Merus Labs International Inc.: Exhibit 10.2 - Filed by newsfilecorp.com








	 
	CREDIT AGREEMENT 
	dated as of July 10, 2012 
	among 
	MERUS LABS INTERNATIONAL INC., 
	as Borrower, 
	MERUS LABS LUXCO S.À R.L, 
	MERUS LABS INC., 
	ECG HOLDINGS INC., 
	and 
	MERUS LABS NETHERLANDS B.V. 
	as Loan Parties, 
	PDL BIOPHARMA, INC., 
	as Lender, 
	and 
	PDL BIOPHARMA, INC., 
	as Agent 
	 







TABLE OF CONTENTS 

	  		 	Page 
	  		 	  
	Section 1. 	Definitions; Interpretation. 	1 
	 	 	 	 
	             1.1. 	Definitions 	1 
	 	 	 	 
	             1.2. 	Interpretation 	19 
	 	 	 	 
	             1.3. 	UCC References; Dutch Terms 	20 
	 	 	 	 
	             1.4. 	Pro Forma Calculation 	20 
	  		 	  
	Section 2. 	Credit Facilities. 	22 
	 	 	 	 
	             2.1. 	Loans 	22 
	  	2.1.1.	Initial Loan 	22 
	  	2.1.2.	Additional Loan 	22 
	  	2.1.3.	General 	22 
	 	 	 	 
	             2.2. 	Loan Accounting 	22 
	  	2.2.1.	Recordkeeping 	22 
	  	2.2.2.	Notes 	22 
	 	 	 	 
	             2.3. 	Interest 	23 
	  	2.3.1.	Interest Rate 	23 
	  	2.3.2.	Interest Payments 	23 
	  	2.3.3.	Computation of Interest 	23 
	  	2.3.4.	Interest Act (Canada) 	23 
	  	2.3.5.	Maximum Lawful Rate. 	23 
	 	 	 	 
	             2.4. 	Prepayment 	24 
	  	2.4.1.	Voluntary Prepayment 	24 
	  	24.2.	Mandatory Prepayment 	24 
	  	2.4.3.	Prepayments 	24 
	 	 	 	 
	             2.5. 	Scheduled Repayment 	25 
	  	2.5.1.	First Scheduled Payment of the Initial Loan 	25 
	  	2.5.2.	Second Scheduled Payment of the Initial Loan 	25 
	  	2.5.3.	Third Scheduled Payment 	25 
	  	2.5.4.	Payment on Maturity Date 	25 
	 	 	 	 
	             2.6. 	Payment 	25 
	  	2.6.1.	Making of Payments 	25 
	  	2.6.2.	Application of Payments and Proceeds. 	25 
	  	2.6.3.	Payment Dates 	26 
	  	2.6.4.	Set-off 	26 
	  	2.6.5.	Currency Matters 	26 
	  		 	  
	Section 3. 	Yield Protection. 	27 
	 	 	 	 
	             3.1. 	Taxes 	27 


i 





	         
         3.2. 	Increased Cost 	28 
	 	 	 	 
	         
         3.3. 	Mitigation of Circumstances 	29 
	 	 	 	 
	         
         3.4. 	Conclusiveness of Statements; Survival 	29 
	 	 	 	 
	Section 4. 	Conditions Precedent. 	29 
	 	 	 	 
	         
         4.1. 	Initial Loan 	29 
	  	4.1.1	Consummation of Purchase 	29 
	  	4.1.2	Delivery of Loan Documents 	30 
	  	4.1.3	Payment of Fees and Expenses 	31 
	  	4.1.4	Representations and Warranties 	31 
	  	4.1.5	No Default 	31 
	  	4.1.6	No Material Adverse Change 	31 
	 	 	 	 
	Section 5. 	Representations and Warranties. 	31 
	 	 	 	 
	         
         5.1. 	Organization 	31 
	 	 	 	 
	         
         5.2. 	Authorization; No Conflict 	32 
	 	 	 	 
	         
         5.3. 	Validity; Binding Nature 	32 
	 	 	 	 
	         
         5.4. 	Financial Condition 	32 
	 	 	 	 
	         
         5.5. 	No Material Adverse Change 	33 
	 	 	 	 
	         
         5.6. 	Litigation 	33 
	 	 	 	 
	         
         5.7. 	Ownership of Properties; Liens 	33 
	 	 	 	 
	         
         5.8. 	Capitalization; Subsidiaries 	33 
	 	 	 	 
	         
         5.9. 	Pension Plans 	34 
	 	 	 	 
	             5.10. 	Compliance with Law; Investment Company Act; Other Regulated
      Entities 	35 
	 	 	 	 
	         
         5.11. 	Margin Stock 	36 
	 	 	 	 
	         
         5.12. 	Taxes 	36 
	 	 	 	 
	         
         5.13. 	Solvency 	37 
	 	 	 	 
	         
         5.14. 	Environmental Matters 	37 
	 	 	 	 
	         
         5.15. 	Insurance 	37 
	 	 	 	 
	         
         5.16. 	Information 	38 
	 	 	 	 
	         
         5.17. 	Intellectual Property 	38 
	 	 	 	 
	         
         5.18. 	Labor Matters 	38 
	 	 	 	 
	         
         5.19. 	Canadian Labour Matters 	38 
	 	 	 	 
	         
         5.20. 	No Default 	39 
	 	 	 	 
	         
         5.21. 	Foreign Assets Control Regulations and Anti-Money Laundering
      	39 


ii 





	  	5.21.1	OFAC 	39 
	  	5.21.2	Patriot Act 	39 
	 	 	 	 
	             5.22. 	Senior Debt 	40 
	 	 	 	 
	             5.23. 	Withholdings and Remittances
      	40 
	 	 	 	 
	             5.24. 	Asset Purchase Documentation
      	40 
	 	 	 	 
	             5.25. 	Inactive Subsidiaries 	40 
	 	 	 	 
	Section 6. 	Affirmative Covenants. 	40 
	 	 	 	 
	             6.1. 	Information 	40 
	  	6.1.1	Annual Report 	41 
	  	6.1.2	Quarterly Reports 	41 
	  	6.1.3	[Reserved] 	41 
	  	6.1.4	Compliance Certificate 	41 
	  	6.1.5	[Reserved] 	41 
	  	6.1.6	Notice of Default; Litigation; ERISA Matters
      	41 
	  	6.1.7	Management Report 	42 
	  	6.1.8	Projections 	42 
	  	6.1.9	Other Information 	42 
	 	 	 	 
	         
         6.2. 	Books; Records; Inspections 	42 
	 	 	 	 
	         
         6.3. 	Maintenance of Property; Insurance 	43 
	 	 	 	 
	             6.4. 	Compliance with Laws and Contractual Obligations; Payment
      of Taxes and Liabilities 	43 
	 	 	 	 
	         
         6.5. 	Maintenance of Existence 	44 
	 	 	 	 
	         
         6.6. 	Employee Benefit Plans 	44 
	 	 	 	 
	         
         6.7. 	Environmental Matters 	45 
	 	 	 	 
	         
         6.8. 	Asset Purchase 	45 
	 	 	 	 
	         
         6.9. 	Further Assurances 	45 
	 	 	 	 
	         
         6.10. 	Post-Closing Obligations 	46 
	 	 	 	 
	         
         6.11. 	Board Observer 	47 
	 	 	 	 
	Section 7. 	Negative Covenants. 	47 
	 	 	 	 
	         
         7.1. 	Debt 	47 
	 	 	 	 
	         
         7.2. 	Liens 	49 
	 	 	 	 
	         
         7.3. 	[Omitted] 	50 
	 	 	 	 
	         
         7.4. 	Restricted Payments 	50 
	 	 	 	 
	         
         7.5. 	Mergers; Consolidations; Asset Sales 	51 
	 	 	 	 
	         
         7.6. 	Modification of Asset Purchase and Organizational Documents
      	52 


iii 





	         
         7.7. 	Use of Proceeds 	52 
	 	 	 	 
	         
         7.8. 	Transactions with Affiliates 	52 
	 	 	 	 
	         
         7.9. 	Inconsistent Agreements 	53 
	 	 	 	 
	         
         7.10. 	Business Activities 	53 
	 	 	 	 
	         
         7.11. 	Investments 	53 
	 	 	 	 
	         
         7.12. 	Fiscal Year 	54 
	 	 	 	 
	         
         7.13. 	Financial Covenants 	54 
	  	7.13.1.	EBITDA 	54 
	  	7.13.2.	Maximum Total Leverage Ratio 	55 
	  	7.13.3.	Minimum Net Sales 	56 
	  	7.13.4.	Sinking Fund Deposit Cure 	57 
	  	7.13.5.	Principal Repayment 	58 
	 	 	 	 
	             7.14. 	Deposit Accounts and Securities Accounts 	58 
	 	 	 	 
	             7.15. 	Sale-Leasebacks 	58 
	 	 	 	 
	             7.16. 	Hazardous Substances 	58 
	 	 	 	 
	             7.17. 	Asset Purchase Agreement Indemnity 	59 
	 	 	 	 
	             7.18. 	Establishment of Defined Benefit Plan 	59 
	 	 	 	 
	             7.19. 	ERISA Liability 	59 
	 	 	 	 
	             7.20. 	Inactive Subsidiaries 	59 
	 	 	 	 
	Section 8. 	Events of Default; Remedies. 	59 
	 	 	 	 
	             8.1. 	Events of Default 	59 
	  	8.1.1.	Non-Payment of Credit 	59 
	  	8.1.2.	Default Under Other Debt 	59 
	  	8.1.3.	Bankruptcy; Insolvency 	60 
	  	8.1.4.	Plan of Arrangement 	60 
	  	8.1.5.	Non-Compliance with Loan Documents. 	60 
	  	8.1.6.	Representations; Warranties 	60 
	  	8.1.7.	[Reserved] 	60 
	  	8.1.8.	Canadian Pensions Plans 	61 
	  	8.1.9.	Judgments. 	61 
	  	8.1.10.	Invalidity of Collateral Documents 	61 
	  	8.1.11.	Invalidity of Subordination Provisions 	61 
	  	8.1.12.	Change of Control 	61 
	 	 	 	 
	             8.2. 	Remedies 	61 
	 	 	 	 
	             8.3. 	Borrower’s Right to Cure 	62 
	 	 	 	 
	Section 9. 	Agent 	62 
	 	 	 	 
	             9.1. 	Appointment; Authorization 	62 


iv 





	         
         9.2. 	Delegation of Duties 	62
      
	 	 	 
	         
         9.3. 	Limited Liability 	63
      
	 	 	 
	         
         9.4. 	Successor Agent 	63
      
	 	 	 
	         
         9.5. 	Collateral Matters 	63
      
	 	 	 
	Section 10. 	Miscellaneous. 	64
      
	 	 	 
	         
         10.1. 	Waiver; Amendments 	64
      
	 	 	 
	         
         10.2. 	Notices 	64
      
	 	 	 
	         
         10.3. 	Computations 	64
      
	 	 	 
	         
         10.4. 	Costs; Expenses 	65
      
	 	 	 
	         
         10.5. 	Indemnification by Borrower 	65
      
	 	 	 
	         
         10.6. 	Marshaling; Payments Set Aside 	66
      
	 	 	 
	         
         10.7. 	Nonliability of the Lender 	66
      
	 	 	 
	         
         10.8. 	Anti-Money Laundering. 	66
      
	 	 	 
	         
         10.9. 	Currency Indemnity 	67
      
	 	 	 
	         
         10.10. 	Confidentiality 	67
      
	 	 	 
	         
         10.11. 	Captions 	68
      
	 	 	 
	         
         10.12. 	Nature of Remedies 	68
      
	 	 	 
	         
         10.13. 	Counterparts 	68
      
	 	 	 
	         
         10.14. 	Severability 	69
      
	 	 	 
	         
         10.15. 	Entire Agreement 	69
      
	 	 	 
	         
         10.16. 	Successors; Assigns 	69
      
	 	 	 
	         
         10.17. 	Governing Law 	69
      
	 	 	 
	         
         10.18. 	Forum Selection; Consent to Jurisdiction; Service of Process
      	69
      
	 	 	 
	         
         10.19. 	Waiver of Jury Trial 	70
      
	 	 	 
	         
         10.20. 	Collateral Agent 	70
      


v 





	Annexes 	  
	Annex
      I 	Commitments
      
	Annex
      II 	Addresses
      
	  	  
	Exhibits 	  
	Exhibit A 	Form of
      Compliance Certificate 
	Exhibit B 	Form of Note




	Schedules 	  
	Schedule 4.1.6 	Material Adverse Changes 
	Schedule 5.4 	Consolidated Financial Projections 
	Schedule 5.6 	Litigation 
	Schedule 5.7 	Real Property 
	Schedule 5.8 	Capitalization 
	Schedule 5.9(b) 	Canadian Employees 
	Schedule 5.10 	Authorizations, Permits, Licenses
      and Approvals 
	Schedule 5.12 	Taxes 
	Schedule 5.14 	Environmental Matters 
	Schedule 5.15 	Insurance 
	Schedule 5.18 	Labor Matters 
	Schedule 5.19 	Canadian Labour Matters 
	Schedule 5.25 	Certificated Inactive Subsidiaries
    
	Schedule 7.1 	Existing Debt 
	Schedule 7.2 	Permitted Liens 
	Schedule 7.5 	Mergers, Consolidations, Asset Sales 
	Schedule 7.9 	Existing
      Agreements 
	Schedule 7.11 	Existing Investments 
	Schedule 7.14 	Bank Accounts
  


vi 




CREDIT AGREEMENT 

               This
Credit Agreement dated as of July 10, 2012, (as amended, restated or
otherwise modified from time to time, this “Agreement”) is made among
MERUS LABS INTERNATIONAL INC., a corporation organized under the laws of British
Columbia (“Borrower”), the Loan Parties named herein, PDL BIOPHARMA, INC.
(the “Lender”), and PDL BIOPHARMA, INC., not individually, but as Agent
(as defined below). 

               Borrower
and the other Loan Parties have agreed to enter into this Agreement with the
Lender and Agent evidencing their agreement to incur the Loans, and in
connection therewith, to make the representations and warranties, covenants and
undertakings as hereinafter set forth. 

Section 1. Definitions;
  Interpretation. 

                         1.1.      Definitions.
When used herein the following terms shall have the following meanings:

               “Acceleration Event” means the occurrence of any of the following: (i) an
  Event of Default under Section 8.1.3; (ii) an Event of Default under Section 8.1.1 and the termination of the Commitments pursuant to Section 8.2; or (iii) any other Event of Default under Section 8.1 and the election by the Lender to declare the Obligations to be due and payable
  pursuant to Section 8.2. 

               “Acquired
Person” has the meaning set forth in Section 1.4. 

               “Acquisition”
means any transaction or series of related transactions for the purpose of or
resulting, directly or indirectly, in (a) the acquisition of all or a
substantial portion of the assets of a Person, or of all or a substantial
portion of any business or division of a Person, (b) the acquisition of in
excess of 50% of the Stock of any Person, or otherwise causing any Person to
become a Subsidiary, (c) a merger, consolidation, amalgamation or any other
combination with another Person (other than a combination between two Persons
that prior to the merger, consolidation, amalgamation or combination were
already Loan Parties) and (d) the acquisition of a brand, line of business,
division, branch, product line, marketing rights with respect to a product line,
operating division or other unit operation of any Person. 

               “Additional
Commitment” means, as to the Lender, the Lender’s commitment to provide the
Additional Loan pursuant to Section 2.1.2. The amount of the Additional
Commitment shall be set forth on Annex I. 

               “Additional
Loan” has the meaning given in the definition of “Loans”. 

               “Affiliate”
of any Person means (a) any other Person which, directly or indirectly, controls
or is controlled by or is under common control with such Person and (b) any
officer or director of such Person. A Person shall be deemed to be “controlled
by” any other Person if such Person possesses, directly or indirectly, power to
vote 10% or more of the securities (on a fully diluted basis) having ordinary
voting power for the election of directors or managers or power to direct or
cause the direction of the management and policies of such Person whether by
contract or otherwise. Unless expressly stated otherwise herein, neither
Agent nor the Lender shall be deemed an Affiliate of any Group Member. 

1 




               “Agent”
means PDL BioPharma, Inc. in its capacity as administrative agent for the Lender
hereunder and any successor thereto in such capacity. 

               “Agreement”
has the meaning set forth in the Preamble. 

               “AML
Legislation” has the meaning set forth in Section 10.8. 

               “Asset
Purchase” means the purchase of the “Transferred Assets” (as defined in the
Asset Purchase Agreement) pursuant to the Asset Purchase Agreement. 

               “Asset
Purchase Agreement” means the Asset Purchase Agreement dated as of July 11,
2012 between Novartis and Merus Labs Luxco S.à r.l. 

               “Asset
Purchase Documents” means the Asset Purchase Agreement and the other
material documents, agreements and instruments executed and delivered in
connection therewith, including, without limitation, the License Agreement, the
Supply Agreement, the TM Assignment Documents, the Patent Assignment Documents
and the Domain Name Assignment Documents (in each case as defined in the Asset
Purchase Agreement). 

               “Asset
Purchase Transactions” means the transactions contemplated by the Asset
Purchase Documents.

               “Asset
Purchaser” means Merus Labs Luxco S.à r.l. 

               “Board
Observer” has the meaning as set forth in Section 6.11. 

               “Board
  Meeting” has the meaning as set forth in Section 6.11.  

               “Borrower” has the meaning set forth in the Preamble. 

               “Business
Day” means any day on which commercial banks are open for commercial banking
business in New York, New York, and on which dealings are carried on in the
London interbank eurodollar market. 

               “Canadian
Dollars” and “CDN$” each mean lawful currency of Canada. 

               “Canadian
Employee” means any employee or former employee of a Canadian Loan Party.


               “Canadian
Employee Benefits Legislation” means the Canada Pension Plan (Canada), the
Pension Benefits Standards Act (British Columbia), and any Canadian federal,
provincial or local counterparts or equivalents, in each case, as applicable and
as amended from time to time. 

               “Canadian
Employee Plan” means any employee benefit, health, welfare, supplemental
unemployment benefit, bonus, pension, supplemental pension, profit sharing,
retiring allowance, severance, deferred compensation, stock compensation, stock
purchase, retirement, life, hospitalization insurance, medical, dental, disability or other
employee group or similar benefit or employment plans or supplemental
arrangements applicable to the Canadian Employees. 

2 




               “Canadian
Guarantee and Collateral Agreement” means the Guarantee and Collateral
Agreement, dated as of the Closing Date, made by each Loan Party (other than
Merus Labs Luxco S.à r.l) and other grantor or pledgor signatory thereto in
favor of Agent, and governed by the laws of British Columbia, as amended,
restated or otherwise modified from time to time in accordance with the terms
hereof and thereof. 

               “Canadian
Loan Parties” means each Loan Party organized under the laws of Canada or a
province thereof, including, for greater certainty, the Borrower and Merus Labs
Inc. 

               “Canadian
Pension Plan” means any pension plan required to be registered under the
Income Tax Act (Canada) or any Canadian federal or provincial law and or
contributed to by a Canadian Loan Party for its Canadian Employees or former
Canadian Employees, including any pension benefit plan within the meaning of the
Pension Benefits Standards Act (British Columbia), but does not include the
Canada Pension Plan maintained by the Government of Canada or the Quebec Pension
Plan maintained by the Province of Quebec. 

               “Capital
Lease” means, with respect to any Person, any lease of (or other agreement
conveying the right to use) any real or personal property by such Person that,
in conformity with IFRS, is accounted for as a capital lease on the balance
sheet of such Person. 

               “Cash
Equivalent Investment” means, at any time, (a) any evidence of Debt,
maturing not more than one year after such time, issued or guaranteed by the
Canadian or the United States Government or any agency thereof, (b) commercial
paper, or corporate demand notes, in each case rated at least A-l by Standard
& Poor’s Ratings Group or P-l by Moody’s Investors Service, Inc., (c) any
certificate of deposit (or time deposit represented by a certificate of deposit)
or banker’s acceptance maturing not more than one year after such time, or any
overnight Federal Funds transaction that is issued or sold by a commercial
banking institution that is a member of the Federal Reserve System and has a
combined capital and surplus and undivided profits of not less than
$500,000,000, (d) any repurchase agreement entered into with any commercial
banking institution of the nature referred to in clause (c) above which (i) is
secured by a fully perfected security interest in any obligation of the type
described in any of clauses (a) through (c) above and (ii) has a market value at
the time such repurchase agreement is entered into of not less than 100% of the
repurchase obligation of such commercial banking institution thereunder, (e)
money market accounts or mutual funds which invest predominantly in assets
satisfying the foregoing requirements and (f) other short term liquid
investments approved in writing by Agent. 

