll
Up Debt, nor will any New Lender, as the holder of any Roll Up Debt, except as
otherwise permitted pursuant to Section 2.8 hereof, take any Enforcement Action
(as hereinafter defined) against any Collateral in respect of the Roll Up Debt,
unless and until the earliest of (i) the Junior Creditor notifies in writing
Borrower and the New Lenders that such payment may be made to and received by
the New Lenders, or (ii) (1) the obligations comprising Existing Debt, if any,
have been paid in full in cash other than any amounts that have been adjudicated
not to be valid, binding and enforceable by a final order of a court of
competent jurisdiction, (2) the Junior Creditor has no commitment or obligation
to lend any further funds to Borrower, and (3) all financing agreements between
the Junior Creditor and Borrower pursuant to which the Junior Creditor could be
required to advance funds to or for the benefit of Borrower are terminated and
all of the Junior Creditor’s post-petition claims against Borrower and the
estate of Borrower that constitute Obligations under Existing Loan Documents,
accruing or incurred thereon or in connection therewith after the commencement
by or against Borrower and its Subsidiaries of any bankruptcy, reorganization or
similar proceeding (regardless of whether such interest, costs, expenses, or
post-petition claims are allowable in such proceeding and even if any such
interest, costs and expenses are disallowed in such proceeding) are paid (the
date on which each of subparts (1), (2) and (3) above have occurred is
hereinafter the “Payment in Full of the Junior Obligations”).  In the event that
any New Lender receives any Collateral or proceeds of Collateral on account of
the Roll Up Debt in connection with the exercise of rights or remedies against
the Collateral or otherwise in violation of this Agreement following Payment in
Full of the New Senior Debt Obligations and prior to Payment in Full of the
Junior Obligations that is not otherwise permitted under this Section 2.2, the
provisions of Section 2.4 hereof shall apply.  Nothing in this Section 2.2 shall
prohibit any New Lender from converting all or any part of the Roll Up Debt into
equity securities of Borrower, provided that, if such securities have any call,
put or other conversion features that would obligate Borrower to declare or pay
dividends, make distributions, or otherwise pay any money or deliver any other
securities or consideration to the holder, each New Lender hereby agrees that
Borrower may not declare, pay or make such dividends, distributions or other
payments to such New Lender, and such New Lender shall not accept any such
dividends, distributions or other payments until the Payment in Full of the
Junior Obligations.

 

2.3                               Nothing in Sections 2.1 or 2.2 hereof shall
prohibit any New Lender from receiving Permitted Junior Roll Up Securities in
exchange or satisfaction for all or any part of the Roll Up Debt, in accordance
with the terms and conditions of the New Money Loan Documents as in effect on
the date hereof.  “Permitted Junior Roll Up Securities” means securities
distributed in any Insolvency Proceeding, consisting of debt securities or
equity securities that are subordinated to the Existing Debt (or any debt
securities issued in respect thereof), and in the case of debt securities
secured by Liens, such Liens shall be subordinated to the Liens securing the
Existing Debt (or any debt securities issued in respect thereof), in each case,
to the same extent as set forth in this Agreement.

 

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2.4                               If the New Lenders receive distributions with
respect to the Roll Up Debt before the Payment in Full of the New Senior Debt
Obligations, such amounts will be deemed applied to the New Senior Debt until
the Payment in Full of the New Senior Debt Obligations.  Following Payment in
Full of the New Senior Debt Obligations and solely until Payment in Full of the
Junior Obligations, each New Lender shall promptly deliver to the Junior Lenders
in the form received (except for endorsement or assignment by the Junior
Creditor where required by the New Lenders) for application to the Existing Debt
any Collateral, distributions in respect thereof or proceeds thereof, including
any such Collateral constituting proceeds, received by such New Lender with
respect to the Roll Up Debt in connection with the exercise of any right or
remedy (including any right of set-off or recoupment) against the Collateral or
in violation of this Agreement.  Furthermore, in the event that any New Lender
actually receives any payment of (or through) adequate protection in any
Insolvency Proceeding (including any payment in respect of a claim granted under
Section 507(b) of the United States Bankruptcy Code) with respect to the Roll Up
Debt following the Payment in Full of the New Senior Debt Obligations, the same
shall be segregated and held in trust and promptly paid over to the Junior
Creditor, in the same form as received, with any necessary endorsements, to be
held or applied by the Junior Creditor in accordance with the terms of the
Existing Loan Documents until the Payment in Full of the Junior Obligations
shall have occurred before any of the same may be retained by one or more of the
New Lenders.  Each New Lender irrevocably authorizes, empowers and directs any
debtor, debtor in possession, receiver, trustee, liquidator, custodian,
conservator or other Person having authority to pay or otherwise deliver all
such payments to the Junior Creditor.

 

2.5                               Consistent with the terms of this Agreement,
in each case acting in accordance with the terms of this Agreement, the New
Lenders in respect of the Roll Up Debt shall be entitled (A) to file any
necessary responsive or defensive pleadings in opposition to any motion, claim,
adversary proceeding or other pleading made by any person objecting to, or
otherwise seeking the disallowance of, the claims of the New Lenders, including
without limitation any claims secured by the Collateral, or challenging the
perfection, enforceability or unavoidability of the Lien of the New Lenders,
(B) file a proof of claim, vote on a plan of reorganization and make other
filings, arguments and motions with respect to the Roll Up Debt in accordance
with this Agreement, and (C) exercise any rights and remedies that may be
exercised by an unsecured creditor.  For the avoidance of doubt, the Senior
Lenders, whether as a secured or unsecured creditor or in any other capacity,
may challenge the validity and/or enforceability of the Existing Debt including,
without limitation, asserting that such Existing Debt is subject to
recharacterization, setoff, subordination, defense or any similar legal or
equitable argument, and nothing in this Agreement shall modify or otherwise
affect the right of the New Lenders, in any capacity, to do so; provided, in no
event shall the New Lenders (in any capacity including as a member of any
official committee or ad hoc committee of creditors or as a decision maker for
any trust established in an Insolvency Proceeding) challenge, join, direct,
support or encourage any other party in challenging or seeking to challenge,
Existing Debt incurred under the Existing Loan Agreement and outstanding as of
the date hereof in the aggregate amount of $25 million (the “Non-Contested
Novelion Intercompany Loan Amount”), or contest the validity and/or
enforceability of such amount (or any payments received by Novelion on account
of the Non-Contested Novelion Intercompany Loan Amount in accordance with this
Agreement); provided nothing herein shall prevent or restrict the New Lenders
from voting in favor of a plan of reorganization in an Insolvency Proceeding
proposed by the Borrower or a third party, for which plan the New Lenders shall
neither be a plan sponsor or plan proponent, which contemplates,

 

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provides for, or reserves the right for any other party to, challenge or contest
the validity of the Non-Contested Intercompany Loan Amount, provided further,
that the New Lenders shall not direct or otherwise instruct The Bank of New York
Mellon Trust Company, N.A., as trustee for holders of the Convertible Notes (as
defined in the Existing Loan Agreement), in their capacity as holders of
Convertible Notes to pursue any challenge to the validity or enforceability of
the Non-Contested Novelion Intercompany Loan Amount (including any payments
received by Novelion on account of the Non-Contested Novelion Intercompany
Amount).

 

2.6                               Until the Payment in Full of the Junior
Obligations, the Senior Lenders agree not to take any Enforcement Action against
the Collateral in respect of the Roll Up Debt during any Roll Up Standstill
Period, except that: (A) the Senior Lenders, as holders of Roll Up Debt, may
join (but not exercise control over) a judicial foreclosure or Lien enforcement
proceeding with respect to the Collateral initiated by the Junior Creditor, to
the extent such action could not reasonably be expected to interfere materially
with the actions of the Junior Creditor; and (B) the Senior Lenders, as holders
of Roll Up Debt, may bid for or purchase Collateral at any public, private or
judicial foreclosure upon any Collateral initiated by the Junior Creditor or any
sale of Collateral during an Insolvency Proceeding.  For avoidance of doubt, and
notwithstanding anything to the contrary herein, the Senior Lenders, as holders
of Roll Up Debt, may exercise any right or remedy available to an unsecured
creditor and may take any Enforcement Action that does not constitute the
exercise of a right or remedy against any Collateral unless such exercise
violates this Agreement.

 

2.7                               From and after the Payment in Full of the New
Senior Debt Obligations, Senior Lenders shall promptly deliver to the Junior
Creditor in the form received (except for endorsement or assignment by the
relevant Senior Lender where required by the Junior Creditor) for application to
the Existing Debt any payment, distribution, security  or proceeds from any
Collateral received by such Senior Lender with respect to the Roll Up Debt other
than in accordance with this Agreement; provided, however, that any such
payment, distribution, security or proceeds shall not be deemed applied to the
Existing Debt unless and until it has been reduced to cash, which reduction to
cash the Junior Creditor shall use commercially reasonable efforts to accomplish
promptly after receipt of such non-cash distribution.