               “Change
of Control” means an event or series of events by which: 

               (a)
any “person” or “group” (as such terms are used in Section 13(d) and 14(d) of
the Securities Exchange Act of 1934, but excluding any employee benefit plan of
such person or its subsidiaries, and any person or entity acting in its capacity
as trustee, agent or other fiduciary or administrator of any such plan) becomes
the “beneficial owner” (as defined in Rules 13-d and 13d-5 under the Securities
Exchange Act of 1934, except that a person or group shall be deemed to have
“beneficial ownership” of all Stock that such person or group has the right to
acquire (such right, an “option right”), whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of fifty percent (50%) or more of the Stock and Stock Equivalents of
the Borrower entitled to vote for members of the board of directors or
equivalent governing body of the Borrower on a fully diluted basis (and taking
into account all such securities that such person or group has the right acquire
pursuant to any option right); or 

3 




               (b)
individuals who on the Closing Date constituted the board of directors or
similar governing body of the Borrower (together with any new directors whose
election or appointment by such board of directors or similar governing body or
whose nomination for election by the shareholders of the Borrower was approved
by a vote of a majority of the directors of the Borrower then still in office
who were either directors on the Closing Date or whose election or nomination
for election was previously so approved) cease for any reason to constitute a
majority of the board of directors or similar governing body of the Borrower
then in office. 

               “Closing
Date” means the date on which the conditions set forth in Section 4.1
have been satisfied or waived by the Lender. 

               “Closing
Date Commitment” means, as to the Lender, the Lender’s commitment to provide
the Initial Loan pursuant to Section 2.1.1. The amount of the Closing
Date Commitment shall be set forth on Annex I. 

               “Collateral”
means all property and interests in property and proceeds thereof now owned or
hereafter acquired by any Loan Party and any other Person who has granted a Lien
to the Agent, in or upon which a Lien now or hereafter exists in favor of the
Lender or the Agent for the benefit of the Agent and the Lender, whether under
this Agreement or under any other documents executed by any such Persons and
delivered to the Agent. 

               “Collateral
Access Agreement” means an agreement in form and substance satisfactory to
Agent in its reasonable discretion pursuant to which a mortgagee or lessor of
real property on which Collateral is stored or otherwise located, or a
warehouseman, processor or other bailee of Inventory or other property owned by
any Loan Party, acknowledges the Liens of Agent and waives (or, if approved by
Agent, subordinates) any Liens held by such Person on such property, and, in the
case of any such agreement with a mortgagee or lessor, permits Agent reasonable
access to and use of such real property during the continuance of an Event of
Default to assemble, complete and sell any Collateral stored or otherwise
located thereon. 

               “Collateral
Documents” means, collectively, the Guarantee and Collateral Agreements,
each Mortgage, the Luxembourg Collateral Documents, the Netherlands Collateral
Documents and each other agreement or instrument pursuant to or in connection
with which any Loan Party or any other Person grants a security interest in any
Collateral to Agent for the benefit of the Lender or pursuant to which any such
security interest in Collateral is perfected, each as amended, restated or
otherwise modified from time to time in accordance with the terms hereof and
thereof. 

               “Commitment”
means the Closing Date Commitment and/or the Additional Commitment, as
applicable.

               “Compliance
Certificate” means a certificate substantially in the form of Exhibit
A. 4 




               “Computation
Period” means each period of two consecutive Fiscal Quarters ending on the
last day of a Fiscal Quarter. 

               “Consideration”
means the value of all cash, Cash Equivalent Investments, Stock (which in the
case of Qualified Preferred Stock is the aggregate liquidation preference of
such Qualified Preferred Stock), Stock Equivalents, securities and “earn-outs”
and other similar agreements representing purchase consideration paid or payable
for any Permitted Acquisition, whether payable at or prior to the consummation
of such Permitted Acquisition or deferred for payment at any future time,
whether or not any such future payment is subject to the occurrence of any
contingency, and includes any and all payments representing the purchase price
and any assumptions of Debt, with “earn-outs” and other similar agreements
valued at the maximum amount reasonably anticipated to be paid therefor. 

               “Consolidated
Net Income” means, with respect to Borrower and its Subsidiaries for any
period, the consolidated net income (or loss) of Borrower and its Subsidiaries
for such period, excluding (i) consolidated net income of any Person for any
period prior to such Person becoming a Subsidiary, (ii) any gains or losses from
dispositions of any assets, (iii) any extraordinary gains or extraordinary
losses, (iv) any net income of any Subsidiary to the extent that such Subsidiary
is unable, by virtue of any legal or contractual prohibition, from distributing
such net income to the Borrower, and (iv) any gains or losses from discontinued
operations. 

               “Contingent
Obligation” means any agreement, undertaking or arrangement by which any
Person guarantees, endorses or otherwise becomes or is contingently liable upon
(by direct or indirect agreement, contingent or otherwise, to provide funds for
payment, to supply funds to or otherwise to invest in a debtor, to provide
security for the obligations of a debtor or otherwise to assure a creditor
against loss) any indebtedness, obligation or other liability of any other
Person (other than by endorsements of instruments in the course of collection),
or guarantees the payment of dividends or other distributions upon the Stock of
any other Person. The amount of any Person’s obligation in respect of any
Contingent Obligation shall (subject to any limitation set forth therein) be
deemed to be the principal amount of the indebtedness, obligation or other
liability supported thereby or the amount of the dividends or distributions
guaranteed, as applicable. 

               “Control
Agreement” means a tri-party deposit account, securities account or
commodities account Control Agreement by and among the applicable Loan Party,
Agent and the depository, securities intermediary or commodities intermediary,
and each in form and substance satisfactory in all respects to Agent in its
reasonable discretion and in any event providing to Agent either (i) “control”
of such deposit account, securities or commodities account within the meaning of
Articles 8 and 9 of the UCC or (ii) “control” of such securities account within
the meaning of the PPSA. For certainty for any Canadian deposit account, such
term shall also refer to a “blocked account agreement” with respect to such
deposit account, notwithstanding that the execution and delivery of such
agreement is not a perfection requirement. 

               “Copyrights”
means all rights, title and interests (and all related IP Ancillary Rights)
arising under any requirement of law in copyrights and all mask work, database
and design rights, whether or not registered or published, all
registrations and recordations thereof and all applications in connection
therewith. 

5 




               “Curable
Default” has the meaning set forth in Section 8.3. 

               “Current
Ratio” means, as of any date of determination, the ratio of (a) cash to (b)
current accounts payable (as determined in accordance with IFRS).

               “DCC”
means the Dutch Civil Code (Burgerlijk Wetboek). 

               “Dutch
Loan Party” means a Loan Party incorporated under Dutch law, including, for
greater certainty, Merus Labs Netherlands B.V., with corporate seat in
Amsterdam, the Netherlands.

               “Debt”
of any Person means, without duplication, (a) all indebtedness of such Person
for borrowed money, (b) all indebtedness evidenced by bonds, debentures, notes
or similar instruments, (c) all obligations of such Person as lessee under
Capital Leases which have been or should be recorded as liabilities on a balance
sheet of such Person in accordance with IFRS, (d) all obligations of such Person
to pay the deferred purchase price of property or services (excluding trade
accounts payable in the ordinary course of business), (e) all indebtedness
secured by a Lien on the property of such Person, whether or not such
indebtedness shall have been assumed by such Person (with the amount thereof
being measured as the fair market value of such property), (f) all obligations,
contingent or otherwise, with respect to letters of credit (whether or not
drawn), banker’s acceptances and surety bonds issued for the account of such
Person, (g) all Hedging Obligations of such Person, (h) all Contingent
Obligations of such Person, (i) all non-compete payment obligations and
earn-out, purchase price adjustment and similar obligations, (j) all obligations
of such Person in respect of Disqualified Capital Stock issued by such Person,
(k) all indebtedness of the types listed in (a) through (j) and (l) of any
partnership of which such Person is a general partner and (l) all obligations of
such Person under any synthetic lease transaction, where such obligations are
considered borrowed money indebtedness for tax purposes but the transaction is
classified as an operating lease in accordance with IFRS. 

               “Default”
means any event that, if it continues uncured, will, with the lapse of time or
the giving of notice or both, constitute an Event of Default. 

               “Default
Rate” has the meaning set forth in Section 2.3.1. 

               “Defined
Benefit Plan” means any Canadian Pension Plan which contains a “defined
benefit provision” as defined in subsection 147.1(1) of the Income Tax Act
(Canada). 

               “Disposition”
means, as to any asset or right of any Group Member, (a) any sale, lease,
assignment or other transfer pursuant to Section 7.5(b)(ii), (b) any
loss, destruction or damage of property or (c) any condemnation, confiscation,
requisition, seizure or taking of property. 

               “Disqualified
Capital Stock” means any Stock which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable), or upon
the happening of any event, (a) matures (excluding any maturity as the result of
an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the option of the
holder thereof, in whole or in part, on or prior to the 365th day after the
Maturity Date, (b) is convertible into or exchangeable (unless at the sole
option of the issuer thereof) for (i) debt securities or (ii) any Stock referred
to in (a) above, in each case at any time on or prior to the 365th day after the
Maturity Date, or (c) contains any repurchase obligation which may come into
effect prior to the Obligations being Paid in Full; provided that any
Stock that would not constitute Disqualified Capital Stock but for provisions
thereof giving holders thereof (or the holders of any security into or for which
such Stock is convertible, exchangeable or exercisable) the right to require the
issuer thereof to redeem or repurchase such Stock upon the occurrence of a
change in control or an asset sale occurring prior to the 365th day after the
Maturity Date shall not constitute Disqualified Capital Stock if such Stock
provides that the issuer thereof will not redeem or repurchase any such Stock
pursuant to such provisions prior to the repayment in full of the Obligations. 

6 




               “Dollar”
and “$” mean lawful currency of the United States of America. 

               “Domain
Name Assignment Documents” has the meaning set forth in the Asset Purchase
Agreement. 

               “EBITDA”
means, for any period, Consolidated Net Income for such period plus, to
the extent deducted in determining such Consolidated Net Income for such period,
without duplication, (i) Interest Expense, (ii) income tax expense, (iii)
depreciation and amortization, (iv) transaction expenses incurred in connection
with the Asset Sale and the financing contemplated by this Agreement, (v)
non-cash stock compensation expense, (vi) any non-cash non-recurring charges or
expenses, and (vii) any extraordinary or non-recurring charges or expenses
approved in writing by the Agent minus, to the extent included in
determining Consolidated Net Income for such period, all non-cash gains for such
period. 

               “Environmental
Claims” means all claims, however asserted, by any governmental, regulatory
or judicial authority or other Person alleging potential liability or
responsibility under or for violation of any Environmental Law, or for release
or injury to the environment or any Person or property or natural resources.


               “Environmental
Laws” means all present or future federal, state, provincial or local laws,
statutes, common law duties, rules, regulations, ordinances and codes, including
all amendments, together with all administrative orders, directed duties,
requests, licenses, authorizations and permits of, and agreements with, any
Governmental Authority, in each case relating to any matter arising out of or
relating to health and safety, or pollution or protection of the environment,
natural resources or workplace, including any of the foregoing relating to the
presence, use, production, recycling, reclamation, generation, handling,
transport, treatment, storage, disposal, distribution, discharge, release,
emission, control, cleanup or investigation or management of any Hazardous
Substance. 

               “Equivalent
Amount” means, on any date of determination, with respect to obligations or
valuations denominated in one currency (the “first currency”), the amount of
another currency (the “second currency”) which would result from the Agent
converting the first currency into the second currency at approximately 12:00 noon (New York time) in
a commercially reasonable manner. 

7 




               “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended. 

               “Event
of Default” means any of the events described in Section 8.1. 

               “Excess
Cash” means, as of any date of determination, Unrestricted Cash in excess of
the amount of Unrestricted Cash that would be required to maintain a Current
Ratio of 1.2 to 1.0.

               “Excluded
Taxes” has the meaning set forth in Section 3.1(a). 

               “Fee
Letter” means the Fee Letter, dated as of or before the Closing Date, signed
by the Lender and Agent, accepted and agreed to by the Borrower, and governed by
the laws of New York. 

               “Fiscal
Quarter” means a fiscal quarter of a Fiscal Year. 

               “Fiscal
Year” means the fiscal year of Borrower and its Subsidiaries, which period
shall be the 12-month period ending on September 30 of each year. 

               “Fixed
Charges” means, for any period, and with respect to the Borrower and its
Subsidiaries determined on a consolidated basis in accordance with IFRS, the
sum, without duplication, of (a) Interest Expense accrued (other than interest
paid-in-kind, amortization of financing fees, and other non-cash Interest
Expense) during such period, (b) principal payments in respect of Debt that are
required to be paid during such period, (c) all federal, state, and local income
taxes paid in cash with respect to such period and (d) all Restricted Payments
paid (whether in cash or other property, other than common Stock) during such
period. 

               “Fixed
Charges Coverage Ratio” means, for any Computation Period, the ratio of (a)
the total for such Computation Period of EBITDA to (b) the total for such
Computation Period of Fixed Charges. 

               “Fixed
Charges Coverage Ratio Requirement” means, for any Computation Period, the
applicable Fixed Charges Coverage Ratio set forth below at the end of each such
Computation Period: 

8 






	Computation Period 	Amount 
	 	 
	September 30, 2012 	   
             2.3:1.0 
	 	 
	December 31, 2012 	   
             2.3:1.0 
	 	 
	March 31, 2013 	   
             2.3:1.0 
	 	 
	June 30, 2013 	   
             2.3:1.0 
	 	 
	September 30, 2013 	   
             2.3:1.0 
	 	 
	December 31, 2013 	   
             2.3:1.0 
	 	 
	March 31, 2014 	   
             2.3:1.0 
	 	 
	June 30, 2014 	   
             2.3:1.0 
	 	 
	September 30, 2014 	   
             2.3:1.0 
	 	 
	December 31, 2014 	   
             2.3:1.0 
	 	 
	March 31, 2015 	   
             2.3:1.0 



               “Foreign
Lender” means the Lender to the extent that it is not resident in Canada for
purposes of the Tax Act. 

               “FRB”
means the Board of Governors of the Federal Reserve System or any successor
thereto. 

               “Governmental
Authority” means any nation or government, any state, province, municipality
or other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government
(including any supra-national bodies such as the European Union or the European
Central Bank), and any corporation or other entity owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing. 

               “Gross
Sales” means, with respect to the Products for any Computation Period, the
gross revenue from the sale of such Products as shown or as would be shown in
the consolidated financial statements of the Loan Parties prepared for such
period in accordance with IFRS applied on a consistent basis. For the avoidance
of doubt, no Disposition shall be included in Gross Sales. 

               “Group
Member” means Borrower and each Subsidiary of Borrower. 

               “Guarantee
and Collateral Agreements” means the U.S. Guarantee and Collateral Agreement
and the Canadian Guarantee and Collateral Agreement. 

9 




               “Hazardous
Substances” means any waste, chemical, substance, or material listed,
defined, classified, or regulated as a hazardous waste, hazardous substance,
pollutant, contaminant, toxic substance, or hazardous, dangerous or radioactive
material, chemical or waste or otherwise regulated by any Environmental Law,
including, without limitation, any petroleum or any derivative, waste, or
byproduct thereof, radon, asbestos, and polychlorinated biphenyls, and any other
substance, the storage, manufacture, disposal, treatment, generation, use,
transportation, remediation, release into or concentration in the environment of
which is prohibited, controlled, regulated or licensed by any governmental
authority under any Environmental Law. 

               “Hedging
Obligation” means, with respect to any Person, any liability of such Person
under any interest rate, currency or commodity swap agreement, cap agreement or
collar agreement, and any other agreement or arrangement designed to protect a
Person against fluctuations in interest rates, currency exchange rates or
commodity prices. The amount of any Person’s obligation in respect of any
Hedging Obligation shall be deemed to be the incremental obligation that would
be reflected in the financial statements of such Person in accordance with IFRS.


               “IFRS”
means the International Financial Reporting Standards and applicable accounting
requirements set by the International Accounting Standards Board or any
successor thereto (or the Financial Accounting Standards Board, the Accounting
Principles Board of the American Institute of Certified Public Accountants, the
Canadian Accounting Standards Board, or any successor to any such Board, or the
Securities and Exchange Commission, as the case may be), as in effect from time
to time. 

               “Inactive
Subsidiaries” means the following Subsidiaries: ECG Properties Inc., Envoy
Securities Corp., and Orbis Pharma Inc. 

               “Indemnified
Liabilities” has the meaning set forth in Section 10.5. 

               “Initial
  Loan” has the meaning given in the definition of “Loans”. 

               “Insolvency
Regulation” means the Council Regulation (EC) n°1346/2000 of 29 May 2000 on
insolvency proceedings. 

               “Intellectual
Property” means all rights, title and interests in intellectual property
arising under any Requirement of Law and all IP Ancillary Rights relating
thereto, including all Copyrights, Patents, Trademarks, Internet Domain Names,
Trade Secrets, industrial designs, integrated circuit topographies, plant
breeders’ rights and rights under IP Licenses. 

               “Interest
Expense” means for any period the consolidated interest expense of Borrower
and its Subsidiaries for such period (including all imputed interest on Capital
Leases). 

               “Internet
Domain Name” means all right, title and interest (and all related IP
Ancillary Rights) arising under any requirement of law in internet domain
names.

               “Inventory”
means all the “inventory” (as such term is defined in the UCC or the PPSA, as
applicable) of the Borrower and its Subsidiaries, including, but not limited to,
all merchandise, raw materials, parts, supplies, work-in-process and finished
goods intended for sale, together with all the containers, packing, packaging,
shipping and similar materials related thereto, and including such inventory as
is temporarily out of the Borrower’s or such Subsidiary’s custody or possession,
including inventory on the premises of others and items in transit. 

10 




               “Investment”
means, with respect to any Person, (a) the purchase of any debt or equity
security of any other Person, (b) the making of any loan or advance to any other
Person, (c) becoming obligated with respect to a Contingent Obligation in
respect of obligations of any other Person or (d) the making of an Acquisition.


               “IP
Ancillary Rights” means, with respect to an item of Intellectual Property
all foreign counterparts to, and all divisionals, reversions, continuations,
continuations-in-part, reissues, reexaminations, renewals and extensions of,
such Intellectual Property and all income, royalties, proceeds and liabilities
at any time due or payable or asserted under or with respect to any of the
foregoing or otherwise with respect to such Intellectual Property, including all
rights to sue or recover at law or in equity for any past, present or future
infringement, misappropriation, dilution, violation or other impairment thereof,
and, in each case, all rights to obtain any other IP Ancillary Right. 

               “IP
License” means all contractual obligations (and all related IP Ancillary
Rights), whether written or oral, granting any right, title and interest in any
Intellectual Property. 

               “IRC”
means the Internal Revenue Code of 1986, as amended. 

               “Issuing
Bank” means Wells Fargo Bank, N.A., the issuing bank of the Novartis Letter
of Credit. 

               “Legal
Costs” means, with respect to any Person, (a) all reasonable fees and
charges of any counsel, accountants, auditors, appraisers, consultants and other
professionals to such Person, (b) the reasonable allocable cost of internal
legal services of such Person and all reasonable disbursements of such internal
counsel and (c) all court costs and similar legal expenses. 

               “Lender
Party” has the meaning set forth in Section 10.5. 

               “Lender”
has the meaning set forth in the Preamble. 

               “License
Agreement” has the meaning set forth in the Asset Purchase Agreement. 

               “Lien”
means, with respect to any Person, any interest granted by such Person in any
real or personal property, asset or other right owned or being purchased or
acquired by such Person which secures payment or performance of any obligation
and shall include any mortgage, lien, encumbrance, charge or other security
interest of any kind, whether arising by contract, as a matter of law, by
judicial process or otherwise. 

               “Loan
Documents” means this Agreement, the Notes, the Collateral Documents, the
Fee Letter, and all other documents, instruments and agreements delivered in
connection with the foregoing, all as amended, restated or otherwise modified from
time to time in accordance with the terms hereof and thereof. 

11




               “Loan
Party” means Borrower and each Subsidiary of Borrower that is not an
Inactive Subsidiary. 

               “Loan
Party Subsidiary” means each Subsidiary of Borrower that is not an Inactive
Subsidiary. 