 

Section 3.                                           Definitions.  As used
herein the following terms have the following meanings:

 

“Enforcement Action” means any action to accelerate maturity, commence or join
in any action or proceeding to recover any amounts due, commence or join in, or
encourage others to file, any involuntary bankruptcy petition or similar
judicial proceeding against Borrower or any Subsidiary, or commence any
litigation against Borrower or any Subsidiary for enforcement of any rights or
remedies, or collect, take possession of, sell any property or assets of,
foreclose upon, or exercise any other rights or remedies with respect to, the
Collateral, judicially or non-judicially, or attempt to do any of the foregoing.

 

“Junior Standstill Period” means a period commencing on the date of any default
or event of default under any documents, instruments or agreements evidencing or
relating to the Existing Debt (a “Subordinated Default”), and ending one hundred
(100) days after written notice has been given by the Junior Creditor, as
applicable, to the Senior Lenders that such Subordinated Default has occurred;
provided that, notwithstanding any of the foregoing

 

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provisions, the Junior Standstill Period shall be extended during any period
that the Senior Lenders are diligently pursuing any Enforcement Action with
respect to the New Senior Debt.

 

“Lien” means, with respect to any asset, any security interest, mortgage,
pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien
(statutory or otherwise), charge, or preference, priority or other security
interest or preferential arrangement in the nature of a security interest of any
kind or nature whatsoever (including any conditional sale or other title
retention agreement, any easement, right of way or other encumbrance on title to
real property, and any financing lease having substantially the same economic
effect as any of the foregoing).

 

“Roll Up Debt” means the Roll Up Loans (as defined in the New Money Loan
Agreement) in the principal amount as of the date of this Agreement and any
interest thereon and all fees payable with respect thereto (if any), together
with, solely following the Payment in Full of the New Senior Debt Obligations,
all costs and expenses of collecting the Roll Up Loans (including attorneys’
fees), and also including, without limitation, all interest, costs and expenses
accruing or incurred in respect of the Roll Up Debt (and not in respect of the
New Senior Debt) after the commencement by or against Borrower or any Subsidiary
of any bankruptcy, reorganization or similar proceeding (regardless of whether
such interest, costs and expenses are allowable in such proceeding and even if
any such interest, costs and expenses are disallowed in such proceeding).

 

“Roll Up Standstill Period” means a period commencing on the date of any default
or event of default under any documents, instruments or agreements evidencing or
relating to the Roll Up Debt (a “Roll Up Default”), and ending one hundred and
fifty (150) days after written notice has been given by a Senior Lender to the
Junior Creditor that such Roll up Default has occurred; provided that,
notwithstanding any of the foregoing provisions, the Roll Up Standstill Period
shall be extended during any period that the Junior Creditor is diligently
pursuing any Enforcement Action against the Collateral with respect to the
Existing Debt in accordance with the terms hereof.

 

Section 4.                                           The Junior Creditor
represents and warrants that such Junior Creditor has provided the Senior
Lenders with true and correct copies of all of the documents evidencing the
Subordinated Obligations.  The Junior Creditor further represents and warrants
that on the date hereof, the Junior Creditor is the collective current owners
and holders of the Existing Debt and all other Existing Loan Documents.  The
Junior Creditor shall immediately affix a legend to the instruments evidencing
the Existing Debt stating that the instruments are subject to the terms of this
Agreement.  By the execution of this Agreement, the Junior Creditor agrees to
amend any financing statements filed by such Junior Creditor against Borrower as
follows: “In accordance with a certain Subordination Agreement by and among the
Secured Party, the Debtor and the Senior Lenders (as defined therein), the
Secured Party has subordinated any security interest that Secured Party may have
in any property of the Debtor to the security interest of the Senior Lenders in
all assets of the Debtor, notwithstanding the respective dates of attachment or
perfection of the security interest of the Secured Party and the Senior Lenders
to the extent set forth in such Subordination Agreement.”