               “Loans”
means the term loan from the Lender in a principal amount equal to the Closing
Date Commitment (subject to the terms and conditions herein) made to Borrower on
the Closing Date pursuant to Section 2.1.1 (such term loan, the
“Initial Loan”) and the additional term loan from the Lender in a
principal amount equal to the Additional Commitment (subject to the terms and
conditions herein) made to the Borrower pursuant to Section 2.1.2 in
order to satisfy the obligations of the Borrower to reimburse the Lender for
amounts drawn under the Novartis Letter of Credit pursuant to the last sentence
of Section 4 (such term loan, the “Additional Loan”). 

               “Luxembourg
Collateral Documents” means the Luxembourg law governed share pledge
agreement, in favor of the Agent over the shares of Merus Labs Luxco S.à r.l.,
and the Luxembourg law governed first demand guarantee agreement, whereby Merus
Labs Luxco S.à r.l. provides a guarantee in favor of the Agent. 

               “Margin
Stock” means any “margin stock” as defined in Regulation T, U or X of the
FRB. 

               “Material
Adverse Effect” means (a) a material adverse change in, or a material
adverse effect upon, the operations, assets, business, prospects, properties or
condition (financial or otherwise) of Loan Parties taken as a whole, (b) a
material impairment of the ability of any Loan Party to perform in any material
respect any of its Obligations under any Loan Document to which it is a party or
(c) a material adverse effect upon the legality, validity, binding effect or
enforceability against any Loan Party of any Loan Document to which it is a
party. 

               “Maturity
Date” means March 31, 2015. 

               “Maximum
Total Leverage Ratio” means, for any Computation Period, the ratio of (a)
the total Debt outstanding less the amount of Unrestricted Cash that is
Excess Cash, in each case as of the last date of such Computation Period to (b)
the total for such Computation Period of EBITDA. 

               “Mortgage”
means a mortgage, deed of trust, leasehold mortgage or similar instrument
granting Agent a Lien on a real property interest of any Loan Party, each as
amended, restated or otherwise modified from time to time in accordance with the
terms hereof and thereof. 

               “Net
Cash Proceeds” means: 

          (a)     
with respect to any Disposition, the aggregate cash proceeds (including cash
proceeds received pursuant to policies of insurance and by way of deferred
payment of principal pursuant to a note,
  installment receivable or otherwise, but only as and when received) received by
  any Group Member pursuant to such Disposition net of (i) the reasonable direct
  costs relating to such Disposition (including sales commissions and legal,
  accounting and investment banking fees, commissions and expenses), (ii) any
  portion of such proceeds deposited in an escrow account pursuant to the
  documentation relating to such Disposition (provided that such amounts
  shall be treated as Net Cash Proceeds upon their release from such escrow
  account to the applicable Group Member), (iii) taxes paid or reasonably
  estimated by Borrower to be payable as a result thereof (after taking into
  account any available tax credits or deductions and any tax sharing
  arrangements), (iv) amounts required to be applied to the repayment of any Debt
  secured by a Lien (permitted hereunder) prior to the Lien of Agent on the asset
  subject to such Disposition, and (v) so long as no Event of Default exists (or
  if an Event of Default exists, only with the prior written consent of the
  Lender) (A) with respect to any Disposition described in clause (a) of the
  definition thereof, all money actually applied within 180 days, or within 360
  days pursuant to a binding agreement executed within 180 days, to replace such
  assets with assets performing the same or similar functions, and (B) with
  respect to any Disposition described in clause (b) or (c) of the definition
  thereof, all money actually applied within 180 days, or within 360 days pursuant
  to a binding agreement executed within 180 days, to repair, replace or
  reconstruct damaged property or property affected by loss, destruction, damage,
condemnation, confiscation, requisition, seizure or taking; and 

12 



 

          (b)     
with respect to any issuance or incurrence of Debt, the aggregate cash proceeds
received by Borrower or any Subsidiary of Borrower pursuant to such issuance or
incurrence, net of the reasonable direct costs relating to such issuance or
incurrence. 

               “Netherlands
Collateral Documents” means the Dutch law governed share pledge agreement,
in favor of the Agent over the shares of Merus Labs Netherlands B.V. 

               “Net
Sales” means, with respect to any Computation Period, Gross Sales minus Net
Sales Deductions. 

               “Net
Sales Deductions” means, with respect to the Products for any Computation
Period, the sum of all applicable (i) freight, insurance and other
transportation and shipping charges, in each case included in the gross invoice
price for such Products; (ii) sales, use, value-added, excise taxes and duties,
in each case included in the gross invoice price for such Products; (iii)
billbacks, chargebacks, customer adjustments (including payment discounts and
customer pricing), performance allowances, promotional monies, trade, quantity,
cash discounts, volume incentives, off invoice discounts, government and other
third-party rebates, and product service fees; (iv) allowances or credits,
including those in respect of rejection, defects, damaged item credits, sales
returns, retroactive price reduction, shipping charges, shipment shortages,
shelf-stock adjustments, invoice errors, and replacement costs; (v) bad debt;
and (vi) such other discounts and other deductions customary in the trade, each
as accrued or required to be accrued by the Borrower with respect to such
Products for such period in accordance with IFRS consistently applied. 

               “Non-Excluded
Taxes” has the meaning set forth in Section 3.1(a). 

13 




               “Note”
means a promissory note substantially in the form of Exhibit B, as the
same may be replaced, substituted, amended, restated or otherwise modified from
time to time. 

               “Novartis”
means Novartis Pharma AG, a company organized under the laws of Switzerland, and
its successors and assigns under the Novartis Letter of Credit. 

               “Novartis
Letter of Credit” means the Irrevocable Standby Letter of Credit, dated as
of or before the Closing Date, identifying Novartis as the beneficiary, issued
by the Issuing Bank, in the amount of $20 million. 

               “Obligations”
means all liabilities, indebtedness and obligations (monetary (including
interest accrued at the rate provided in the applicable Loan Document after the
commencement of a bankruptcy proceeding whether or not a claim for such interest
is allowed) or otherwise) of any Group Member under this Agreement, any other
Loan Document, any Collateral Document or any other document or instrument
executed in connection herewith or therewith, in each case howsoever created,
arising or evidenced, whether direct or indirect, absolute or contingent, now or
hereafter existing, or due or to become due. 

               “OFAC”
has the meaning set forth in Section 5.21.1. 

               “Other
Taxes” means all present or future stamp, court or documentary, intangible,
recording, filing or similar Taxes that arise from any payment made under, from
the execution, delivery, performance, enforcement or registration of, from the
receipt or perfection of a security interest under, or otherwise with respect
to, any Loan Document. 

               “Paid
in Full” or “Payment in Full” means, with respect to any Obligations,
the payment in full in cash and performance of all such Obligations. 

               “Patent
Assignment Documents” has the meaning set forth in the Asset Purchase
Agreement. 

               “Patents”
means all rights, title and interests (and all related IP Ancillary Rights)
arising under any requirement of law in or relating to letters patent and
applications therefor. 

               “Permitted
Acquisition” means any Acquisition, in each case to the extent that each of
the conditions precedent set forth below shall have been satisfied in a manner
reasonably satisfactory to the Agent: 

 

14 






15 






16 




               “Person”
means any natural person, corporation, partnership, trust, limited liability
company, association, Governmental Authority or unit, or any other entity,
whether acting in an individual, fiduciary or other capacity. 

               “PPSA”
means the Personal Property Security Act (British Columbia) and the Regulations
thereunder, as from time to time in effect, provided, however, if
attachment, perfection or priority of the Agent’s security interests in any
Collateral is governed by the personal property security laws of any
jurisdiction other than British Columbia, PPSA shall mean those personal
property security laws in such other jurisdiction for the purposes of the
provisions hereof relating to such attachment, perfection or priority and for
the definitions related to such provisions (including the Civil Code of Quebec).


               “Pro
Forma Basis” means, with respect to compliance with any test or covenant or
calculation of any financial ratio hereunder, the determination or calculation
of such test, covenant or ratio (including in connection with Specified
Transactions) in accordance with Section 1.4.

               “Product”
means Enablex, Factive, Vancomycin, Collacare, and any other product sold by the
Loan Parties in the ordinary course of business that (x) constitutes a brand,
line of business, division, branch, product line, marketing rights with respect
to a product line, operating division or other unit operation of any Person
acquired by the Loan Parties in a Permitted Acquisition, and (y) is elected by
the Borrower to be a “Product” for purposes of this Agreement, by written notice
to the Agent. 

               “Proposed
Acquisition Target” means any Person or any brand, product, marketing rights
with respect to a product, line of business, division, branch, operating
division or other unit operation of any Person. 

               “Public
Record” means the public filings made by the Borrower pursuant to
requirements of law, in each case as available on SEDAR. 

               “Qualified
Capital Stock” of any person shall mean any Stock of such person that is not
Disqualified Capital Stock. 

               “Reference
Computation Period” has the meaning set forth in Section 7.13.4. 

               “Required
Deposit Date” has the meaning set forth in Section 7.13.4. 

               “Restricted
Payment” has the meaning set forth in Section 7.4. 

               “Retroactive
Effect Deposit” has the meaning set forth in Section 7.13.4. 

               “Seller”
means Novartis Pharma AG. 

 

17 






               “Specified
Transaction” has the meaning set forth in Section 1.4. 

               “Stock”
means all shares of capital stock (whether denominated as common stock or
preferred stock), equity interests, beneficial, partnership or membership
interests, joint venture interests, participations or other ownership or profit
interests in, or equivalents (regardless of how designated) of, a Person (other
than an individual), whether voting or non-voting. 

               “Stock
Equivalents” means all securities convertible into or exchangeable for Stock
or any other Stock Equivalent and all warrants, options or other rights to
purchase, subscribe for or otherwise acquire any Stock or any other Stock
Equivalent, whether or not presently convertible, exchangeable or exercisable.


               “Subsidiary”
means, with respect to any Person, a corporation, partnership, limited liability
company or other entity of which such Person owns, directly or indirectly, such
number of outstanding shares of voting Stock or Stock Equivalents as to have
more than 50% of the ordinary voting power for the election of directors or
other managers of such corporation, partnership, limited liability company or
other entity. Unless the context otherwise requires, each reference to
Subsidiaries herein shall be a reference to Subsidiaries of Borrower. 

               “Supply
Agreement” has the meaning set forth in the Asset Purchase Agreement.

               “Tax Act” means the Income Tax Act (Canada), as amended. 

               “Taxes”
has the meaning set forth in Section 3.1(a). 

               “Tax
Returns” has the meaning set forth in Section 5.12. 

               “TM
Assignment Documents” has the meaning set forth in the Asset Purchase
Agreement. 

               “Trade
Secrets” means all right, title and interest (and all related IP Ancillary
Rights) arising under any requirement of law in or relating to trade secrets.


               “Trademark”
means all rights, title and interests (and all related IP Ancillary Rights)
arising under any requirement of law in trademarks, trade names, corporate
names, company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers and, in each case,
all goodwill associated therewith, all registrations and recordations thereof
and all applications in connection therewith. 

18 




               “UCC”
means the Uniform Commercial Code as in effect in from time to time in the State
of New York, provided that where the context so requires any term defined by
reference to “UCC” shall also have any extended, alternative or analogous
meaning given to such term in applicable Canadian personal property security and
other laws (including without limitation, the PPSA of each applicable province
of Canada, the Civil Code of Quebec, the Bills and Exchange Act
(Canada) and the Depository Bills and Notes Act (Canada), in each case
for the extension, preservation or betterment of the security and rights of the
Agent and the Lender under the Loan Documents. 

               “Unrestricted
Cash” means, as of any date of determination, the aggregate amount of cash
credited as of such date to all deposit accounts of the Loan Parties that are
subject to Control Agreements in favor of the Agent, which cash is subject to no
restriction on its use, transfer or distribution pursuant to any requirement of
law or contractual obligation (other than this Agreement, the Collateral
Documents and the applicable Control Agreement) and is subject to no Liens other
than Liens securing obligations under the Loan Documents, and shall include, for
the avoidance of doubt, the amount of cash credited as of such date to the
Sinking Fund Account, if any. 

               “U.S.
Guarantee and Collateral Agreement” means the Guarantee and Collateral
Agreement, dated as of the Closing Date, made by each Loan Party and other
grantor or pledgor signatory thereto in favor of Agent, and governed by the laws
of New York, as amended, restated or otherwise modified from time to time in
accordance with the terms hereof and thereof. 

               “Wholly-Owned
Subsidiary” means, as to any Subsidiary, all of the Stock and Stock
Equivalents of which (except directors’ qualifying shares) are at the time
directly or indirectly owned by Borrower and/or another Wholly-Owned Subsidiary
of Borrower. 

                         1.2.     
Interpretation. In the case of this Agreement and each other Loan
Document, (a) the meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms; (b) Annex, Exhibit, Schedule and
Section references in each Loan Document are to the particular Annex, Exhibit,
Schedule and Section of such Loan Document unless otherwise specified; (c) the
term “including” is not limiting and means “including but not limited to”; (d)
in the computation of periods of time from a specified date to a later specified
date, the word “from” means “from and including”; the words “to” and “until”
each mean “to but excluding”, and the word “through” means “to and including”;
(e) unless otherwise expressly provided in such Loan Document, (i) references to
agreements and other contractual instruments shall be deemed to include all
subsequent amendments and other modifications thereto, but only to the extent
such amendments and other modifications are not prohibited by the terms of any
Loan Document, and (ii) references to any statute or regulation shall be
construed as including all statutory and regulatory provisions amending,
replacing, supplementing or interpreting such statute or regulation; (f) this
Agreement and the other Loan Documents may use several different limitations,
tests or measurements to regulate the same or similar matters, all of which are
cumulative and each shall be performed in accordance with its terms; and (g)
this Agreement and the other Loan Documents are the result of negotiations among
and have been reviewed by counsel to Agent, Borrower, Lender and the other
parties hereto and thereto and are the products of all parties; accordingly,
they shall not be construed against Agent or the Lender merely because of
Agent’s or the Lender’s involvement in their preparation. Any reference in any
Loan Document to a Permitted Lien is not intended to subordinate or
postpone, and shall not be interpreted as subordinating or postponing, or as any
agreement to subordinate or postpone, any Lien created by any of the Loan
Documents to any Permitted Lien. 

19 




                         1.3.     
UCC References; Dutch Terms. Notwithstanding the foregoing, and where the
context so requires, (i) any term defined in this Agreement by reference to the
“Code”, the “UCC” or the “Uniform Commercial Code” shall also have any extended,
alternative or analogous meaning given to such term in applicable Canadian
personal property security and other laws (including, without limitation, the
Personal Property Security Act of each applicable province of Canada, the
Civil Code of Quebec, the Bills and Exchange Act (Canada) and the
Depository Bills and Notes Act (Canada)), in all cases for the extension,
preservation or betterment of the security and rights of the Collateral, (ii)
all references in this Agreement to “Article 8” shall be deemed to refer also to
applicable Canadian securities transfer laws (including, without limitation, the
Securities Transfer Act (British Columbia), (iii) all references in this
Agreement to a financing statement, continuation statement, amendment or
termination statement shall be deemed to refer also to the analogous documents
used under applicable Canadian personal property security laws, (v) all
references to the United States of America, or to any subdivision, department,
agency or instrumentality thereof shall be deemed to refer also to Canada, or to
any subdivision, department, agency or instrumentality thereof, and (vi) all
references to federal or state securities law of the United States shall be
deemed to refer also to analogous federal and provincial securities laws in
Canada. In this Agreement , where it relates to a Dutch entity, a reference to:
(a) unless a contrary indication appears, a “director”, in relation to a
Dutch Loan Party, means a managing director (bestuurder) and “board of
directors” means its managing board (bestuur); (b) a “necessary action
to authorise” where applicable, includes without limitation: (i) any action
required to comply with the Dutch Works Councils Act (Wet op de
ondernemingsraden); and (ii) obtaining an unconditional positive advice
(advies) from the competent works council(s); (c) “financial
assistance” means any act contemplated by: (i) (for a besloten
vennootschap met beperkte aansprakelijkheid) section 2:207(c) DCC; or (ii)
(for a naamloze vennootschap) Article 2:98(c) DCC; (d) “Security”
includes any mortgage (hypotheek), pledge (pandrecht), right of
retention (recht van retentie), and, in general, any right in rem
(beperkt recht), created for the purpose of granting security
(goederenrechtelijk zekerheidsrecht); (e) (i) a “winding-up”,
“administration” or “dissolution” includes a Dutch entity being
declared bankrupt (failliet verklaard) or dissolved (ontbonden);
(ii) a “moratorium” includes surseance van betaling and
noodregeling and “a moratorium is declared” or “occurs”
includes surseance verleend and noodregeling uitgesproken; (iii)
any “step” or “procedure” taken in connection with insolvency
proceedings includes a Dutch entity having filed a notice under Section 36 of
the Dutch 1990 Tax Collection Act (Invorderingswet 1990) (whether or not
pursuant to section 60 of the Act on the Financing of Social Insurances (Wet
financiering sociale verzekeringen); (iv) a “trustee in bankruptcy”
includes a curator; (v) an “administrator” includes a
bewindvoerder; and (vi) an “attachment” includes a beslag.


                         1.4.     
Pro Forma Calculation.



20 






21 






Section 2.        Credit
Facilities. 

                         2.1.      Loans.

                         2.1.1.
Initial Loan. On the terms and subject to the conditions of this
Agreement, the Lender agrees to lend to Borrower on the Closing Date the entire
amount of its Closing Date Commitment, after which the Closing Date Commitment
shall terminate. 

                         2.1.2.
Additional Loan. On the terms and subject to the conditions of this
Agreement, upon a draw by the Seller under the Novartis Letter of Credit (which
draw cannot be made until one year after the Closing Date pursuant to the terms
of the Asset Purchase Agreement) to satisfy the remaining purchase price
obligations of the Asset Purchaser under Section 9.2 of the Asset Purchase
Agreement, the Lender agrees to lend to Borrower the entire amount of its
Additional Commitment. The Borrower agrees that the Additional Loan shall be
made on behalf of Borrower but the proceeds of the Additional Loan shall be
funded directly to the Issuing Bank to reimburse the Issuing Bank for the
Seller’s draw under the Novartis Letter of Credit, if any. The Additional
Commitment shall immediately terminate upon the funding of the Additional Loan.
If the Additional Loan is not funded on the first anniversary of the Closing
Date, the Additional Commitment shall immediately terminate. The Agent shall
provide written notice to the Borrower of the funding of the Additional Loan
within one Business Day of such funding.

                         2.1.3.
General. No portion of the Loans may be re-borrowed once repaid. The
proceeds of the Loans shall be used to finance the consummation of the Asset
Purchase. 

                         2.2.     
Loan Accounting. 

                         2.2.1.
Recordkeeping. Agent, on behalf of the Lender, shall record in its
records the date and amount of the share of the Loans made by the Lender and
each repayment thereof. The aggregate unpaid principal amount so recorded shall
be rebuttably presumptive evidence of the principal amount of the Loans owing
and unpaid. The failure to so record any such amount or any error in so
recording any such amount shall not, however, limit or otherwise affect the
Obligations of Borrower hereunder or under any Note to repay the principal
amount of the Loans hereunder, together with all interest accruing thereon. 

                         2.2.2.
Notes. At the request of the Lender, the Loans shall be evidenced by one
or more Notes, with appropriate insertions, payable to the order of the Lender
in a face principal amount equal to the Loans and payable in such amounts and on
such dates as are set forth herein. 

22 




                         2.3.     
Interest.

                         2.3.1.
Interest Rate. Borrower promises to pay interest on the unpaid principal
amount of the Initial Loan for the period commencing on the Closing Date until
the Initial Loan is Paid in Full at a rate per annum equal to 13.50% simple
interest per annum. Borrower promises to pay interest on the unpaid principal
amount of the Additional Loan for the period commencing on the date that the
Lender advances the Additional Loan to or on behalf of the Borrower until the
Additional Loan is Paid in Full at a rate per annum equal to 14.00% simple
interest per annum. The foregoing notwithstanding, (i) at any time an Event of
Default exists, if requested by the Agent or the Lender, the interest rate then
applicable to the Initial Loan and the Additional Loan shall be increased by two
percent (2.00%) simple interest per annum (and, in the case of Obligations other
than the Loans, such Obligations shall bear interest at two percentage points
per annum in excess of their contract interest rate) (any such increased rate,
the “Default Rate”), (ii) any such increase may thereafter be rescinded
by the Lender, and (iii) upon the occurrence of an Event of Default under
Section 8.1.1 or 8.1.3, any such increase described in the
foregoing clause (i) shall occur automatically. In no event shall interest
payable on the Loans by Borrower to the Lender hereunder exceed the maximum rate
permitted under applicable law, and if any such provision of this Agreement is
in contravention of any such law, such provision shall be deemed modified to
limit such interest to the maximum rate permitted under such law. 