 

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Section 5.                                           Each Senior Lender
represents and warrants that such Senior Lender has provided the Junior Creditor
with true and correct copies of all of the documents evidencing the New
Obligations.  Each Senior Lender further represents and warrants that on the
date hereof, the Senior Lenders party hereto are the collective current owners
and holders of the New Obligations and all other New Money Loan Documents.  The
Senior Lenders shall immediately affix a legend to the instruments evidencing
the Roll Up Debt stating that the instruments are subject to the terms of this
Agreement.  By the execution of this Agreement, the Senior Lenders agree to
amend any financing statements filed by such Senior Lender against Borrower as
follows: “In accordance with a certain Subordination Agreement by and among the
Secured Party, the Debtor and the Junior Creditor (as defined therein), the
Secured Party has subordinated any security interest that Secured Party may have
in any property of the Debtor to the security interest of the Junior Creditor in
all assets of the Debtor, notwithstanding the respective dates of attachment or
perfection of the security interest of the Secured Party and the Junior Creditor
to the extent set forth in such Subordination Agreement.”

 

Section 6.                                           If the Junior Creditor has
any Collateral in its possession or control for which possession or control
thereof is taken to perfect a Lien thereon under the UCC or other applicable
law, then the Junior Creditor will promptly notify the Senior Agent of its
possession or control of such Collateral and if requested by the Senior Agent,
deliver or transfer such Collateral in its possession or control, together with
any necessary endorsements (which endorsements will be without recourse and
without any representation or warranty), to the Senior Agent in such manner as
the Senior Agent shall reasonably direct.  Until such transfer, the Junior
Creditor agrees to hold or control that part of the Collateral that is in its
possession or control (or in the possession or control of its agents or bailees)
to the extent that possession or control thereof is taken to perfect a Lien
thereon under the UCC or other applicable law as collateral agent for the Senior
Lenders and any assignee thereof solely for the purpose of perfecting any
security interest granted under the New Money Loan Agreement.  The Junior
Creditor shall have no obligation whatsoever to the Senior Lenders to assure
that the Collateral is genuine or owned by any of the Borrower or its
Subsidiaries or to preserve rights or benefits of any Person except as expressly
set forth in this Section 6.  The duties or responsibilities of the Junior
Creditor under this Section 6 shall be limited solely to holding the Collateral
as bailee and agent for and on behalf of the Senior Lenders for purposes of
perfecting the Lien held by such Senior Lenders.

 

Section 7.

 

7.1                               No amendment of the documents evidencing or
relating to the Subordinated Obligations shall directly or indirectly modify the
provisions of this Agreement in any manner which might terminate or impair the
subordination of the Subordinated Obligations or the subordination of the Liens
that the Junior Creditor may have in any property of Borrower, or which would
increase the principal amount of the Existing Debt (excluding the payment of
paid-in-kind interest, which amounts are or will be compounded and added to the
principal amount of the Existing Debt).  By way of example, such instruments
shall not be amended to (a) increase the rate of interest with respect to the
Existing Debt (or to provide for the payment of any interest in cash), (b) other
than certain prepayments of the Existing Debt on the closing date of the New
Money Loan Agreement and from the potential proceeds of the permitted Permitted
Licensing Transaction (as defined, as of the date hereof, in the New Money Loan
Agreement), each as provided in Section 1.3, accelerate the payment of the
principal or interest or any other portion of

 