                         2.3.2.
Interest Payments. Interest accrued on the Loans during the period from
the Closing Date until the Maturity Date shall be paid on a monthly basis, in
cash, in arrears, on the last day of each calendar month, and, to the extent not
paid in advance, upon a prepayment of the Loans in accordance with Section
2.4 and at maturity, in each case, in cash. After maturity and at any time
an Event of Default exists, all accrued interest on the Loans shall be payable
in cash on demand at the rates specified in Section 2.3.1. 

                         2.3.3.
Computation of Interest. Interest shall be computed for the actual number
of days elapsed on the basis of a year of 360 days consisting of twelve 30-day
months. 

                         2.3.4.
Interest Act (Canada). For the purposes of Interest Act (Canada)
and disclosure thereunder, whenever any interest or any fee to be paid hereunder
or in connection herewith is to be calculated on the basis of a 360-day or
365-day year, the yearly rate of interest to which the rate used in such
calculation is equivalent is the rate so used multiplied by the actual number of
days in the calendar year in which the same is to be ascertained and divided by
360 or 365, as applicable. The rates of interest under this Agreement are
nominal rates, and not effective rates or yields. The principle of deemed
reinvestment of interest does not apply to any interest calculation under this
Agreement. 

                         2.3.5.
Maximum Lawful Rate. If any provision of this Agreement would oblige a
Canadian Loan Party to make any payment of interest or other amount payable to
the Agent in an amount or calculated at a rate which would be prohibited by law
or would result in a receipt by the Agent of “interest” at a “criminal rate” (as
such terms are construed under the Criminal Code (Canada)), then,
notwithstanding such provision, such amount or rate shall be deemed to have been
adjusted with retroactive effect to the maximum amount or rate of interest, as
the case may be, as would not be so prohibited by applicable law or so result in
a receipt by the Agent of “interest” at a “criminal rate”, such adjustment to be
effected, to the extent necessary (but only to the extent necessary), as
follows: 

23 





	 	(A) 	
      first, by reducing the amount or rate of interest;
    and

	 	 	 
	 	(B) 	
      thereafter, by reducing any fees, commissions, costs,
      expenses, premiums and other amounts required to be paid which would
      constitute interest for purposes of section 347 of the Criminal Code
      (Canada).



Any provision of this Agreement that would oblige a Canadian
Loan Party to pay any fine, penalty or rate of interest on any arrears of
principal or interest secured by a mortgage on real property or hypothec on
immovables that has the effect of increasing the charge on arrears beyond the
rate of interest payable on principal money not in arrears shall not apply to
such Canadian Loan Party, which shall be required to pay interest on money in
arrears at the same rate of interest payable on principal money not in arrears.


                         2.4.     
Prepayment.

 

24 






                         2.6.     
Payment. 

                         2.6.1.
Making of Payments. All payments of principal of or interest on the
Loans, and of all fees, shall be made by Borrower to Agent without setoff,
recoupment or counterclaim and in immediately available funds, in the currency
required by Section 2.6.5, at the deposit account of Agent in New York,
New York set forth on Annex II or at such other deposit account specified
by Agent, in any case, not later than 1:00 p.m. New York City time on the date
due, and funds received after that hour shall be deemed to have been received by
Agent on the following Business Day. Agent shall promptly remit to the Lender
all principal, interest and fee payments received in collected funds by Agent
for the account of such Lender.

                         2.6.2.
Application of Payments and Proceeds. 

                         (a)     
Except as set forth in Section 2.4.3, and subject to the provisions of
Section 2.6.2(b) below, each payment by Borrower hereunder shall be
applied to such Obligations as Borrower shall direct by notice to be received by
Agent on or before the date of such payment or, in the absence of such notice,
as Agent shall determine in its sole discretion. Concurrently with each
remittance to the Lender of its share of any such payment, Agent shall advise
such Lender as to the application of such payment. 

                         (b)      If
an Event of Default or an Acceleration Event shall have occurred and be
continuing, notwithstanding anything herein or in any other Loan Document to the
contrary, Agent shall apply all or any part of payments in respect of the
Obligations and proceeds of Collateral, in each case as received by Agent, to
the payment of the Obligations in the following order: 

                         (i)      FIRST, to (A) the
  payment of all fees, costs, expenses and indemnities due and owing to Agent
  under this Agreement or any other Loan Document, and (B) any other Obligations owing to Agent in respect of sums advanced by Agent
  to preserve or protect the Collateral or to preserve or protect its security
  interest in the Collateral (whether or not such Obligations are then due and
  owing to Agent), until Paid in Full; 

25 




                         (ii)     
SECOND, to the payment of all fees, costs, expenses and indemnities due and
owing to the Lender until Paid in Full; 

                         (iii)      THIRD,
to the payment of all accrued and unpaid interest due and owing to the Lender in
respect of the Loans (on a pro rata basis in respect of the Initial Loan and the
Additional Loan) until Paid in Full; 

                          (iv)     
FOURTH, to the payment of all principal then owing in respect of the Loans (on a
pro rata basis in respect of the Initial Loan and the Additional Loan) until
Paid in Full; 

                         (v)      FIFTH,
to the payment of all other Obligations owing to the Lender until Paid in Full;
and 

                         (vi)     
SIXTH, the balance to the Borrower or such other Person as may be lawfully
entitled thereto. 

                         2.6.3.
Payment Dates. If any payment of principal of or interest on a Loan, or
of any fees, falls due on a day which is not a Business Day, then such due date
shall be extended to the immediately following Business Day (unless such
immediately following Business Day is the first Business Day of a calendar
month, in which case such due date shall be the immediately preceding Business
Day) and, in the case of principal, additional interest shall accrue and be
payable for the period of any such extension. 

                         2.6.4.
Set-off. Borrower agrees that Agent and the Lender and its Affiliates
have all rights of set-off and bankers’ lien provided by applicable law, and in
addition thereto, Borrower agrees that at any time an Event of Default has
occurred and is continuing, Agent and the Lender may apply to the payment of any
Obligations of Borrower hereunder, whether or not then due, any and all
balances, credits, deposits, accounts or moneys of Borrower then or thereafter
maintained with Agent or such Lender.

                         2.6.5.
Currency Matters. Principal, interest, reimbursement obligations, cash
collateral for reimbursement obligations, fees, and all other amounts payable
under this Agreement and the other Loan Documents to the Agent and the Lender
shall be payable (except as otherwise specifically provided herein) in Dollars.
Unless stated otherwise, all calculations, comparisons, measurements or
determinations under this Agreement shall be made in Canadian Dollars. If the
Agent receives a payment in one currency for application to Obligations
denominated in another currency (whether as proceeds of Collateral, proceeds of
a judgment, or the exercise of control under a Control Agreement or otherwise),
the Agent shall convert (or will be deemed to have converted) the payment to the
Equivalent Amount thereof in the currency in which the Obligations are due. 

26 




Section 3.        Yield
Protection. 

                         3.1.      Taxes.


                    (a)     
Except as otherwise provided in this Section 3.1, all payments of
principal and interest on the Loans and all other amounts payable under any Loan
Document shall be made free and clear of and without deduction or withholding
for any present or future income, excise, stamp, documentary, property or
franchise taxes or other taxes, fees, duties, levies, withholdings or other
charges of any nature whatsoever imposed by any taxing authority, including any
interest, additions to tax or penalties applicable thereto (“Taxes”),
excluding (i) taxes imposed on or measured by the Lender’s net income by the
jurisdiction under which the Lender is organized or conducts business (other
than business arising from the Lender having executed, delivered, become a party
to, performed its obligations under, received payments under, received or
perfected a security interest under, engaged in any other transaction with
respect to the Loans or pursuant to or enforced any Loan Document), (ii) any
branch profit taxes imposed by Canada, or any similar tax imposed by any other
jurisdiction, in each case to the extent the applicable Lender is organized or
has its applicable lending office in such jurisdiction, and (iii) in the case of
any Foreign Lender, any Canadian withholding tax that would not have been
imposed but for such Foreign Lender’s failure (other than as a result of a
change in law, rule, regulation or treaty or in the administration,
interpretation or application thereof by any Governmental Authority) to provide
any form or other certificate or other information required by the Borrower for
the purpose of reducing or eliminating the withholding or imposition of the Tax,
provided, that such Lender is legally entitled to complete, execute and deliver
such documentation and in such Lender’s judgment such completion, execution or
submission would not materially prejudice the legal position of such Lender or
otherwise impose a material burden on it (collectively, “Excluded Taxes”
and all such non-Excluded Taxes, “Non-Excluded Taxes”). If any
withholding or deduction from any payment to be made by Borrower hereunder is
required in respect of any Taxes pursuant to any applicable law (as determined
in the good faith reasonable discretion of the Borrower or Agent), rule or
regulation, then Borrower shall: (i) timely pay directly to the relevant taxing
authority the full amount required to be so withheld or deducted; (ii) within
thirty (30) days after the date of any such payment of Taxes, forward to Agent
an official receipt or other documentation satisfactory to Agent evidencing such
payment to such authority; and (iii) in the case of Non-Excluded Taxes, pay to
Agent for the account of the Lender such additional amount or amounts as is
necessary to ensure that the net amount actually received by the Lender will
equal the full amount the Lender would have received had no such withholding or
deduction (including withholdings and deductions applicable to any additional
sums payable under this Section 3.1) been required. 

                         (b)      Borrower
shall timely pay to the relevant Governmental Authority in accordance with
applicable law, or at the option of the Agent timely reimburse it for the
payment of, any Other Taxes. 

                         (c)     
The Borrower shall reimburse and indemnify, within 10 days after receipt of
demand therefor (with copy to the Agent), Agent and the Lender for all
Non-Excluded Taxes and Other Taxes (including any additional Taxes imposed by
any jurisdiction on amounts payable under this Section 3.1) paid by the
Agent or the Lender, or required to be withheld or deducted from a payment to
the Agent or the Lender, and any liabilities arising therefrom or with respect thereto (including any penalty, interest or expense),
whether or not such Taxes were correctly or legally asserted. A certificate of
the Agent or the Lender (or of the Agent on behalf of the Lender) claiming any
compensation under this clause (c), setting forth the amounts to be paid
thereunder and delivered to the Borrower with copy to the Agent, shall be
conclusive, binding and final for all purposes, absent manifest error. 

27 




                         (d)      [Reserved.]


The provisions of this Section 3.1 shall survive the
termination of this Agreement and repayment of all Obligations. 

                         3.2.      Increased
Cost. 

                         (a)      If,
after the Closing Date, the adoption or taking effect of, or any change in, any
applicable law, rule, regulation or treaty, or any change in the interpretation
or administration of any applicable law, rule, regulation or treaty by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Lender with any
request, rule, guideline or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency: (i) shall impose,
modify or deem applicable any reserve (including any reserve imposed by the
FRB), special deposit or similar requirement against assets of, deposits with or
for the account of, or credit extended by the Lender; (ii) subject the Lender or
Agent to any Taxes (other than Taxes indemnified pursuant to Section
3.1); or (iii) shall impose on the Lender any other condition affecting its
Loan, its Note or its obligation to make the Loan; and the result of anything
described in clauses (i) through (iii) above is to increase the cost to (or to
impose a cost on) such Lender of making or maintaining its Loan, or to reduce
the amount of any sum received or receivable by such Lender under this Agreement
or under its Note with respect thereto, then, upon demand by such Lender (which
demand shall be accompanied by a statement setting forth the basis for such
demand and a calculation of the amount thereof in reasonable detail, a copy of
which shall be furnished to Agent), Borrower shall pay directly to the Lender
such additional amount as will compensate the Lender for such increased cost or
such reduction. 

                         (b)     
If the Lender shall reasonably determine that any change in, or the adoption or
phase-in of, any applicable law, rule or regulation regarding capital adequacy,
or any change in the interpretation or administration thereof by any
Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or the compliance by the Lender or any
Person controlling the Lender with any request or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on the Lender’s or such controlling Person’s capital as a consequence of
such Lender’s Commitments hereunder to a level below that which the Lender or
such controlling Person could have achieved but for such change, adoption,
phase-in or compliance (taking into consideration the Lender’s or such
controlling Person’s policies with respect to capital adequacy) by an amount
deemed by the Lender or such controlling Person to be material, then from time
to time, upon demand by the Lender (which demand shall be accompanied by a
statement setting forth the basis for such demand and a calculation of the
amount thereof in reasonable detail, a copy of which shall be furnished to Agent), Borrower shall pay to the Lender such
additional amount as will compensate the Lender or such controlling Person for
such reduction. 

28 




                         (c)      Notwithstanding
anything herein to the contrary, (i) all requests, rules, guidelines,
requirements and directives promulgated by the Bank for International
Settlements, the Basel Committee on Banking Supervision (or any successor or
similar authority) or by United States or foreign regulatory authorities, in
each case pursuant to Basel III, and (ii) the Dodd-Frank Wall Street Reform and
Consumer Protection Act and all requests, rules, guidelines, requirements and
directives thereunder or issued in connection therewith or in implementation
thereof, shall in each case be deemed to be a change in law, regardless of the
date enacted, adopted, issued or implemented. 

                         3.3.     
Mitigation of Circumstances. 

                         The
Lender shall promptly notify Borrower and Agent of any event of which it has
knowledge which will result in, and will use reasonable commercial efforts
available to it (and not, in such Lender’s sole judgment, otherwise
disadvantageous to such Lender) to mitigate or avoid, any obligation by Borrower
to pay any amount pursuant to Section 3.1 or 3.2. Borrower hereby
agrees to pay all reasonable costs and expenses incurred by Lender in connection
with this Section 3.3. 

                         3.4.      Conclusiveness
of Statements; Survival. Determinations and statements of the Lender
pursuant to Sections 3.1 or 3.2 shall be conclusive absent
demonstrable error provided that the Lender or the Agent provides Borrower with
written notification of such determinations and statements. The Lender may use
reasonable averaging and attribution methods in determining compensation under
Sections 3.1 or 3.2 and the provisions of such Sections shall
survive repayment of the Loans, cancellation of the Notes and termination of
this Agreement. 

Section 4.      
 Conditions Precedent. 

                         4.1.      Initial
Loan. The obligation of the Lender to make the Initial Loan on the Closing
Date is subject to the following conditions precedent, each of which shall be
satisfactory in all respects to Agent and the Lender: 

                         4.1.1.   
Consummation of Purchase. Each of the following shall have occurred: 

                         (a)      The
Agent shall have received a complete and correct copy of each of the Asset
Purchase Agreement, the Supply Agreement, and the License Agreement, in each
case including all schedules, exhibits, amendments, supplements, modifications,
assignments and all other material documents delivered pursuant thereto or in
connection therewith, and all such documentation shall be satisfactory to the
Agent; provided that the Agent agrees that the executed versions of each
of the Asset Purchase Agreement, the Supply Agreement, and the License Agreement
(together with all exhibits and schedules thereto) in the form delivered to it
on July 9, 2012, is satisfactory to it. 

                         (b)      The
Asset Purchase and the other transactions contemplated by the Asset Purchase
Documents shall have been, or simultaneously with the making of the Initial Loan
hereunder shall be, consummated in accordance with applicable
law and on the terms described in the Asset Purchase Documents, without material
waiver or amendment thereof (or consent thereunder) unless consented to by the
Agent (it being understood and agreed that any increase or decrease in the
Purchase Price of more than 10% shall be deemed a material amendment). 

29 




                         4.1.2.
Delivery of Loan Documents. Borrower shall have delivered the following
documents in form and substance satisfactory to Agent (and, as applicable, duly
executed by all Persons named as parties thereto and dated the Closing Date or
an earlier date satisfactory to Agent): 

                         (a)      Agreement.
This Agreement. 

                         (b)      Notes.
A Note in respect of the Initial Loan. 

                         (c)     
Collateral Documents. The Guarantee and Collateral Agreements, all other
Collateral Documents, and all instruments, documents, certificates and
agreements executed or delivered pursuant thereto (including Intellectual
Property assignments and pledged equity and limited liability company interests
in the Borrower and the Borrower’s Subsidiaries, with undated irrevocable
transfer powers executed in blank), in each case, executed and delivered by each
Loan Party and each other Person named as a party thereto. 

                         (d)     
Financing Statements. Properly completed Uniform Commercial Code
financing statements, PPSA filings, and other filings and documents required by
law or the Loan Documents to provide Agent perfected Liens (subject only to
Permitted Liens) in the Collateral. 

                         (e)      Lien
Searches. Copies of Uniform Commercial Code and PPSA search reports listing
all effective financing statements or equivalent filings filed against any Loan
Party, with copies of such financing statements and filings; and copies of
Patent, Trademark, Copyright and Internet Domain Name search reports in material
jurisdictions listing all effective collateral assignments in respect of such
Intellectual Property filed with respect to any Loan Party, with copies of such
collateral assignment documentation. 

                         (f)      Authorization
Documents. For each Loan Party, such Person’s (i) charter (or similar
formation document), certified by the appropriate Governmental Authority (as
applicable) in its jurisdiction of incorporation (or formation) (including, in
relation to a Dutch Loan Party, a recent extract from the Dutch Trade Register
(handelsregister) relating to it), (ii) good standing certificates in its
jurisdiction of incorporation (or formation) and in each other jurisdiction
requested by Agent or the Lender, (iii) limited liability company agreement,
partnership agreement, bylaws (and similar governing document) (as applicable),
(iv) (a) resolutions of its board of directors (or similar governing body)
approving and authorizing such Person’s execution, delivery and performance of
the Loan Documents to which it is party and the transactions contemplated
thereby, (b) in respect of a Dutch Loan Party: (1) a copy of a resolution of its
board of supervisory directors (if any) approving its execution and the terms
of, and the transactions contemplated by, the Loan Documents to which it is a
party; (2) a copy of a resolution of its general meeting of shareholders
approving its execution and the terms of, and the transactions contemplated by,
the Loan Documents to which it is a party; and (3) if it is required by law or
any arrangement binding on it to obtain works council advice in respect of its
or any other person’s entry into the Loan Documents, a copy of
an unconditional positive advice from its (central) works council; and (v)
signature and incumbency certificates of its directors and/or officers executing
any of the Loan Documents, all certified by its secretary or an assistant
secretary (or similar officer) as being in full force and effect without
modification. 

30 




                         (g)      Opinions
of Counsel. Opinions of New York counsel for each Loan Party, of British
Columbia counsel for each Loan Party formed in Canada, of Dutch Counsel for the
Dutch Loan Party, and of Luxembourg counsel for each Loan Party formed in
Luxembourg, each in form and substance requested by Agent. 

                         (h)      Insurance.
Certificates or other evidence of insurance in effect as required by Section
6.3(b), with endorsements naming Agent as lenders’ loss payee and/or
additional insured, as applicable. 

                         (i)      Other
Documents. Such other certificates, documents and agreements that may be
listed on the closing checklist provided by Agent to the Borrower or as Agent or
the Lender may request. 

                         4.1.3.
Payment of Fees and Expenses. The Borrower shall have paid, on or prior
to the Closing Date, all fees and expenses owing and payable to Agent and the
Lender as of the Closing Date (including the fees payable pursuant to the Fee
Letter as of the Closing Date) and, subject to Section 10.4 and without
duplication, all fees, expenses and other amounts payable set forth herein and
costs and expenses incurred by Agent and the Lender in connection with the
transactions contemplated hereby which are required to be paid by the
Borrower.

                         4.1.4.
Representations and Warranties. Each representation and warranty by each
Loan Party contained herein or in any other Loan Document shall be true and
correct in all material respects (without duplication of any materiality
qualifier contained therein) as of the Closing Date. 

                         4.1.5.
No Default. No Default or Event of Default shall have occurred and be
continuing. 

                         4.1.6.
No Material Adverse Change. Except as set forth in Schedule 4.1.6 hereto,
since September 30, 2011, there has been no event or occurrence that has or
could reasonably be expected to result in a Material Adverse Effect. 

Section 5.       
Representations and Warranties. 