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the Existing Debt, (c) other than as in effect on the date of this Agreement,
charge any additional fees to be earned by the Junior Creditor thereunder
(including any consent or amendment fee) unless the Senior Lenders shall charge
additional fees for similar accommodations, in which case, Junior Creditor may
pursue matching fees on an appropriate basis, (d) prohibit or limit the granting
of, or perfecting of, any Lien in favor of the Senior Lenders, or (e) prohibit,
limit or derogate (or purport to prohibit, limit or derogate) any right of the
Senior Lenders under the New Money Loan Documents.  Until the Payment in Full of
the New Senior Debt Obligations and subject to applicable law, the Senior
Lenders shall have the sole and exclusive right relative to the Junior Creditor
to restrict or permit, or approve or disapprove, the sale, transfer or other
disposition of property of Borrower.  Upon written notice from the Senior
Lenders to the Junior Creditor of the Senior Lenders’ agreement to release its
Lien on all or any portion of the Collateral in connection with the sale,
transfer or other disposition thereof by the Senior Lenders (or by Borrower or
any Subsidiary with consent of the Senior Lenders), the Junior Creditor shall be
deemed to have also, automatically and simultaneously, released its Lien on the
Collateral, and the Junior Creditor shall, upon written request by the Senior
Lenders, immediately take such action as shall be necessary or appropriate to
evidence and confirm such release; provided that, other than with respect to a
portion of the potential proceeds of the Permitted Licensing Transaction (as set
forth, as of the date hereof, in Schedule 1.01 of the New Money Loan Agreement),
all proceeds resulting from any such sale, transfer or other disposition shall
be applied first to the New Senior Debt until Payment in Full of the New Senior
Debt Obligations, with the balance, if any, to the Existing Debt, if any, until
Payment in Full of the Junior Debt, with the balance, if any, applied to the
Roll Up Debt, or to any other entitled party.  If the Junior Creditor fails to
release any Lien as required hereunder, the Junior Creditor hereby appoints the
Senior Lenders as attorney in fact with full power of substitution to release
the Junior Creditor’s Liens, as applicable, as provided hereunder.  Such power
of attorney being coupled with an interest shall be irrevocable.  The Parties
intend that the Collateral securing the Existing Debt also secure the New Senior
Debt and the parties hereto agree that, so long as the Payment in Full of New
Senior Debt Obligations has not occurred, the Borrower shall not, and shall not
permit any of its Subsidiaries to, grant or permit any Liens on any asset or
property of the Borrower or any of its Subsidiaries to secure any Existing Debt
unless it has granted, or substantially concurrently therewith grants, a Lien on
such asset or property of such Obligor to secure the New Senior Debt (unless
with respect to any New Senior Debt, the Senior Agent has elected in writing not
to receive such lien).  Unless the Senior Agent has elected not to receive such
lien, if the Junior Creditor shall hold any Lien on any assets or property of
Borrower or any Subsidiary securing any Junior Debt that are not also subject to
the first-priority Liens securing all New Senior Debt, Junior Creditor (i) shall
notify the Senior Agent promptly upon becoming aware thereof and, until such
Borrower or Subsidiary grants a similar Lien on such assets or property to
Senior Agent as security for the New Senior Debt, shall be deemed to hold and
have held such Lien for the benefit of Senior Agent and the Senior Lenders as
security for the New Senior Debt.  To the extent that the provisions of the
immediately preceding sentence are not complied with for any reason, without
limiting any other right or remedy available to Senior Agent or any Senior
Lender, Junior Creditor agrees that any amounts received by or distributed to
Junior Creditor pursuant to or as a result of any Lien held or granted in
contravention of this Section 7.1 shall be subject to Section 1.5.

 

7.2                               The Parties intend that the Collateral
securing the Roll Up Debt also secure the Existing Debt and the parties hereto
agree that, if the Payment in Full of New Senior Debt

 

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Obligations has occurred, the Borrower shall not, and shall not permit any of
its Subsidiaries to, grant or permit any Liens on any asset or property of the
Borrower or any of its Subsidiaries to secure any Roll Up Debt unless it has
granted, or substantially concurrently therewith grants, a Lien on such asset or
property of such Obligor to secure the Existing Debt (unless with respect to any
Existing Debt, the Junior Creditor has elected in writing not to receive such
lien).  If the Payment in Full of New Senior Debt Obligations has occurred,
unless the Junior Creditor has elected not to receive such lien, if the New
Lenders shall hold any Lien on any assets or property of Borrower or any
Subsidiary securing any Roll Up Debt that are not also subject to the
first-priority Liens securing all the Existing Debt, the New Lenders (i) shall
notify the Junior Creditor promptly upon becoming aware thereof and, until such
Borrower or Subsidiary grants a similar Lien on such assets or property to
Junior Creditor as security for the Existing Debt, shall be deemed to hold and
have held such Lien for the benefit of Junior Creditor and the New Lenders as
security for the Existing Debt.  To the extent that the provisions of the
immediately preceding sentence are not complied with for any reason, without
limiting any other right or remedy available to Junior Creditor, the New Lenders
agree that any amounts received by or distributed to Senior Lenders pursuant to
or as a result of any Lien held or granted in contravention of this Section 7.2
shall be subject to Section 2.7.

 

Section 8.                                           All necessary actions on
the part of the Junior Creditor, its respective officers, directors, partners,
members and shareholders, as applicable, necessary for the authorization of this
Agreement and the performance of all obligations of the Junior Creditor
hereunder has been taken.  This Agreement constitutes the legal, valid and
binding obligation of the Junior Creditor, enforceable against the Junior
Creditor in accordance with its terms.  The execution, delivery and performance
of and compliance with this Agreement by the Junior Creditor will not (a) result
in any material violation or default of any term of the Junior Creditor’s
charter, formation or other organizational documents (such as Articles or
Certificate of Incorporation, bylaws, partnership agreement, operating
agreement, etc.) or (b) violate any material applicable law, rule or
regulation.  All necessary actions on the part of the New Lenders, their
respective officers, directors, partners, members and shareholders, as
applicable, necessary for the authorization of this Agreement and the
performance of all obligations of each New Lender hereunder has been taken. 
This Agreement constitutes the legal, valid and binding obligation of each New
Lender, enforceable against each New Lender in accordance with its terms.  The
execution, delivery and performance of and compliance with this Agreement by the
New Lenders will not (a) result in any material violation or default of any term
of any New Lenders’ charter, formation or other organizational documents (such
as Articles or Certificate of Incorporation, bylaws, partnership agreement,
operating agreement, etc.) or (b) violate any material applicable law, rule or
regulation.