          To
induce Agent and the Lender to enter into this Agreement and to induce the
Lender to advance the Loans hereunder, Borrower represents and warrants to Agent
and the Lender that each of the following are, and after giving effect to the
Asset Purchase Transactions, will be, true, correct and complete: 

                         5.1.      Organization.
Borrower is a corporation validly existing and in good standing under the laws
of British Columbia; each other Loan Party is validly existing and in good
standing (as applicable) under the laws of the jurisdiction of its organization;
and each Loan Party is duly qualified to do business in each jurisdiction where,
because of the nature of its activities or properties, such qualification is required,
except for such jurisdictions where the failure to so qualify could not
reasonably be expected to have a Material Adverse Effect. The “centre of main
interests” (as that term is used in the Insolvency Regulation) of Merus Labs
Luxco S.à r.l. is in Luxembourg, and Merus Labs Luxco S.à r.l has no
“establishment” (as that term is used in the Insolvency Regulation) outside
Luxembourg. 

31 




                         5.2.     
Authorization; No Conflict. Each of Borrower and each other Loan Party is
duly authorized to execute and deliver each Loan Document and each Asset
Purchase Document to which it is a party, Borrower is duly authorized to borrow
monies hereunder, the granting of the security interests pursuant to the
Collateral Documents is within the corporate purposes of Borrower and each other
Loan Party, and each of Borrower and each other Loan Party is duly authorized to
perform its Obligations under each Loan Document to which it is a party and its
obligations under each Asset Purchase Document to which it is a party. The
execution, delivery and performance by Borrower of this Agreement and by each of
Borrower and each Loan Party of each Loan Document to which it is a party and
each Asset Purchase Document to which it is a party, and the borrowings by
Borrower hereunder, do not and will not (a) require any consent or approval of
any governmental agency or authority (other than (i) any consent or approval
which has been obtained and is in full force and effect, (ii) recordings and
filings in connection with the Liens granted to the Agent under the Collateral
Documents and (iii) with respect to Marketing Authorizations (as defined in the
Asset Purchase Agreement) to be obtained after the Closing Date in accordance
with the terms of the Asset Purchase Agreement), (b) conflict with (i) any
provision of applicable law, (ii) the charter, by-laws, limited liability
company agreement, partnership agreement or other organizational documents of
any Group Member or (iii) any agreement, indenture, instrument or other
document, or any judgment, order or decree, which is binding upon any Group
Member or any of their respective properties or (c) require, or result in, the
creation or imposition of any Lien on any asset of Borrower or any other Group
Member (other than Liens in favor of Agent created pursuant to the Collateral
Documents). 

                         5.3.      Validity;
Binding Nature. Each of this Agreement, each other Loan Document to which
Borrower or any other Loan Party is a party and each Asset Purchase Document to
which any Loan Party is a party is the legal, valid and binding obligation of
such Person, enforceable against such Person in accordance with its terms,
subject to bankruptcy, insolvency and similar laws affecting the enforceability
of creditors’ rights generally and to general principles of equity. 

                         5.4.      Financial
Condition. 

                         (a)     
The audited consolidated financial statements of Borrower and its Subsidiaries
(presented on a consolidated basis) as at September 30, 2011, together with the
unaudited consolidated financial statements of Borrower and its Subsidiaries
(presented on a consolidated basis) as at March 31, 2012, copies of each of
which have been delivered pursuant hereto, were prepared in accordance with IFRS
(or, in the case of the audited financial statements for the periods ending on
or prior to September 30, 2011, Canadian GAAP) (subject, in the case of such
unaudited statements, to the absence of footnotes and to normal year-end
adjustments) and present fairly the consolidated financial condition of such
Persons as at such dates and the results of their operations for the periods
then ended. 

32 




                         (b)      The
consolidated financial projections (including an operating budget and a cash
flow budget) of Borrower and its Subsidiaries for the period commencing June 30,
2012 through March 31, 2015 delivered to Agent and the Lender on or prior to the
Closing Date and attached as Schedule 5.4 were: (i) prepared by Borrower
in good faith; (ii) based upon current expectations regarding future events; and
(iii) prepared in accordance with assumptions for which Borrower has a
reasonable basis to believe as of the Closing Date, and the accompanying
consolidated pro forma balance sheets of Borrower and its Subsidiaries as at the
Closing Date, adjusted to give effect to the consummation of the financing
contemplated hereby as if such transactions had occurred on such date, is
consistent in all material respects with such projections; with the recognition,
however, that projections are inherently subject to varying degrees of
uncertainty and their achievability, despite the reasonableness upon which they
were prepared, depend upon the timing and probability of occurrence of a complex
series of future events, both internal and external, certain of which are beyond
Borrower’s control, and which may result in future costs, results of operations
or outcomes that may be materially different from the projections attached as
Schedule 5.4.

                         5.5.      No
Material Adverse Change. Except as set forth in Schedule 4.1.6, since
September 30, 2011, there has been no event or occurrence that has or could
reasonably be expected to result in a Material Adverse Effect. 

                         5.6.      Litigation.
No litigation (including derivative actions), arbitration proceeding or
governmental investigation or proceeding is pending or, to any Loan Party’s
knowledge, threatened, against any Loan Party or any of their respective
properties which (i) purport to affect or pertain to this Agreement, any other
Loan Document, any Asset Purchase Document or any of the transactions
contemplated hereby or thereby or (ii) except as set forth in Schedule
5.6(a), could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect. No injunction, writ, temporary restraining
order or any order of any nature has been issued by any court or other
Governmental Authority purporting to enjoin or restrain the execution, delivery
or performance of this Agreement, any other Loan Document or any Asset Purchase
Document, or directing that the transactions provided for herein or therein not
be consummated as herein or therein provided. As of the Closing Date, except as
specifically disclosed in Schedule 5.6(b), no Group Member is the subject
of an audit or, to each Group Member’s knowledge, any review or investigation by
any Governmental Authority (excluding the IRS and other taxing authorities)
concerning the violation or possible violation of any requirement of law. 

                         5.7.     
Ownership of Properties; Liens. As of the date hereof, there are no Liens
on the Collateral other than those granted in favor of the Agent to secure the
Obligations and Permitted Liens. Each of Borrower and each other Loan Party owns
good and, in the case of real property, marketable, title to all of its
properties and assets, real and personal, tangible and intangible, of any nature
whatsoever (including patents, trademarks, trade names, service marks and
copyrights), free and clear of all Liens, charges and claims (including
infringement claims with respect to Intellectual Property), except as permitted
by Section 7.2. As of the Closing Date, Schedule 5.7 lists all of
the real property owned, leased, subleased or otherwise owned or occupied by any
Group Member. 

                         5.8.      Capitalization;
Subsidiaries.

33 




                    (a)     
Equity Interests. Schedule 5.8 sets forth a list, as of the
Closing Date, of (i) all the Subsidiaries of Borrower and their jurisdictions of
organization and (ii) the number of each class of its Stock and Stock
Equivalents outstanding. All Stock and Stock Equivalents of each Group Member
are duly and validly issued and, in the case of each entity that is a
corporation, are fully paid and non-assessable, and, other than the Stock and
Stock Equivalents of Borrower, are owned by Borrower, directly or indirectly
through Wholly-Owned Subsidiaries. Each Loan Party is the record and beneficial
owner of, and has good and marketable title to, the Stock and Stock Equivalents
pledged by it to the Agent under the Collateral Documents, free of any and all
Liens, rights or claims of other persons, except the security interest created
by the Collateral Documents, and there are no outstanding warrants, options or
other rights to purchase, or shareholder, voting trust or similar agreements
outstanding with respect to, or property that is convertible into, or that
requires the issuance or sale of, any such Stock and Stock Equivalents. Other
than the the security interest created by the Collateral Documents, there is no
floating charge (gage sur fonds de commerce) or similar security in
existence on the business of the Borrower or Merus Labs Luxco S.à r.l, nor any
mandate with a view to the creation thereof. Except as set forth on Schedule
5.8, as of the Closing Date no Group Member is engaged in any joint venture
with any other Person.

                         (b)      No
Consent of Third Parties Required. No consent of any person including any
other general or limited partner, any other member of a limited liability
company, any other shareholder or any other trust beneficiary is necessary or
reasonably desirable (from the perspective of a secured party) in connection
with the creation, perfection or first priority status of the security interest
of the Agent in any Stock and Stock Equivalents pledged to the Agent for the
benefit of the Lender under the Collateral Documents or the exercise by the
Agent of the voting or other rights provided for in the Collateral Documents or
the exercise of remedies in respect thereof.

                         5.9.     
Pension Plans.

                         (a)     
U.S. Pension Plans. No Loan Parties have any liability under ERISA and no
Loan Party sponsors any “pension plan” or has any liability subject to Title IV
of ERISA. 

                         (b)     
Canadian Employees.

                         (i)      Except
as set forth on Schedule 5.9(b) (as updated from time to time) and as of
the date hereof, no Canadian Loan Party maintains or contributes to any plan
other than statutory plans required by applicable law. 

                         (ii)      Except
as set forth in Schedule 5.9(b) and as of the date hereof, no Canadian
Loan Party has or is subject to any present or future obligation or liability
under any Canadian Employee Plan and any overtime pay, vacation pay, premiums
for unemployment insurance, health and welfare insurance premiums, accrued
wages, salaries and commissions, severance pay and employee benefit plan
payments have been fully paid by each Canadian Loan Party or, in the case of
accrued unpaid overtime pay or accrued unpaid vacation pay for Canadian
Employees, has been accurately accounted for in the books and records of each
Canadian Loan Party or has been reported pursuant to the collateral reporting
obligation pursuant to Section 5.9(b). 

34 




                         (iii)  
 Schedule 5.9(b) (as updated from time to time) lists all the
Canadian Pension Plans and Canadian Employee Plans applicable to the Canadian
Employees of each Canadian Loan Party in respect of employment in Canada and
which are currently maintained or sponsored by each Canadian Loan Party or to
which each Canadian Loan Party contributes or has an obligation to contribute,
except, for greater certainty, any statutory plans to which each Canadian Loan
Party is obligated to contribute to or comply with under applicable law. 

                         (iv)    
No improvements to any Canadian Pension Plan or any Canadian Employee Plan have
been promised, except such improvements as are described in the collective
bargaining agreements listed in Schedule 5.9(b) (as updated from time to
time), and no amendments or improvements to a Canadian Employee Plan will be
made or promised by any Canadian Loan Party before the Closing Date. 

                         (v)     
Except as disclosed in Schedule 5.9(b) (as updated from time to time), no
Canadian Loan Party provides benefits to retired Canadian Employees or to
beneficiaries or dependents of retired Canadian Employees. 

                         (vi)    
All obligations regarding the Canadian Pension Plans and the Canadian Employee
Plans (including current service contributions) have been satisfied, there are
no outstanding defaults or violations by any party to any Canadian Pension Plan
and any Canadian Employee Plan and no taxes, penalties or fees are owing or
exigible under any of the Canadian Employee Plans, except which could not
reasonably be expected to result in a Material Adverse Effect. Except as
disclosed in Schedule 5.9(b), as of the date hereof, each Canadian
Pension Plan and each Canadian Employee Plan is fully funded or fully insured
pursuant to the actuarial assumptions and methodology set out in Schedule
5.9(b) (as updated from time to time) and, in the case of a Canadian Pension
Plan, as required under the most recent actuarial valuation filed with the
applicable governmental authority pursuant to generally accepted actuarial
practices and principles. To the best knowledge of each Canadian Loan Party, no
fact or circumstance exists that could adversely affect the tax-exempt status of
a Canadian Pension Plan or Canadian Employee Plan. 

                         (vii)   
All contributions, assessments, premiums, fees, taxes, penalties or fines in
relation to the Canadian Employees have been duly paid and there is no
outstanding liability of any kind in relation to the employment of the Canadian
Employees or the termination of employment of any Canadian Employee. 

                         (viii)  
Each Canadian Loan Party is in compliance with all requirements of Canadian
Employee Benefits Legislation and health and safety, workers compensation,
employment standards, labor relations, health insurance, employment insurance,
protection of personal information, human rights laws and any Canadian federal,
provincial or local counterparts or equivalents in each case, as applicable to
the Canadian Employees and as amended from time to time. 

                         5.10.  
 Compliance with Law; Investment Company Act; Other Regulated
Entities. Except as set out in Schedule 5.10, Borrower and each other
Group Member possesses all necessary authorizations, permits, licenses and
approvals from all Governmental Authorities in order to conduct their respective
businesses as presently conducted. All business and operations of the Borrower and each other Group Member complies
with all applicable federal, state and local laws and regulations, except where
the failure so to comply could not reasonably be expected to result in a
Material Adverse Effect. Neither the Borrower nor any other Group Member is
operating any aspect of its business under any agreement, settlement, order or
other arrangement with any Governmental Authority. Neither Borrower nor any
other Group Member is an “investment company” or a company “controlled” by an
“investment company” or a “subsidiary” of an “investment company”, within the
meaning of the Investment Company Act of 1940. None of any Group Member, any
Person controlling any Group Member, or any Subsidiary of any Group Member, is
subject to regulation under the Federal Power Act, the Interstate Commerce Act,
any state public utilities code, or any other Federal or state statute, rule or
regulation limiting its ability to incur Debt, pledge its assets or perform its
Obligations under the Loan Documents. 

35 




                         5.11.   
Margin Stock. Neither Borrower nor any Group Member is engaged
principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying Margin Stock. No portion of the
Obligations is secured directly or indirectly by Margin Stock. 

                         5.12.  
 Taxes. Except as disclosed in Schedule 5.12, each of Borrower and
each other Group Member has filed all federal, state, provincial, local and
foreign income, sales, goods and services, harmonized sales and franchise and
other material tax returns, reports and statements (collectively, the “Tax
Returns”) with the appropriate Governmental Authorities in all jurisdictions
in which such Tax Returns are or were required to be filed. All such Tax Returns
are true and correct in all material respects. All Taxes, charges and other
impositions reflected therein or otherwise due and payable have been paid prior
to the date on which any liability may be added thereto for non-payment thereof,
except for those contested in good faith by appropriate proceedings diligently
conducted and for which adequate reserves are maintained on the books of the
appropriate Group Member, as applicable, in accordance with IFRS. Except as
specifically disclosed in Schedule 5.12, no Tax Return is under audit or
examination by any Governmental Authority and no notice of such an audit or
examination or any assertion of any claim for Taxes has been given or made by
any Governmental Authority. Proper and accurate amounts have been withheld by
each Group Member, as applicable, from their respective employees for all
periods in full and complete compliance with the tax, social security and
unemployment withholding provisions of applicable requirements of law and such
withholdings have been timely paid to the respective Governmental Authorities.
No Group Member has been a member of an affiliated, combined or unitary group
other than the group of which a Group Member is the common parent or has
liability for Taxes of any other person. Except as otherwise permitted under the
Agreement or as set out in Schedule 5.12, each Group Member has withheld and
remitted all required amounts within the prescribed periods to the appropriate
governmental authorities, and in particular has deducted, remitted and paid all
Canada Pension Plan contributions, Quebec Pension Plan contributions, workers
compensation assessments, employment insurance premiums, employee health
premiums, and real estate taxes within the prescribed periods to the appropriate
governmental authorities. Borrower is resident in Canada for purposes of the Tax
Act, is not resident in any other country, and no other country has asserted
residency with respect to Borrower for purposes of the other country’s Tax Laws.


36 




                         5.13.   
Solvency. Both immediately before and after giving effect to (a) the
Loans made on or prior to the date this representation and warranty is made or
remade, (b) the disbursement of proceeds of such Loans, (c) the consummation of
the transactions contemplated by the Asset Purchase Documents and (d) the
payment and accrual of all transaction costs in connection with the foregoing,
with respect to the Borrower and each other Loan Party, on a consolidated basis,
(i) the fair value of its assets is greater than the amount of its liabilities
(including disputed, contingent and unliquidated liabilities) as such value is
established and liabilities evaluated, (ii) the present fair saleable value of
its assets is not less than the amount that will be required to pay the probable
liability on its debts as they become absolute and matured, (iii) it is able to
realize upon its assets and pay its debts and other liabilities (including
disputed, contingent and unliquidated liabilities) as they mature in the normal
course of business, (iv) it does not intend to, and does not believe that it
will, incur debts or liabilities beyond its ability to pay as such debts and
liabilities mature and (v) it is not engaged in business or a transaction, and
is not about to engage in business or a transaction, for which its property
would constitute unreasonably small capital. None of Merus Labs Luxco S.à r.l.’s
managers has taken any resolution to effect, and to the best of each such
manager’s knowledge no party has initiated, any of the following proceedings
against Merus Labs Luxco S.à r.l.: (i) insolvency proceedings (faillite),
or (ii) proceedings for voluntary arrangement with its creditors (concordat
préventif de faillite), (iii) controlled management (gestion
contrôlée) or (iv) suspension of payments (sursis de paiement) or (v)
voluntary dissolution or liquidation (dissolution ou liquidation
volontaire) or (vi) any similar foreign law proceedings having similar
effects. 

                         5.14.   
Environmental Matters. The on-going operations of Borrower and each other
Group Member comply in all respects with all Environmental Laws, except such
non-compliance which could not (if enforced in accordance with applicable law)
reasonably be expected to result in a Material Adverse Effect. Borrower and each
other Group Member have obtained, and maintained in good standing, all licenses,
permits, authorizations and registrations required under any Environmental Law
and necessary for their respective ordinary course operations, and Borrower and
each other Group Member are in compliance with all material terms and conditions
thereof, except where the failure to do so could not reasonably be expected to
result in material liability to Borrower or any other Group Member and could not
reasonably be expected to result in a Material Adverse Effect. Except as set
forth on Schedule 5.14, none of Borrower, any other Group Member or any
of their respective properties or operations is subject to any outstanding
written order from or agreement with any federal, state or local Governmental
Authority, nor subject to any judicial or docketed administrative proceeding,
nor subject to any indemnification agreement or other contractual obligation,
respecting any Environmental Law, Environmental Claim or Hazardous Substance.
There are no Hazardous Substances or other conditions or circumstances existing
with respect to any property, or arising from operations prior to the Closing
Date, of Borrower or any other Group Member that could reasonably be expected to
result in a Material Adverse Effect. Neither Borrower nor any other Group Member
has any underground or above ground storage tanks that are not properly
registered or permitted under applicable Environmental Laws or that are leaking
or disposing of Hazardous Substances. 

                         5.15.  
 Insurance. Borrower and each other Group Member and their
respective properties are insured with financially sound and reputable insurance
companies which are not Affiliates of Borrower, in such amounts, with such
deductibles and covering such risks as are customarily carried by companies
engaged in similar businesses and owning similar properties in localities where Borrower or such other Group Member operates.
A true and complete listing of such insurance as of the Closing Date, including
issuers, coverages and deductibles, is set forth on Schedule 5.15. 

37 




                         5.16.   
Information. All information heretofore or contemporaneously herewith
furnished in writing by Borrower or any other Loan Party to Agent or the Lender
for purposes of or in connection with this Agreement and the transactions
contemplated hereby is, and all written information hereafter furnished by or on
behalf of Borrower or any Loan Party to Agent or the Lender pursuant hereto or
in connection herewith will be, true and accurate in every material respect on
the date as of which such information is dated or certified, and none of such
information is or will be incomplete by omitting to state any material fact
necessary to make such information not misleading in light of the circumstances
under which made (it being recognized by Agent and the Lender that any
projections and forecasts provided by Borrower are based on good faith estimates
and assumptions believed by Borrower to be reasonable as of the date of the
applicable projections or assumptions and that actual results during the period
or periods covered by any such projections and forecasts may differ from
projected or forecasted results). 

                         5.17.    Intellectual
Property. Each Group Member owns, or is licensed or otherwise has the right
to use, all Intellectual Property necessary to conduct its business as currently
conducted except for such Intellectual Property the failure of which to own or
have a license or other right to use would not reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect. To the
knowledge of each Group Member, (a) the conduct and operations of the businesses
of each Group Member do not infringe, misappropriate, dilute or violate any
Intellectual Property owned by any other Person and (b) no other Person has
contested any right, title or interest of any Group Member in any Intellectual
Property, other than, in each case, as cannot reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. 

                         5.18.   
Labor Matters. Except as set forth on Schedule 5.18, neither Borrower nor
any other Group Member is subject to any labor or collective bargaining
agreement. There are no existing or threatened strikes, lockouts or other labor
disputes involving Borrower or any other Group Member that singly or in the
aggregate could reasonably be expected to have a Material Adverse Effect. Hours
worked by and payment made to employees of Borrower and the other Group Members
are not in violation of the Fair Labor Standards Act or any other applicable
law, rule or regulation dealing with such matters. 