 

Section 9.                                           If, at any time any
payments of the New Senior Debt must be disgorged by the Senior Lenders for any
reason (including, without limitation, any Insolvency Proceeding), this
Agreement and the relative rights and priorities set forth herein shall be
reinstated as to all such disgorged payments as though such payments had not
been made and the Junior Creditor shall immediately pay over to the Senior
Lenders all payments received with respect to the Existing Debt to the extent
that such payments would have been prohibited hereunder.  If, at any time any
payments of the enforceable Existing Debt must be disgorged by the Junior
Creditor for any reason (including, without limitation, any Insolvency
Proceeding), this Agreement and the relative rights and priorities set forth
herein shall be reinstated as to all such disgorged payments

 

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as though such payments had not been made and the New Lenders shall immediately
pay over to the Junior Creditor for application to the enforceable Existing Debt
all payments received with respect to the Roll Up Debt to the extent that such
payments would have been prohibited hereunder.

 

Section 10.                                    At any time and from time to
time, without notice to the Junior Creditor, the Senior Lenders may take such
actions with respect to the New Senior Debt as the Senior Lenders, in their sole
discretion, may deem appropriate, including, without limitation, terminating
advances to Borrower, increasing the principal amount (provided, that the
initial principal amount of the New Senior Debt shall not exceed $50,000,000
(the “New Senior Debt Cap”) and for avoidance of doubt the New Senior Debt Cap
shall not apply to any paid in kind interest or any fees, costs and expenses
that may be added to principal form time to time) or creating an additional
tranche of debt under the New Money Loan Agreement (provided that all tranches
of New Senior Debt shall be treated as a single class for purposes of voting on
any plan in an Insolvency Proceeding) without the prior written consent of the
Junior Creditor), extending the time of payment, increasing applicable interest
rates (provided such increase is not 300 basis points greater than the rate
applicable on the date hereof), renewing, compromising or otherwise amending the
terms of any documents affecting the New Senior Debt and any Collateral securing
the New Senior Debt, and enforcing or failing to enforce any rights against
Borrower, any Subsidiary or any other person; provided that no modification of
the New Money Loan Documents shall (a) prohibit, release or limit the granting
of, or perfecting of, any Lien in favor of the Junior Creditor to the extent
permitted by this Agreement, (b) prohibit, limit or derogate (or purport to
prohibit, limit or derogate) any right of the Junior Creditor under the Existing
Loan Documents except as set forth herein or under any document governing any
other Subordinated Obligations, or (c) prohibit, limit or derogate (or purport
to prohibit, limit or derogate) any right of the Junior Creditor under this
Agreement, including without limitation, the right to receive the payments
provided under Section 1 of this Agreement.

 

Section 11.                                    Miscellaneous.

 

11.1                        This Agreement shall bind any successor or permitted
assignee of the Junior Creditor and shall benefit any successors or assigns of
the New Lenders; provided, however, each Junior Creditor agrees that, prior to,
and as conditions precedent to, the Junior Creditor assigning all or any portion
of the Existing Debt: (a) Junior Creditor shall give the New Lenders prior
written notice of such assignment, and (b) such successor or assignee, as
applicable, shall execute a written agreement whereby such successor or assignee
expressly agrees to assume and be bound by all terms and conditions of this
Agreement, and any assignment that fails to comply with the foregoing
requirements shall be void ab initio.  This Agreement shall bind any successors
or assignees of each New Lender and shall benefit any successors or permitted
assigns of the Junior Creditor; provided, however, each New Lender agrees that,
prior to, and as conditions precedent to, any New Lender assigning all or any
portion of the New Obligations: (a) such New Lender shall give the Junior
Creditor prior written notice of such assignment, and (b) such successor or
assignee, as applicable, shall execute a written agreement whereby such
successor or assignee expressly agrees to assume and be bound by all terms and
conditions of this Agreement, and any assignment that fails to comply with the
foregoing requirements shall be void ab initio.

 

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11.2                        This Agreement shall (i) remain effective with
respect to the New Senior Debt until terminated in writing by each of the New
Lenders or, if earlier, Payment in Full of the New Senior Debt Obligations and
(ii) remain effective with respect to the Roll Up Debt until terminated in
writing by the Junior Creditor or, if earlier, Payment in Full of the Junior
Obligations.  This Agreement is solely for the benefit of the New Lenders, and
the Junior Creditor, and not for the benefit of Borrower or any other party. 
The Junior Creditor further agrees that if Borrower is in the process of
refinancing any portion of the New Senior Debt with a new lender, and if the New
Lenders make a request of the Junior Creditor, the Junior Creditor shall agree
to enter into a new subordination agreement with the new lender on substantially
the terms and conditions of this Agreement, but no less favorable to the Junior
Creditor than this Agreement.

 

11.3                        The Existing Loan Agreement and each other Existing
Loan Document evidencing a payment obligation with respect to the Existing Debt
shall bear the following legend (or a substantially similar legend):  “THE
INDEBTEDNESS AND OTHER OBLIGATIONS OF AEGERION PHARMACEUTICALS, INC.
(“BORROWER”) UNDER OR EVIDENCED HEREBY AND THE LIENS AND SECURITY INTERESTS
SECURING SAME ARE SUBORDINATED AND SUBJECT TO THE TERMS AND CONDITIONS OF THE
SUBORDINATION AGREEMENT, DATED AS OF NOVEMBER 8, 2018, AMONG BORROWER, NOVELION
THERAPEUTICS INC., AND THE NEW LENDERS.”  The Junior Creditor hereby agrees to
execute such documents and/or take such further action as the Senior Lenders may
at any time or times reasonably request (at the Borrower’s sole cost and
expense) in order to carry out the provisions and intent of this Agreement,
including, without limitation, ratifications and confirmations of this Agreement
from time to time hereafter, as and when requested by the Senior Lenders.

 

11.4                        The New Money Loan Agreement and each other New
Money Loan Document evidencing a payment obligation with respect to the Roll Up
Debt shall bear the following legend (or a substantially similar legend):  “THE
INDEBTEDNESS AND OTHER OBLIGATIONS OF AEGERION PHARMACEUTICALS, INC.
(“BORROWER”) UNDER OR EVIDENCED HEREBY AND THE LIENS AND SECURITY INTERESTS
SECURING SAME ARE SUBORDINATED AND SUBJECT TO THE TERMS AND CONDITIONS OF THE
SUBORDINATION AGREEMENT, DATED AS OF NOVEMBER 8, 2018, AMONG BORROWER, NOVELION
THERAPEUTICS INC., AND THE NEW LENDERS.”  Each New Lender hereby agrees to
execute such documents and/or take such further action as the Junior Creditor
may at any time or times reasonably request (at the Borrower’s sole cost and
expense) in order to carry out the provisions and intent of this Agreement,
including, without limitation, ratifications and confirmations of this Agreement
from time to time hereafter, as and when requested by the Junior Creditor.

 

11.5                        This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.

 

11.6                        This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
conflicts of laws principles.  The Junior Creditor and the New Lenders submit to
the exclusive jurisdiction of the state and federal courts located in New York,
New York in any action, suit, or proceeding of any kind, against it which

 

17

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arises out of or by reason of this Agreement, provided, however, after the
commencement of a case under the United States Bankruptcy Code by Borrower or
any Subsidiary, the Junior Creditor and the New Lenders acknowledge and agree
that the applicable bankruptcy court shall have the jurisdiction for resolving
disputes or matters arising out of this Agreement.  THE NEW LENDERS AND THE
JUNIOR CREDITOR WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR ANY OF THE
TRANSACTIONS CONTEMPLATED HEREIN.

 

11.7                        This Agreement represents the entire agreement with
respect to the subject matter hereof, and supersedes all prior negotiations,
agreements and commitments.  No Junior Creditor is relying on any
representations by the New Lenders or Borrower in entering into this Agreement,
and the Junior Creditor has kept and will continue to keep itself fully apprised
of the financial and other condition of Borrower.  No New Lender is relying on
any representations by the Junior Creditor or Borrower in entering into this
Agreement, and each Senior Lender has kept and will continue to keep itself
fully apprised of the financial and other condition of Borrower.  This Agreement
may be amended only by written instrument signed by each New Lender, the Junior
Creditor and Borrower.