                         5.19.    Canadian
Labour Matters 

                         (a)      Except
as disclosed in Schedule 5.19, 

                         (i)     
No Canadian Loan Party is a party to any application, complaint, grievance,
arbitration, or other proceeding under any statute or under any collective
agreement related to any Canadian Employee or the termination of any Canadian
Employee and there is no complaint, inquiry or other investigation by any
regulatory or other administrative authority or agency with regard to or in
relation to any Canadian Employee or the termination of any Canadian Employee;
and 

38 




                         (ii)      No
Canadian Loan Party has engaged in any unfair labor practice, nor is any
Canadian Loan Party aware of any pending or threatened complaint regarding any
alleged unfair labor practices. 

                         5.20.
No Default. No Default or Event of Default exists or would result from
the incurring of any Obligations by any Loan Party or the grant or perfection of
the Agent’s Liens on the Collateral or the consummation of the transactions
contemplated by the Asset Purchase Documents. No Group Member is in default
under or with respect to any contractual obligation in any respect which,
individually or together with all such defaults, would reasonably be expected to
have a Material Adverse Effect. 

                         5.21.
Foreign Assets Control Regulations and Anti-Money Laundering. 

                         5.21.1.
OFAC. Each Group Member is and will remain in compliance in all material
respects with all U.S. and Canadian economic sanctions laws, Executive Orders
and implementing regulations as promulgated by the U.S. Treasury Department’s
Office of Foreign Assets Control (“OFAC”), the Proceeds of Crime
(Money Laundering) and Terrorist Financing Act
(Canada), the Criminal Code (Canada), the United Nations
Act (Canada) and all applicable anti-money laundering and
counter-terrorism financing provisions of the Bank Secrecy Act and all
regulations issued pursuant to any of the foregoing. No Group Member (i) is a
Person designated by the U.S. government on the list of the Specially Designated
Nationals and Blocked Persons (the “SDN List”) with which a U.S. Person
cannot deal with or otherwise engage in business transactions, (ii) is a Person
designated by the Canadian government on any list set out in the United Nations
Al-Qaida and Taliban Regulations, the Regulations Implementing the United
Nations Resolutions on the Suppression of Terrorism or the Criminal Code
(collectively, the “Terrorist Lists”) with which a Canadian Person cannot
deal with or otherwise engage in business transactions, (iii) is a Person who is
otherwise the target of U.S. or Canadian economic sanctions laws such that a
U.S. Person or Canadian Person cannot deal or otherwise engage in business
transactions with such Person or (iv) is controlled by (including without
limitation by virtue of such person being a director or owning voting shares or
interests), or acts, directly or indirectly, for or on behalf of, any person or
entity on the SDN List, a Terrorist List or a foreign government that is the
target of U.S. or Canadian economic sanctions prohibitions such that the entry
into, or performance under, this Agreement or any other Loan Document would be
prohibited under U.S. law or Canadian law. 

                         5.21.2.
Patriot Act. The Group Members and each of their Affiliates are in
compliance with (a) the Trading with the Enemy Act, and each of the foreign
assets control regulations of the United States Treasury Department (31 CFR,
Subtitle B Chapter V, as amended) and any other enabling legislation or
executive order relating thereto, (b) the Patriot Act and (c) other federal,
provincial or state laws or similar foreign laws relating to “know your
customer” and anti-money laundering rules and regulations, including without
limitation, the Proceeds of Crime (Money Laundering) and Terrorist
Financing Act (Canada). No part of the proceeds of any Loan will be
used directly or indirectly for any payments to any government official or
employee, political party, official of a political party, candidate for
political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977. 

39 




                         5.22.     
Senior Debt. The Obligations shall rank pari passu with any other senior
Debt of the Loan Parties, and shall constitute senior indebtedness as defined in
any other documentation documenting any junior indebtedness of any Loan Party.


                         5.23.      Withholdings
and Remittances. Each Canadian Loan Party has remitted all Canada Pension
Plan contributions, provincial pension plan contributions, workers’ compensation
assessments, employment insurance premiums, employee health premiums, municipal
real estate taxes and other taxes payable under applicable law by them, and,
furthermore, have withheld from each payment made to any of its present or
former employees, officers and directors, and to all persons who are
non-residents of Canada for the purposes of the Tax Act all amounts required by
law to be withheld, including without limitation all payroll deductions required
to be withheld and has remitted such amounts to the proper governmental
authority within the time required under applicable law. 

                         5.24.     
Asset Purchase Documentation. As of the Closing Date, the Borrower has
delivered to the Agent a complete and correct copy of the Asset Purchase
Documents (including all schedules, exhibits, amendments, supplements,
modifications, assignments and all other material documents delivered pursuant
thereto or in connection therewith). No Loan Party and, to the best of each Loan
Party’s knowledge, no other party thereto is in default in the performance or
compliance with any provisions thereof. The Asset Purchase Agreement complies in
all material respects with, and the transactions contemplated by the Asset
Purchase Documents have been (or, substantially contemporaneously herewith will
be) consummated in all material respects in accordance with, all applicable
requirements of law. The Asset Purchase Agreement is in full force and effect
and has not been terminated, rescinded or withdrawn. All material requisite
approvals by Governmental Authorities having jurisdiction over the Seller, any
Group Member or the other Persons referenced therein with respect to the
transactions contemplated by the Asset Purchase Documents have been obtained,
and no such approvals impose any conditions to the consummation of the
transactions contemplated by the Asset Purchase Documents or to the conduct by
any Loan Party of its business thereafter. To the best of each Loan Party’s
knowledge, the Seller and Asset Purchaser’s representations or warranties in the
Asset Purchase Agreement are true and correct in all material respects. 

                         5.25.      Inactive
Subsidiaries. No Inactive Subsidiary (x) has any Subsidiaries, assets,
properties, rights, liabilities or operations or (y) engages in any business.
Except as set forth in Schedule 5.25, no Stock of any Inactive Subsidiary is
evidenced by certificates.1 

Section 6. Affirmative Covenants.


               Until
all Obligations (other than contingent indemnification obligations to the extent
no claim giving rise thereto has been asserted) are Paid in Full, each Loan
Party agrees that, unless at any time the Lender shall otherwise expressly
consent in writing, it will: 

                         6.1.      Information.
Unless such information set out below is available in the Public Record, furnish
to Agent and the Lender: 

_______________________________________
1 Note:
Any stock disclosed on Schedule 5.25 will be required to be delivered as a
closing condition. 

40 




                         6.1.1.
Annual Report. Promptly when available and in any event within the time
period prescribed by any relevant Governmental Authority: a copy of the annual
audit report for Borrower and its Subsidiaries for such Fiscal Year, along with
the audited consolidated financial statements of Borrower and the Subsidiaries
as at the end of such Fiscal Year, which audit report is without qualification
by independent auditors of recognized standing selected by Borrower and
acceptable to Agent in its reasonable discretion (it being understood that as of
the Closing Date, the Borrower’s auditor as of the date hereof, Deloitte &
Touche LLP, is acceptable to Agent). 

                         6.1.2.
Quarterly Reports. Promptly when available and in any event within the
time period prescribed by any relevant Governmental Authority, consolidated
balance sheets of Borrower and its Subsidiaries as of the end of such
fiscal quarter, together with consolidated financial statements for such period
and a customary Management Discussion and Analysis relating to such information,
together with a comparison with the corresponding period of the previous Fiscal
Year and a comparison with the budget for such period of the current Fiscal
Year, certified by the chief financial officer of Borrower. 

                         6.1.3.
[Reserved].

                         6.1.4.
Compliance Certificate. Contemporaneously with the furnishing of a copy
of each annual audit report pursuant to Section 6.1.1 and each set of
statements pursuant to Section 6.1.2 for each calendar quarter (beginning
with the calendar quarter ending March 31, 2013) a duly completed Compliance
Certificate, with appropriate insertions, dated the date of such annual report
or such quarterly statements, and signed by the chief financial officer of
Borrower, containing a computation of each of the financial ratios and
restrictions set forth in Section 7.13 and to the effect that such
officer has not become aware of any Event of Default or Default that has
occurred and is continuing or, if there is any such Event of Default, describing
it and the steps, if any, being taken to cure it. 

                         6.1.5.
[Reserved].

                         6.1.6.
Notice of Default; Litigation; ERISA Matters. Promptly upon becoming
aware of any of the following, written notice describing the same and the steps
being taken by Borrower or the applicable Loan Party affected thereby with
respect thereto: 

                         (a)      the
occurrence of an Event of Default or a Default; 

                         (b)     
any litigation, arbitration or governmental investigation or proceeding not
previously disclosed by Borrower to the Lender which has been instituted or, to
the knowledge of Borrower, is threatened against Borrower or any other Group
Member, or to which any of the properties of any thereof is subject, which could
reasonably be expected to have a Material Adverse Effect; 

                         (c)      [Reserved];


                         (d)     
any cancellation or material change in coverage in any insurance maintained by
Borrower or any other Group Member; or 

41




                         (e)      any
other event (including (i) any violation of any Environmental Law or the
assertion of any Environmental Claim, (ii) the enactment or effectiveness of any
law, rule or regulation, (iii) any violation or noncompliance with any law or
(iv) any breach or non-performance of, or any default under, any contractual
obligation of any Group Member) which could reasonably be expected to have a
Material Adverse Effect. 

                         6.1.7.
Management Report. Promptly upon receipt thereof, copies of all detailed
financial and management reports submitted to Borrower or any other Loan Party
by independent auditors in connection with each annual or interim audit made by
such auditors of the books of Borrower or any other Loan Party. 

                         6.1.8.
Projections. As soon as practicable, and in any event not later than 30
days after the commencement of each Fiscal Year, financial projections for
Borrower and its Subsidiaries for such Fiscal Year (including monthly operating
and cash flow budgets) prepared in a manner consistent with the projections
delivered by Borrower to Agent prior to the Closing Date or otherwise in a
manner reasonably satisfactory to Agent, accompanied by a certificate of the
chief financial officer of Borrower to the effect that (a) such
projections were prepared by Borrower, in good faith, (b) Borrower has a
reasonable basis for the assumptions contained in such projections and (c) such
projections have been prepared in accordance with such assumptions. 

                         6.1.9.
Other Information. Promptly from time to time, such other information
concerning Borrower and any other Group Member as the Lender or Agent may
reasonably request. 

                         6.2.      Books;
Records; Inspections. Keep, and cause each other Loan Party to keep, its
books and records in accordance with sound business practices sufficient to
allow the preparation of financial statements in accordance with IFRS; permit,
and cause each other Loan Party to permit, Agent (accompanied by the Lender) or
any representative thereof to inspect, at any reasonable time and with
reasonable notice (or at any time without notice if an Event of Default exists),
the properties and operations of Borrower or such other Loan Party; and permit,
and cause each other Loan Party to permit, at any reasonable time and with
reasonable notice (or at any time without notice if an Event of Default exists),
Agent (accompanied by the Lender) or any representative thereof to visit any or
all of its offices, to discuss its financial matters with its directors or
officers and its independent auditors (and Borrower hereby authorizes such
independent auditors to discuss such financial matters with the Lender or Agent
or any representative thereof), and to examine (and, at the expense of Borrower
or the applicable Loan Party, photocopy extracts from) any of its books or other
records; and permit, and cause each other Loan Party to permit, Agent and its
representatives to inspect, at any reasonable time and with reasonable notice
(or at any time without notice if an Event of Default exists), the Collateral
and other tangible assets of Borrower or such Loan Party, to perform appraisals
of the equipment of Borrower or such Party, and to inspect, audit, check and
make copies of and extracts from the books, records, computer data, computer
programs, journals, orders, receipts, correspondence and other data relating to
any Collateral. 

42 




                         6.3.     
Maintenance of Property; Insurance. 

                         (a)      Keep,
and cause each other Loan Party to keep, all property useful and necessary in
the business of Borrower or such other Loan Party in good working order and
condition, ordinary wear and tear excepted. 

                         (b)     
Maintain, and cause each other Group Member to maintain, with responsible
insurance companies, such insurance coverage as shall be required by all laws,
governmental regulations and court decrees and orders applicable to it and such
other insurance, to such extent and against such hazards and liabilities, as is
customarily maintained by companies similarly situated; provided that in
any event, such insurance shall insure against all risks and liabilities of the
type insured against as of the Closing Date and shall have insured amounts no
less than, and deductibles no higher than, those amounts provided for as of the
Closing Date. Upon request of Agent or the Lender, Borrower shall furnish to
Agent or such Lender a certificate setting forth in reasonable detail the nature
and extent of all insurance maintained by Borrower and each other Group Member.
Borrower shall cause each issuer of an insurance policy to provide Agent with an
endorsement (i) showing Agent as a loss payee with respect to each policy of
property or casualty insurance and naming Agent as an additional insured with
respect to each policy of liability insurance, (ii) providing that 30 days’
notice will be given to Agent prior to any cancellation of, or reduction or
change in coverage provided by or other material modification to such policy and
(iii) acceptable in all other respects to Agent. Borrower shall execute and
deliver to Agent, upon request of Agent, a collateral assignment, in form and
substance satisfactory to Agent, of each business interruption insurance policy
maintained by the Loan Parties. 

                         (c)      Unless
Borrower provides Agent with evidence of the continuing insurance coverage
required by this Agreement, Agent may purchase insurance (to the extent of such
insurance coverage as shall be required by clause (b) above) at Borrower’s
expense to protect Agent’s and the Lender’s interests in the Collateral. This
insurance may, but need not, protect Borrower’s and each other Group Member’s
interests. The coverage that Agent purchases may, but need not, pay any claim
that is made against Borrower or any other Group Member in connection with the
Collateral. Borrower may later cancel any insurance purchased by Agent, but only
after providing Agent with evidence that Borrower has obtained the insurance
coverage required by this Agreement. If Agent purchases insurance for the
Collateral, as set forth above, Borrower will be responsible for the costs of
that insurance, including interest and any other charges that may be imposed
with the placement of the insurance, until the effective date of the
cancellation or expiration of the insurance and the costs of the insurance may
be added to the principal amount of the Loans owing hereunder. 

                         6.4.      Compliance
with Laws and Contractual Obligations; Payment of Taxes and
Liabilities. 

                         (a)      Comply,
and cause each other Group Member to comply, in all material respects with all
applicable laws, rules, regulations, decrees, orders, judgments, licenses and
permits and all indentures, agreements and other instruments binding upon it or
its property, except where failure to comply could not reasonably be expected to
have a Material Adverse Effect; (b) without limiting clause (a) above, ensure,
and cause each other Group Member to ensure, that no person who owns a controlling interest in or
otherwise controls a Group Member is or shall be (i) listed on the Specially
Designated Nationals and Blocked Person List maintained by OFAC, Department of
the Treasury, and/or any other similar lists maintained by OFAC pursuant to any
authorizing statute, Executive Order or regulation or (ii) a person designated
under Section 1(b), (c) or (d) of Executive Order 13224,
any related enabling legislation or any other similar Executive Orders; (c)
without limiting clause (a) above, comply and cause each other Group Member to
comply, with all applicable Bank Secrecy Act and anti-money laundering laws and
regulations; and (d) timely prepare and file all Tax Returns required to be
filed by applicable law and pay, and cause each other Group Member to pay, prior
to delinquency, all taxes and other governmental charges against it or any of
its property, as well as claims of any kind which, if unpaid, could become a
Lien on any of its property; provided that the foregoing shall not
require Borrower or any other Group Member to pay any such Tax or charge so long
as it shall promptly contest the validity thereof in good faith by appropriate
proceedings and shall set aside on its books adequate reserves with respect
thereto in accordance with IFRS; 

43 




                         6.5.      Maintenance
of Existence. Maintain and preserve, and (subject to Section
7.5) cause each other Loan Party to maintain and preserve, (a) its
existence and good standing (as applicable) in the jurisdiction of its
organization and (b) its qualification to do business and good standing (as
applicable) in each jurisdiction where the nature of its business makes such
qualification necessary, other than any such jurisdiction where the failure to
be qualified or in good standing could not reasonably be expected to have a
Material Adverse Effect. 

                         6.6.     
Employee Benefit Plans. 

                         (a)     
Canadian Employees. 

                         (i)      Each
Canadian Loan Party will cause to be delivered to the Agent, promptly upon the
Agent’s written request, a copy of each Canadian Pension Plan and Canadian
Employee Plan and, if applicable, related trust agreements or other funding
instruments and all amendments thereto. 

                         (ii)     
Each Canadian Loan Party shall to the extent it receives any correspondence from
any Governmental Authority with respect to any revocation of a Canadian Pension
Plan or Canadian Employee Plan, promptly provide the Agent with such
correspondence. Each Canadian Loan Party shall ensure that each Canadian Pension
Plan or Canadian Employee Plan retains its registered status under and is
administered in all material respects in accordance with the terms of the
applicable Canadian Pension Plan text, funding agreement and Canadian Employee
Benefits Legislation. 

                         (iii)      Each
Canadian Loan Party will cause all reports and disclosures required by any
Canadian Pension Plan or applicable Canadian Employee Benefits Legislation to be
filed and distributed as required. 

                         (iv)      Each
applicable Canadian Loan Party shall perform in all material respects all
obligations (including (if applicable), funding, investment and administration
obligations) required to be performed by such Canadian Loan Party in connection
with each applicable Canadian Pension Plan and Canadian Employee Plan and the
funding therefore; make and pay all current service and, as applicable, special
payments relating to solvency deficiencies under each applicable Canadian
Pension Plan and pay all premiums required to be made or paid by it in
accordance with the terms of each applicable Canadian Employee Plan and Canadian
Employee Benefits Legislation and withhold by way of authorized payroll
deductions or otherwise collect and pay into the applicable Canadian Pension
Plan or Canadian Employee Plan all employee contributions required to be
withheld or collected by it in accordance with the terms of each applicable
Canadian Pension Plan or Canadian Employee Plan, and Canadian Employee Benefits
Legislation; and ensure that, to the extent that such Canadian Loan Party has a
Canadian Pension Plan which is a defined benefit pension plan, that such plan is
fully funded, both on an ongoing basis and on a solvency basis (using actuarial
methods and assumptions which are consistent with the actuarial valuations last
filed with the applicable governmental authorities and which are consistent with
Canadian GAAP or IFRS). 

44 




                         6.7.      Environmental
Matters. If any release or disposal of Hazardous Substances shall occur or
shall have occurred on or from any real property or any other assets of Borrower
or any other Group Member, cause, or direct the applicable Group Member to
cause, the prompt containment and removal of such Hazardous Substances and the
remediation of such real property or other assets as is necessary to comply with
all Environmental Laws and to preserve the value of such real property or other
assets. Without limiting the generality of the foregoing, Borrower shall, and
shall cause each other Group Member to, comply with each valid Federal or state
judicial or administrative order requiring the performance at any real property
by Borrower or any other Group Member of activities in response to the release
or threatened release of a Hazardous Substance. If any violation of any
Environmental Law shall occur or shall have occurred at any real property or any
other assets of Borrower or any other Group Member or otherwise in connection
with their operations, cause, or direct the applicable Group Member to cause,
the prompt correction of such violation. 

                         6.8.     
Asset Purchase. The Borrower shall cause the Asset Purchase to be
consummated in accordance with the terms of the Asset Purchase Documents and
applicable requirements of law and shall cause compliance by Asset Purchaser in
all material respects with its obligations under the Asset Purchase Documents.
The Loan Parties shall deliver such agreements, documents and instruments
reasonably requested by Agent to evidence consummation of the transactions
contemplated by the Asset Purchase Documents. 