 

11.8                        All notices, consents, requests, approvals, demands,
or other communication by any party to this Agreement must be in writing and
shall be deemed to have been validly served, given, or delivered: (a) upon the
earlier of actual receipt and three (3) Business Days after deposit in the U.S.
mail, first class, registered or certified mail return receipt requested, with
proper postage prepaid; (b) upon transmission, when sent by electronic mail;
(c) one (1) Business Day after deposit with a reputable overnight courier with
all charges prepaid; or (d) when delivered, if hand-delivered by messenger, all
of which shall be addressed to the party to be notified and sent to the address,
facsimile number, or email address indicated below.  Any of the New Lenders, the
Junior Creditor or Borrower may change its mailing or electronic mail address or
facsimile number by giving the other party written notice thereof in accordance
with the terms of this Section 11.8.

 

If to the Senior Lenders:    Cantor Fitzgerald Securities

1801 N. Military Trail, Suite 202

Boca Raton, FL 33431

Telecopier: (646) 219-1180

Attention: N. Horning (Aegerion)

E-mail: NHorning@cantor.com

 

and

 

Cantor Fitzgerald Securities

900 West Trade Street, Suite 725

Charlotte, North Carolina 28202

Phone: (747) 374-0574

Telecopier: (646) 390-1764

Attention: B. Young (Aegerion)

E-mail: BYoung@cantor.com

 

18

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with a copy (that shall not constitute notice) to:

 

Shipman & Goodwin LLP

One Constitution Plaza

Hartford, CT 06103

Attention: Nathan Plotkin

E-mail: NPlotkin@goodwin.com

 

If to the Junior Creditor:   Novelion Therapeutics Inc.

c/o Norton Rose Fulbright

1800 - 510 West Georgia Street, Vancouver, BC

V6B 0M3 Canada

Attn: Ben Harshbarger

Email: ben.harshbarger@novelion.com

 

with a copy to:                   Goodwin Procter LLP

100 Northern Avenue

Boston, MA 02210

Attn: Anna Dodson and Greg Fox

Email: adodson@goodwinlaw.com and gfox@goodwinlaw.com

 

11.9                        Cantor Fitzgerald Securities is executing and
delivering this Agreement solely in its capacity as “Administrative Agent” under
the New Money Loan Agreement and when acting hereunder shall be entitled to all
of the rights, privileges and immunities granted to it under the Bridge Loan
Agreement.

 

[Signature pages follows]

 

19

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.

 

 

CANTOR FITZGERALD SECURITIES, as Administrative Agent

 

 

 

 

 

 

By:

/s/ James Buccola

 

Name:

James Buccola

 

Title:

Head of Fixed Income

 

[Signature Page to Subordination Agreement – Aegerion Pharmaceuticals]

 

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1992 MSF INTERNATIONAL LTD., as a NEW LENDER

 

 

 

 

 

 

By:

/s/ Jonathan Segal

 

Name:

Jonathan Segal

 

Title:

Managing Director

 

 

 

 

 

 

1992 TACTICAL CREDIT MASTER FUND, L.P., as a NEW LENDER

 

 

 

 

 

 

 

By:

/s/ Jonathan Segal

 

Name:

Jonathan Segal

 

Title:

Managing Director

 

[Signature Page to Subordination Agreement]

 

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ATHYRIUM OPPORTUNITIES II ACQUISITION, LP, as a NEW LENDER

 

 

 

By:

Athyrium Opportunities II LP, its general partner

 

 

 

 

By:

Athyrium GP Holdings LLC, its general partner

 

 

 

 

 

 

 

By:

/s/ Andrew C. Hyman

 

Name:

Andrew C. Hyman

 

Title:

Authorized Signatory

 

 

 

 

 

 

ATHYRIUM OPPORTUNITIES III ACQUISITION, LP, as a NEW LENDER

 

 

 

 

By:

Athyrium Opportunities III LP, its general partner

 

 

 

 

By:

Athyrium Opportunities III GP LLC, its general partner

 

 

 

 

 

 

 

By:

/s/ Andrew C. Hyman

 

Name:

Andrew C. Hyman

 

Title:

Authorized Signatory

 

[Signature Page to Subordination Agreement]

 

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NOVELION THERAPEUTICS INC.

 

 

 

 

 

 

By:

/s/ Benjamin S. Harshbarger

 

Name:

Benjamin S. Harshbarger

 

Title:

General Counsel and Secretary

 

 

 

 

 

 

NOVELION SERVICES USA, INC.

 

 

 

 

 

 

 

By:

/s/ Benjamin S. Harshbarger

 

Name:

Benjamin S. Harshbarger

 

Title:

Secretary

 

[Signature Page to Subordination Agreement]

 

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