                         6.9.     
Further Assurances. Promptly upon request by the Agent, the Loan Parties
shall (and, subject to the limitations hereinafter set forth, shall cause each
of their Subsidiaries to) take such additional actions as the Agent may
reasonably require from time to time in order (i) to subject to the Liens
created by any of the Collateral Documents any of the properties, rights or
interests, whether now owned or hereafter acquired, covered or intended to be
covered by any of the Collateral Documents, (ii) to perfect and maintain the
validity, effectiveness and priority of any of the Collateral Documents and the
Liens intended to be created thereby, and (iii) to better assure, convey, grant,
assign, transfer, preserve, protect and confirm to the Agent and the Lender the
rights granted or now or hereafter intended to be granted to the Agent and the
Lender under any Loan Document or under any other document executed in
connection therewith. Without limiting the generality of the foregoing and
except as otherwise approved in writing by the Lender, the Loan Parties shall
cause each of their Subsidiaries (including any Subsidiary formed or acquired after the Closing
Date by any Loan Party, but excluding Inactive Subsidiaries) to guaranty the
Obligations and cause each such Subsidiary to grant to the Agent, for the
benefit of the Agent and the Lender, a security interest in, subject to the
limitations hereinafter set forth, all of such Subsidiary’s property to secure
such guaranty, in each case pursuant to documents in form and substance
reasonably satisfactory to Agent. Furthermore and except as otherwise approved
in writing by the Lender, Borrower shall, and shall cause each of its
Subsidiaries (except Inactive Subsidiaries) to, pledge all of the Stock and
Stock Equivalents of each of its Subsidiaries to the Agent for the benefit of
the Agent and the Lender, to secure the Obligations, in each case pursuant to
documents in form and substance reasonably satisfactory to Agent. In connection
with each pledge of Stock and Stock Equivalents, Borrower and each such Loan
Party Subsidiary shall deliver, or cause to be delivered, to the Agent,
irrevocable proxies and stock powers and/or assignments, as applicable, duly
executed in blank, in each case pursuant to documents in form and substance
satisfactory to Agent. In the event any Loan Party acquires or leases as lessee
any real property, simultaneously with such acquisition, such Person shall
execute and/or deliver, or cause to be executed and/or delivered, to the Agent,
(x) a fully executed Mortgage, in form and substance reasonably satisfactory to
the Agent together with in the case of a lease, such lease amendments, consents
and/or estoppels as Agent may reasonably request, and in any event, together
with an A.L.T.A. lender’s title insurance policy issued by a title insurer
reasonably satisfactory to the Agent, in form and substance and in an amount
reasonably satisfactory to the Agent insuring that the Mortgage is a valid and
enforceable first priority Lien on the respective property, free and clear of
all defects, encumbrances and Liens, (y) then current A.L.T.A. surveys,
certified to the Agent and the Lender by a licensed surveyor sufficient to allow
the issuer of the lender’s title insurance policy to issue such policy without a
survey exception and (z) an environmental site assessment prepared by a
qualified firm acceptable to the Agent, in form and substance reasonably
satisfactory to the Agent. 

45 




                         6.10.     
Post-Closing Obligations.



46 






                         6.11.      Board
Observer. Agent shall have the right to designate one (1) observer (the
“Board Observer”) to attend, as a nonvoting observer, two meetings of the
board of directors of the Borrower in each Fiscal Year (each, a “Board
Meeting”) at which the Borrower’s management is scheduled to present the
Borrower’s financial statements and financial and operating results and discuss
the marketing of Enablex / Emselex. The Borrower shall provide the Board
Observer with (i) reasonable advance notice of all Board Meetings or notice of
such Board Meetings at the same time such notice is delivered to the directors
and (ii) provide all documents and other written materials (including consents)
delivered to the directors in connection with such meetings at the same time
such notice and documents and other written materials are delivered to the
directors. The Borrower shall reimburse the Board Observer for its reasonable,
documented out-of-pocket fees, costs, expenses and disbursements (including
reasonable and documented travel and lodging expenses) in connection with
attending Board Meetings. The Board Observer shall be subject to the same
obligations of confidentiality as a director, except that the Board Observer may
disclose or communicate information to the Agent and the Lender notwithstanding
such obligations. 

Section 7.      
 Negative Covenants. 

                         Until
the Obligations (other than contingent indemnification obligations to the extent
no claim giving rise thereto has been asserted) are Paid in Full, each Loan
Party agrees that, unless at any time the Lender shall otherwise expressly
consent in writing, it will: 

                         7.1. Debt. Not, and not suffer or permit any
  Group Member to, create, incur, assume or suffer to exist any Debt, except for the following Debt of the Borrower and/or Loan Party
  Subsidiaries: 

 

47 






48 






                         7.2.
Liens. Not, and not suffer or permit any Group Member to, create or
permit to exist any Lien on any of its real or personal properties, assets or
rights of whatsoever nature (whether now owned or hereafter acquired),
except: 



49 






50 






51 






                         7.6.      Modification
of Asset Purchase and Organizational Documents. Not, and not suffer or
permit any waiver, amendment or modification of any term of any Asset Purchase
Document, or any term of the charter, limited liability company agreement,
partnership agreement, articles of incorporation, by-laws or other
organizational documents of Borrower or any other Group Member, in each case
except for those waivers, amendments and modifications that do not materially
adversely affect the interests of the Agent or the Lender under the Loan
Documents or in the Collateral (it being understood and agreed that any adverse
impact on the effectiveness or validity of any Collateral Document or the Liens
granted to the Agent thereunder shall be deemed to materially adversely affect
such interests of the Agent and the Lender). 

                         7.7.      Use
of Proceeds. Not use the proceeds of the Loans for any purposes other than
solely as provided in Section 2.1.3. 

                         7.8.      Transactions
with Affiliates. Not, and not suffer or permit any Group Member to, enter
into any transaction with any Affiliate of the Borrower or of any such Group
Member, except: 



52 






                         7.9.     
Inconsistent Agreements. Not, and not suffer or permit any other Group
Member to, enter into any agreement containing any provision which would (i) be
violated or breached by any borrowing by Borrower hereunder or by the
performance by Borrower or any other Loan Party of any of its Obligations
hereunder or under any other Loan Document, (ii) prohibit Borrower or any other
Group Member from granting to Agent and the Lender a Lien on any of its assets
that constitute Collateral or (iii) other than pursuant to any agreement in
effect on the Closing Date and set forth on Schedule 7.9, or pursuant to
the Loan Documents, create or permit to exist or become effective any
encumbrance or restriction on the ability of any other Subsidiary to (x) pay
dividends or make other distributions to Borrower or any Wholly-Owned
Subsidiary, or pay any Debt owed to Borrower or any Wholly-Owned Subsidiary, (y)
make loans or advances to Borrower or any Wholly-Owned Subsidiary or (z)
transfer any of its assets or properties to Borrower or any Wholly-Owned
Subsidiary, except, in the case of clause (ii) and (iii)
above: (a) negative pledges and restrictions on Liens in favor of any holder of
Debt permitted under Section 7.1(b) and 7.1(k) but solely to the
extent any negative pledge or limitation on Liens relates to the property that
is the subject of such Debt and the proceeds and products thereof, (b) customary
restrictions on leases, subleases, licenses or asset sale agreements otherwise
permitted hereby so long as such restrictions relate to the assets subject
thereto, (c) customary provisions restricting assignment of any agreement
entered into in the ordinary course of business, (d) [Reserved], (e) related to
any sale, transfer, disposition or conveyance of property permitted by
Section 7.5(b) pending such sale, transfer, disposition or conveyance,
solely to the assets subject to such sale, transfer, disposition or conveyance
of property and (f) prohibitions and limitations that exist pursuant to
applicable requirements of law. 

                         7.10.      Business
Activities. Not, and not suffer or permit any Group Member to, engage in any
line of business other than the businesses engaged in on the Closing Date and
businesses reasonably related thereto or such other businesses as could
reasonably be contemplated to be engaged in by any Loan Party as a result of
such Loan Party carrying out its business strategy as set forth in the Public
Record, provided that such businesses are in the biopharmaceuticals and
medical devices industry. 

                         7.11.     
Investments. Not, and not suffer or permit any Group Member to, make or
permit to exist, any Investment in any other Person, except the following: 



53 






54 




 

                         7.13.2.
Maximum Total Leverage Ratio. Not and not suffer or permit the Maximum
Total Leverage Ratio for any Computation Period ending on or after March 31,
2013, to be more than the applicable Maximum Total Leverage Ratio set forth
below at the end of each such Computation Period: 

55 






	Computation Period 	Ratio 
	 	 
	September 30, 2012 	   
         7.0:1.0 
	 	 
	December 31, 2012 	   
         7.0:1.0 
	 	 
	March 31, 2013 	   
         7.0:1.0 
	 	 
	June 30, 2013 	   
         7.0:1.0 
	 	 
	September 30, 2013 	   
         7.0:1.0 
	 	 
	December 31, 2013 	   
         7.0:1.0 
	 	 
	March 31, 2014 	   
         7.0:1.0 
	 	 
	June 30, 2014 	   
         7.0:1.0 
	 	 
	September 30, 2014 	   
         7.0:1.0 
	 	 
	December 31, 2014 	   
         7.0:1.0 
	 	 
	March 31, 2015 	   
         7.0:1.0 



                         7.13.3.
Minimum Net Sales. Not and not suffer or permit Net Sales for any
Computation Period ending on or after March 31, 2013, to be less than the
applicable Net Sales set forth below at the end of each such Computation Period
(subject to adjustment as described in Section 7.13.5); provided, that
with respect to any incurrence of subordinated Debt pursuant to Section
7.1(c), and any Permitted Acquisition, in each case to be consummated prior
to the availability of financial statements for the Fiscal Quarter ending March
31, 2013, Net Sales shall not be less than CDN$


56 




 

                         7.13.4.
Sinking Fund Deposit Cure. If, at any time, the Borrower deposits cash
into the Sinking Fund Account (the amount of such deposit, the “Sinking Fund
Deposit Amount”), then:



57 






                         7.14.
Deposit Accounts and Securities Accounts. Not, and not suffer or permit
any Group Member to, maintain or establish any deposit account or securities
account other than the deposit accounts and securities accounts set forth on
Schedule 7.14 without prior written notice to Agent and unless Agent,
Borrower or such other Group Member and the bank or securities intermediary at
which such deposit account or securities account, as applicable, is to be opened
or maintained enter into a Control Agreement (blocked account agreement with
respect to a deposit account in Canada) regarding such deposit account or
securities account, as applicable, on terms satisfactory to Agent.

                         7.15.
Sale-Leasebacks. Not and not suffer or permit any Group Member to, engage
in a sale leaseback, synthetic lease or similar transaction involving any of its
assets. 

                         7.16.
Hazardous Substances. Not, and not suffer or permit any other Group
Member to, cause or suffer to exist any release of any Hazardous Substances at,
to or from any real property owned, leased, subleased or otherwise operated or
occupied by any Group Member that would violate any Environmental Law, form the
basis for any Environmental Claims or otherwise adversely affect the value or
marketability of any real property (whether or not owned by any Group Member), other than such violations, Environmental
Claims and effects that would not, in the aggregate, be reasonably be expected
to have a Material Adverse Effect. Notwithstanding the foregoing, under no
circumstances will any Group Member cause or suffer to exist any disposal of any
Hazardous Substances at, on, under or in any real property owned, leased,
subleased, or otherwise operated or occupied by any Group Member. 

58 




                         7.17.
Asset Purchase Agreement Indemnity. Not, and not suffer or permit,
directly or indirectly, the seeking of pricing and reimbursement for the Product
(as defined in the Asset Purchase Agreement) in France, Italy or Spain in
contravention of Section 11.5(d) of the Asset Purchase Agreement.

                         7.18.
Establishment of Defined Benefit Plan. Notwithstanding any other
provision of this Agreement or any other Loan Document, not, and not suffer or
permit, (i) establishing or contributing to any Defined Benefit Plan or (ii)
acquiring an interest in any Person if such Pension sponsors, administers,
maintains or contributes to, or has any liability in respect of any Defined
Benefit Plan. 

                         7.19.
ERISA Liability. Not, and not suffer or permit, any liability under ERISA
and the sponsorship of any “pension plan” or any liability subject to Title IV
of ERISA. 

                         7.20.
Inactive Subsidiaries. Not suffer or permit any Inactive Subsidiary (x)
to have any Subsidiaries, assets, properties, rights, liabilities or operations,
(y) to engage in any business or enter into any transaction except as required
by Section 6.10(c), or (z) other than in the case of Orbis Pharma Inc.,
to have any of its Stock evidenced by certificates. 

Section 8.        Events
of Default; Remedies. 

                         8.1.
Events of Default. Each of the following shall constitute an Event of
Default under this Agreement: 8.1.1. Non-Payment of Credit. Default, in
the payment when due of the principal of the Loan shall occur; or default, and
continuance thereof for 5 Business Days, in the payment when due of any
interest, fee, or other amount payable by any Loan Party hereunder or under any
other Loan Document shall occur. 

                         8.1.2.
Default Under Other Debt. 

                         (a)     
Any default for the payment of principal or interest when due shall occur under
the terms applicable to any Debt (other than the Obligations) of any Group
Member in an aggregate amount (for all such Debt so affected and including
undrawn committed or available amounts and amounts owing to all creditors under
any combined or syndicated credit arrangement) exceeding CDN$ and 

                         (b)      Any
default shall occur under the terms applicable to any Debt (other than the
Obligations) of any Group Member in an aggregate amount (for all such Debt so
affected and including undrawn committed or available amounts and amounts owing
to all creditors under any combined or syndicated credit arrangement) exceeding
CDN$ and such default shall result in the
acceleration of the maturity of such Debt or permit the holder or holders
thereof, or any trustee or agent for such holder or holders, to cause such
Debt to become due and payable (or require Borrower or any other Group Member to
purchase or redeem such Debt or post cash collateral in respect thereof) prior
to its expressed maturity. 

59 




                         8.1.3.
Bankruptcy; Insolvency. Any Loan Party becomes insolvent or generally
fails to pay, or admits in writing its inability or refusal to pay, debts as
they become due; or any Loan Party applies for, consents to, or acquiesces in
the appointment of a trustee, receiver, ad hoc manager or other custodian for
such Loan Party or any property thereof, or makes a general assignment for the
benefit of creditors; or, in the absence of such application, consent or
acquiescence, a trustee, receiver, ad hoc manager or other custodian is
appointed for any Loan Party or for a substantial part of the property of any
Loan Party and is not discharged within 60 days; or any bankruptcy,
reorganization, debt arrangement, or other case or proceeding under any
bankruptcy or insolvency law (including in respect of Merus Labs Luxco S.à r.l.:
(i) insolvency proceedings (faillite), or (ii) proceedings for voluntary
arrangement with its creditors (concordat préventif de faillite),
(iii) controlled management (gestion contrôlée) or (iv)
suspension of payments (sursis de paiement) or (v) voluntary dissolution
or liquidation (dissolution ou liquidation volontaire) or (vi) any
similar foreign law proceedings having similar effects), or any dissolution or
liquidation proceeding, is commenced in respect of any Loan Party, and if such
case or proceeding is not commenced by such Loan Party, it is consented to or
acquiesced in by such Loan Party, or remains for 60 days undismissed; or any
Loan Party takes any action to authorize, or in furtherance of, any of the
foregoing. 

                         8.1.4.
Plan of Arrangement. If any Loan Party or any other Person shall take any
steps or actions (other than preparation of preliminary legal documentation and
similar preparatory actions) to pursue or provide any notice to any Person that
they intend to pursue a recapitalization of any Loan Party, whether pursuant to
a plan of arrangement under the Canada Business Corporations Act (Canada) or
otherwise. 

                         8.1.5.
Non-Compliance with Loan Documents. 

                         (a)      Failure
by Borrower or any other Loan Party to comply with or to perform any covenant
set forth in Sections 6.1.1, 6.1.2, 6.1.4, 6.1.6,
6.3(b), 6.5, 6.7, 6.8 and 7; (b) default by
the Asset Purchaser in any material respect of any of its obligations under the
Asset Purchase Documents or (c) failure by Borrower or any other Loan
Party to comply with or to perform any other provision of this Agreement or any
other Loan Document applicable to it (and not constituting an Event of Default
under any other provision of this Section 8) and continuance of such
failure described in this clause (c) for 30 days. 

                         8.1.6. 
Representations; Warranties. Any representation or warranty made by any
Loan Party herein or any other Loan Document is breached or is false or
misleading in any material respect, or any schedule, certificate, financial
statement, report, notice or other writing furnished by any Loan Party to Agent
or the Lender in connection herewith is false or misleading in any material
respect on the date as of which the facts therein set forth are stated or
certified. 

                         8.1.7.
[Reserved].

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                         8.1.8.
Canadian Pensions Plans. (a) Any Person institutes steps to terminate a
Canadian Pension Plan or causes such Canadian Pension Plan to no longer be
registered if required to be registered, if as a result of such termination or
de-registration any Loan Party could be required to make a contribution to such
Canadian Pension Plan, or could incur a liability or obligation to such Canadian
Pension Plan, in excess of CDN or (b) a
contribution failure occurs with respect to any Canadian Pension Plan sufficient
to give rise to a Lien under any Canadian Employee Benefits Legislation. 

                         8.1.9. 
Judgments. 

                         (a)     
Final judgments which exceed an aggregate of CDN$
shall be rendered against any Group Member and shall not have been paid,
discharged or vacated or had execution thereof stayed pending appeal within 30
days after entry or filing of such judgments; or 

                         (b)      One
or more non-monetary judgments, orders or decrees shall be rendered against any
one or more of the Loan Parties or any of their respective Subsidiaries which
has had or would reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect, and there shall be any period of ten (10)
consecutive days during which a stay of enforcement of such judgment or order,
by reason of a pending appeal or otherwise, shall not be in effect. 

                         8.1.10.
Invalidity of Collateral Documents. Any Collateral Document shall cease
to be in full force and effect; or any Group Member or other grantor or pledgor
(or any Person by, through or on behalf of any Group Member, grantor or pledgor)
shall contest in any manner the validity, binding nature or enforceability of
any Collateral Document. 

                         8.1.11.
Invalidity of Subordination Provisions. Any subordination provision in
any document or instrument governing Debt that is intended to be subordinated to
the Obligations or any subordination provision in any subordination agreement
that relates to any such Debt, or any subordination provision in any guaranty by
any Loan Party of any such Debt, shall cease to be in full force and effect, or
any Person (including the holder of any applicable Debt) shall contest in any
manner the validity, binding nature or enforceability of any such provision.


                         8.1.12.
Change of Control. (a) A Change of Control shall occur, (b) Borrower
shall cease to, directly or indirectly, own and control 100% of each class of
the outstanding Stock and Stock Equivalents of each Subsidiary of the Borrower,
or (c) a “Change of Control” or other similar event shall occur, as defined in,
or under, any indenture, agreement, instrument or other documentation evidencing
or otherwise relating to any Debt. 

                         8.2.     
Remedies. If any Event of Default described in Section 8.1.3 shall
occur, the Loans and all other Obligations shall become immediately due and
payable and all outstanding Commitments shall terminate, all without
presentment, demand, protest or notice of any kind; and, if any other Event of
Default shall occur and be continuing, Agent may, and upon the written request
of the Lender shall, declare all or any part of the Loans and other Obligations
to be due and payable and/or all or any part of the Commitments
then outstanding to be terminated, whereupon the Loans and other Obligations
shall become immediately due and payable (in whole or in part, as applicable),
and such Commitments shall immediately terminate (in whole or in part, as
applicable), all without presentment, demand, protest or notice of any kind.
Agent shall promptly advise Borrower of any such declaration, but failure to do
so shall not impair the effect of such declaration. Any cash collateral
delivered hereunder shall be applied by Agent to any remaining Obligations and
any excess remaining after the Obligations shall have been Paid in Full shall be
delivered to Borrower or as a court of competent jurisdiction may elect. 

61 




                         8.3.     
Borrower’s Right to Cure. Notwithstanding anything to the contrary
contained in Section 8.1.5, in the event of any Event of Default under
Section 7.13 (a “Curable Default”), the Borrower may cure
such Event of Default if it complies with the provisions set forth in Section
7.13.4. From the effective date of the delivery of the Sinking Fund Deposit
Cure Notice to Agent until the earlier to occur of the Required Deposit Date and
the date on which Agent is notified that the applicable Retroactive Effect
Deposit will not be deposited into the Sinking Fund Account, neither Agent nor
Lender shall impose the Default Rate, accelerate the Obligations or exercise any
enforcement remedy against any Group Member or any of their respective
properties solely as a result of the existence of the applicable Curable
Default. In the event that the applicable Retroactive Effect Deposit is
deposited into the Sinking Fund Account and the inclusion of the Retroactive
Effect Deposit in the calculation of, as applicable, EBITDA, the Maximum Total
Leverage Ratio or Net Sales for the Reference Computation Period results in
compliance with, respectively, Section 7.13.1, Section 7.13.2 or
Section 7.13.3 for the Reference Computation Period, the applicable
Curable Default shall be deemed waived.

Section 9.      
 Agent. 

                         9.1.      Appointment;
Authorization. 

                         (a)      Each
Lender hereby irrevocably appoints, designates and authorizes Agent to take such
action on its behalf under the provisions of this Agreement and each other Loan
Document and to exercise such powers and perform such duties as are expressly
delegated to it by the terms of this Agreement or any other Loan Document,
together with such powers as are reasonably incidental thereto. Notwithstanding
any provision to the contrary contained elsewhere in this Agreement or in any
other Loan Document, Agent shall not have any duty or responsibility except
those expressly set forth herein, nor shall Agent have or be deemed to have any
fiduciary relationship with the Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against Agent. 

                         9.2.     
Delegation of Duties. Agent may execute any of its duties under this
Agreement or any other Loan Document by or through agents, employees or
attorneys in fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. Agent shall not be responsible for the
negligence or misconduct of any agent or attorney in fact that it selects with
reasonable care. 

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                         9.3.      Limited
Liability. None of Agent or any of its directors, officers, employees or
agents shall (a) be liable for any action taken or omitted to be taken by any of
them under or in connection with this Agreement or any other Loan Document or
the transactions contemplated hereby (except to the extent resulting from its
own gross negligence or willful misconduct as determined in a final
non-appealable judgment by a court of competent jurisdiction), or (b) be
responsible in any manner to the Lender for any recital, statement,
representation or warranty made by any Loan Party or Affiliate of any Loan
Party, or any officer thereof, contained in this Agreement or in any other Loan
Document, or in any certificate, report, statement or other document referred to
or provided for in, or received by Agent under or in connection with, this
Agreement or any other Loan Document, or the validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or any other Loan
Document (or the creation, perfection or priority of any Lien or security
interest therein), or for any failure of any Loan Party or any other party to
any Loan Document to perform its Obligations hereunder or thereunder. Agent
shall not be under any obligation to the Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of any Loan Party or Affiliate of any Loan Party.


                         9.4.     
Successor Agent. Agent may resign as Agent at any time upon 30 days’
prior notice to the Lender. If Agent resigns under this Agreement, the Lender
shall, with (so long as no Event of Default exists) the consent of Borrower
(which shall not be unreasonably withheld or delayed), appoint a successor agent
for the Lender. If no successor agent is appointed prior to the effective date
of the resignation of Agent, Agent may appoint, on behalf after consulting with
the Lender and (so long as no Event of Default exists) Borrower, a successor
agent. Upon the acceptance of its appointment as successor agent hereunder, such
successor agent shall succeed to all the rights, powers and duties of the
retiring Agent and the term “Agent” shall mean such successor agent, and the
retiring Agent’s appointment, powers and duties as Agent shall be terminated.
After any retiring Agent’s resignation hereunder as Agent, the provisions of
this Section 9 and Sections 10.4 and 10.5 shall continue to
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement. If no successor agent has accepted
appointment as Agent by the date which is 30 days following a retiring Agent’s
notice of resignation, the retiring Agent’s resignation shall nevertheless
thereupon become effective and the Lender shall perform all of the duties of
Agent hereunder until such time as the Lender shall appoint a successor agent as
provided for above. 

                         9.5.      Collateral
Matters. The Lender irrevocably authorizes Agent, at its option and in its
discretion, (a) to release any Lien granted to or held by Agent under any
Collateral Document (i) when all Obligations have been Paid in Full; (ii)
constituting property sold or to be sold or disposed of as part of or in
connection with any sale or other disposition permitted hereunder (it being
agreed and understood that Agent may conclusively rely without further inquiry
on a certificate of an officer of Borrower as to the sale or other disposition
of property being made in compliance with this Agreement); or (iii) subject to
Section 10.1, if approved, authorized or ratified in writing by the Lender; or
(b) to subordinate its interest in any Collateral to any holder of a Lien on
such Collateral which is permitted by clause (d)(i) or (d)(ii) of Section
7.2 (it being understood that Agent may conclusively rely on a
certificate from Borrower in determining whether the Debt secured by any such
Lien is permitted by Section 7.1(b)). Upon request by Agent at any time,
the Lender will confirm in writing Agent’s authority to release, or subordinate its interest in, particular types or items of
Collateral pursuant to this Section 9.5. The Agent shall have the right,
in accordance with the Collateral Documents, to sell, lease or otherwise dispose
of any Collateral for cash, credit or any combination thereof, and Agent may
purchase any Collateral at public or, if permitted by law, private sale and, in
lieu of actual payment of the purchase price, may credit bid and setoff the
amount of such price against the Obligations.

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Section 10.      Miscellaneous.


                         10.1.  
Waiver; Amendments. No delay on the part of Agent or the Lender in the
exercise of any right, power or remedy shall operate as a waiver thereof, nor
shall any single or partial exercise by any of them of any right, power or
remedy preclude other or further exercise thereof, or the exercise of any other
right, power or remedy. No amendment, modification or waiver of, or consent with
respect to, any provision of this Agreement, the Notes or any of the other Loan
Documents (or any subordination and intercreditor agreement or other
subordination provisions relating to any other Debt) shall in any event be
effective unless the same shall be in writing and approved by the Agent and the
Lender, and then any such amendment, modification, waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given. No provision of Section 9 or other provision of this Agreement affecting
Agent in its capacity as such shall be amended, modified or waived without the
consent of Agent. 

                         10.2.  
Notices. All notices hereunder shall be in writing (including facsimile
transmission) and shall be sent to the applicable party at its address shown on
Annex II or at such other address as such party may, by written notice
received by the other parties, have designated as its address for such purpose.
Notices sent by facsimile or other electronic transmission shall be deemed to
have been given when sent; notices sent to the Borrower by mail shall be deemed
to have been given three Business Days after the date when sent by registered or
certified mail, postage prepaid; and notices sent by hand delivery or overnight
courier service shall be deemed to have been given when received.

                         10.3. 
 Computations. Unless otherwise specifically provided herein, any
accounting term used in this Agreement (including in Section 7.13 or any
related definition) shall have the meaning customarily given such term in
accordance with IFRS, and all financial computations (including pursuant to
Section 7.13 and the related definitions, and with respect to the
character or amount of any asset or liability or item of income or expense, or
any consolidation or other accounting computation) hereunder shall be computed
in accordance with IFRS consistently applied; provided that if Borrower
notifies Agent that Borrower wishes to amend any covenant in Section 7.13
(or any related definition) to eliminate or to take into account the effect of
any change after the Closing Date in IFRS on the operation of such covenant (or
if the Lender wishes to amend Section 7.13 (or any related definition)
for such purpose), then Borrower’s compliance with such covenant shall be
determined on the basis of IFRS in effect immediately before the relevant change
in IFRS became effective, until either such notice is withdrawn or such covenant
(or related definition) is amended in a manner satisfactory to Borrower and the
Lender. The explicit qualification of terms or computations by the phrase “in
accordance with IFRS” shall in no way be construed to limit the foregoing. 

64 




                    10.4.  
 Costs; Expenses. Each party shall bear its own costs (including
Legal Costs) in connection with the preparation, execution, delivery and
administration on or prior to the Closing Date (including perfection and
protection of Collateral prior to and on the Closing Date) of this Agreement,
the other Loan Documents and all other documents provided for herein or
delivered or to be delivered hereunder or in connection herewith. After the
Closing Date, Borrower agrees to pay on demand all reasonable out-of-pocket
costs and expenses of Agent and the Lender (including Legal Costs) in connection
with the administration (including perfection and protection of Collateral
subsequent to the Closing Date) of this Agreement, the other Loan Documents and
all other documents provided for herein or delivered or to be delivered
hereunder or in connection herewith (including any proposed or actual amendment,
supplement or waiver to any Loan Document), and all out-of-pocket costs and
expenses (including Legal Costs) incurred by Agent and the Lender in connection
with the collection of the Obligations and enforcement of this Agreement, the
other Loan Documents or any such other documents. In addition, Borrower agrees
to pay, and to save Agent and the Lender harmless from all liability for, any
fees of Borrower’s auditors in connection with any reasonable exercise by Agent
and the Lender of their rights pursuant to Section 6.2. All Obligations
provided for in this Section 10.4 shall survive repayment of the Loans,
cancellation of the Notes and termination of this Agreement. 

                    10.5.   
Indemnification by Borrower. In consideration of the execution and
delivery of this Agreement by Agent and the Lender and the agreement to extend
the Commitments provided hereunder, Borrower hereby agrees to indemnify,
exonerate and hold Agent, the Lender and each of the officers, directors,
employees, Affiliates and agents of Agent and the Lender (each a “Lender
Party”) free and harmless from and against any and all actions, causes of
action, suits, losses, liabilities (including, without limitation, strict
liabilities), damages, fines, penalties and expenses, including Legal Costs
(collectively, the “Indemnified Liabilities”), incurred by Lender Parties or
asserted against the Lender Party by any Person (including in connection with
any action, suit or proceeding brought by the Borrower, any other Group Member
or any Lender Party) as a result of, or arising out of, or relating to (a) any
repayment of Debt, tender offer, merger, purchase of Stock and Stock
Equivalents, purchase of assets or other similar or dissimilar transaction
financed or proposed to be financed in whole or in part, directly or indirectly,
with the proceeds of the Loans, (b) the generation, use, handling, recycling,
reclamation, release, emission, discharge, transportation, storage, treatment or
disposal of any Hazardous Substance at any property owned or leased by Borrower
or any other Group Member, (c) any violation of or liability under any
Environmental Laws or any Environmental Claim with respect to conditions at any
property owned or leased by any Group Member or the operations conducted
thereon, (d) the investigation, cleanup or remediation of offsite locations at
which any Group Member or their respective predecessors are alleged to have
directly or indirectly released or disposed of Hazardous Substances and any
related Environmental Claims or (e) the execution, delivery, performance or
enforcement of this Agreement or any other Loan Document by any Lender Party,
except to the extent any such Indemnified Liabilities result from the applicable
Lender Party’s own gross negligence or willful misconduct as determined by a
court of competent jurisdiction. If and to the extent that the foregoing
undertaking may be unenforceable for any reason, Borrower hereby agrees to make
the maximum contribution to the payment and satisfaction of each of the
Indemnified Liabilities which is permissible under applicable law. All
Obligations provided for in this Section 10.5 shall survive repayment of
the Loans, cancellation of the Notes, any foreclosure under, or any modification,
release or discharge of, any or all of the Collateral Documents and termination
of this Agreement. 

65 




                         10.6.   
Marshaling; Payments Set Aside. Neither Agent nor the Lender shall be
under any obligation to marshal any assets in favor of Borrower or any other
Person or against or in payment of any or all of the Obligations. To the extent
that Borrower makes a payment or payments to Agent or the Lender, or Agent or
the Lender enforces its Liens or exercises its rights of set-off, and such
payment or payments or the proceeds of such enforcement or set-off or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required (including pursuant to any settlement entered into by
Agent or the Lender in its discretion) to be repaid to a trustee, receiver or
any other party in connection with any bankruptcy, insolvency or similar
proceeding, or otherwise, then (a) to the extent of such recovery, the
obligation hereunder or part thereof originally intended to be satisfied shall
be revived and continued in full force and effect as if such payment had not
been made or such enforcement or setoff had not occurred and (b) the Lender
severally agrees to pay to Agent upon demand its ratable share of the total
amount so recovered from or repaid by Agent to the extent paid to such Lender.


                         10.7.  
 Nonliability of the Lender. The relationship between Borrower on
the one hand and the Lender and Agent on the other hand shall be solely that of
borrower and lender. Neither Agent nor the Lender shall have any fiduciary
responsibility to Borrower or any other Group Member. Neither Agent nor the
Lender undertakes any responsibility to Borrower or any other Group Member to
review or inform Borrower or any other Group Member of any matter in connection
with any phase of Borrower’s or any other Group Member’s business or operations.
Execution of this Agreement by Borrower constitutes a full, complete and
irrevocable release of any and all claims which Borrower may have at law or in
equity in respect of all prior discussions and understandings, oral or written,
relating to the subject matter of this Agreement and the other Loan Documents.
Neither Agent nor the Lender shall have any liability with respect to, and
Borrower hereby waives, releases and agrees not to sue for, any special,
indirect, punitive or consequential damages or liabilities. 

                         10.8.  
 Anti-Money Laundering. 

                         (a)      Each
Canadian Loan Party acknowledges that, pursuant to the Proceeds of Crime
(Money Laundering) and Terrorist Financing Act (Canada) and other applicable
anti-money laundering, anti-terrorist financing, government sanction and “know
your client” Laws, whether within Canada or elsewhere (collectively, including
any guidelines or orders thereunder, “AML Legislation”), the Lender and
the Agent may be required to obtain, verify and record information regarding
each Canadian Loan Party, its directors, authorized signing officers, direct or
indirect shareholders or other Persons in control of each Canadian Loan Party,
and the transactions contemplated hereby. Each Canadian Loan Party shall
promptly provide all such information, including supporting documentation and
other evidence, as may be reasonably requested by the Lender or the Agent, or
any prospective assign or participant of the Lender or the Agent, in order to
comply with any applicable AML Legislation, whether now or hereafter in
existence. 

66 




                         (b)      If
the Agent has ascertained the identity of each Canadian Loan Party or any
authorized signatories of each Canadian Loan Party for the purposes of
applicable AML Legislation, then the Agent: 

                         (i)      shall
be deemed to have done so as an agent for the Lender, and this Agreement shall
constitute a “written agreement” in such regard between the Lender and the Agent
within the meaning of applicable AML Legislation; and 

                         (ii)     
shall provide to the Lender copies of all information obtained in such regard
without any representation or warranty as to its accuracy or completeness. 

Notwithstanding the preceding sentence and except as may
otherwise be agreed in writing, the Lender agrees that the Agent has no
obligation to ascertain the identity of each Canadian Loan Party or any
authorized signatories of each Canadian Loan Party on behalf of the Lender, or
to confirm the completeness or accuracy of any information it obtains from each
Canadian Loan Party or any such authorized signatory in doing so. 

                         10.9.   
Currency Indemnity. If, for the purposes of obtaining judgment in any
court in any jurisdiction with respect to this Agreement or any other Loan
Document, it becomes necessary to convert into a particular currency (the
“Judgment Currency”) any amount due under this Agreement or under any
other Loan Document in any currency other than the Judgment Currency (the
“Currency Due”), then conversion shall be made at the rate of exchange
prevailing on the Business Day before the day on which judgment is given. For
this purpose “rate of exchange” means the rate at which the Agent is able, on
the relevant date, to purchase the Currency Due with the Judgment Currency in
accordance with its normal practice through its bankers. In the event that there
is a change in the rate of exchange prevailing between the Business Day before
the day on which the judgment is given and the date of receipt by the Agent of
the amount due, each Canadian Loan Party will, on the date of receipt by the
Agent, pay such additional amounts, if any, or be entitled to receive
reimbursement of such amount, if any, as may be necessary to ensure that the
amount received by the Agent on such date is the amount in the Judgment Currency
which when converted at the rate of exchange prevailing on the date of receipt
by the Agent is the amount then due under this Agreement or such other Loan
Document in the Currency Due. If the amount of the Currency Due which the Agent
is so able to purchase is less than the amount of the Currency Due originally
due under this Agreement or any other Loan Document, each Canadian Loan Party
shall indemnify and save the Agent and the Lender harmless from and against all
loss or damage arising as a result of such deficiency. This indemnity shall
constitute an obligation separate and independent from the other obligations
contained in this Agreement and the other Loan Documents, shall give rise to a
separate and independent cause of action, shall apply irrespective of any
indulgence granted by the Agent or the Lender from time to time and shall
continue in full force and effect notwithstanding any judgment or order for a
liquidated sum in respect of an amount due under this Agreement or any other
Loan Document or under any judgment or order.

                         10.10.  
Confidentiality. Agent and the Lender agree to use commercially
reasonable efforts (equivalent to the efforts Agent or such Lender applies to
maintain the confidentiality of its own confidential information) to maintain as
confidential all information provided to them by any Loan Party and designated
as confidential, except that Agent and the Lender may disclose such information (a) to Persons employed or
engaged by Agent or such Lender or any of their Affiliates (including collateral
managers of the Lender) in evaluating, approving, structuring or administering
the Loan and the Commitments; (b) to any assignee or participant or potential
assignee or participant that has agreed to comply with the covenant contained in
this Section 10.10 (and any such assignee or participant or potential
assignee or participant may disclose such information to Persons employed or
engaged by them as described in clause (a) above); (c) as required or requested
by any federal or state regulatory authority or examiner, or any insurance
industry association, or as reasonably believed by Agent or such Lender to be
compelled by any court decree, subpoena or legal or administrative order or
process; (d) as, on the advice of Agent’s or such Lender’s counsel, is required
by law; (e) in connection with the exercise of any right or remedy under the
Loan Documents or in connection with any litigation to which Agent or such
Lender is a party; (f) to any nationally recognized rating agency or investor of
the Lender that requires access to information about the Lender’s investment
portfolio in connection with ratings issued or investment decisions with respect
to such Lender; (g) that ceases to be confidential through no fault of Agent or
the Lender; (h) to a Person that is an investor or prospective investor in a
Securitization (as defined below) that agrees that its access to information
regarding Borrower and the Loan and Commitments is solely for purposes of
evaluating an investment in such Securitization and who agrees to treat such
information as confidential; (i) to a Person that is a trustee, collateral
manager, servicer, noteholder or secured party in a Securitization in connection
with the administration, servicing and reporting on the assets serving as
collateral for such Securitization; or (j) to a Person that is an investor or
prospective investor in the Agent or any of its Affiliates. For purposes of this Section 10.10, “Securitization” means a public or private offering
by the Lender or any of its Affiliates or their respective successors and
assigns, of securities which represent an interest in, or which are
collateralized, in whole or in part, by the Loans or the Commitments.
Notwithstanding the foregoing, Borrower consents to the publication by Agent or
the Lender of a tombstone or similar advertising material relating to the
financing transactions contemplated by this Agreement, and Agent reserves the
right to provide to industry trade organizations information necessary and
customary for inclusion in league table measurements. 

67




                         10.11.  
Captions. Captions used in this Agreement are for convenience only and
shall not affect the construction of this Agreement. 

                         10.12.  
Nature of Remedies. All Obligations of Borrower and rights of Agent and
the Lender expressed herein or in any other Loan Document shall be in addition
to and not in limitation of those provided by applicable law. No failure to
exercise and no delay in exercising, on the part of Agent or the Lender, any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. 

                         10.13.  
Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts and
each such counterpart shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same Agreement. Receipt
by telecopy or electronic transmission of any executed signature page to this
Agreement or any other Loan Document shall constitute effective delivery of such
signature page. 

68 




                         10.14. 
 Severability. The illegality or unenforceability of any provision
of this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.


                         10.15. 
 Entire Agreement. This Agreement, together with the other Loan
Documents, embodies the entire agreement and understanding among the parties
hereto and supersedes all prior or contemporaneous agreements and understandings
of such Persons, verbal or written, relating to the subject matter hereof and
thereof and any prior arrangements made with respect to the payment by Borrower
of (or any indemnification for) any fees, costs or expenses payable to or
incurred (or to be incurred) by or on behalf of Agent or the Lender 10.16.
Successors; Assigns. This Agreement shall be binding upon Borrower, the
Lender and Agent and their respective successors and assigns, and shall inure to
the benefit of Borrower, the Lender and Agent and the successors and assigns of
the Lender and Agent. No other Person shall be a direct or indirect legal
beneficiary of, or have any direct or indirect cause of action or claim in
connection with, this Agreement or any of the other Loan Documents. Borrower may
not assign or transfer any of its rights or Obligations under this Agreement
without the prior written consent of Agent and the Lender. 

                         10.17. 
 Governing Law. THIS AGREEMENT AND EACH NOTE SHALL BE A CONTRACT
MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE
TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE, WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES (OTHER THAN SECTION 5-1401 OF THE NEW YORK
GENERAL OBLIGATIONS LAW). 

                         10.18. 
 Forum Selection; Consent to Jurisdiction; Service of Process. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED
EXCLUSIVELY IN THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES
DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK; PROVIDED THAT ANY
SUIT SEEKING ENFORCEMENT AGAINST ANY COLLATERAL OR OTHER PROPERTY MAY BE
BROUGHT, AT AGENT’S OPTION, IN THE COURTS OF ANY JURISDICTION WHERE SUCH
COLLATERAL OR OTHER PROPERTY MAY BE FOUND. EACH LOAN PARTY HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. EACH LOAN PARTY
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL,
POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK.
EACH LOAN PARTY HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND
ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
Each Loan Party hereby appoints CT Corporation as such Loan Party’s
agent where notices and demands to or upon such Loan Party in respect of this
Agreement or any other Loan Document may be served (without prejudice to the
right of Agent or Lender to serve process in any other manner permitted by law).
If for any reason such process agent is unable to act as such, such Loan Party
will within 30 days appoint a substitute process agent located in the State of
New York and give notice of such appointment to Agent. 

69 




                         10.19.  
Waiver of Jury Trial. EACH LOAN PARTY, AGENT AND EACH LENDER HEREBY
WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR
DEFEND ANY RIGHTS UNDER THIS AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT AND
ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY
LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE FOREGOING, AND
AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT
BEFORE A JURY. 

                         10.20.  
Collateral Agent. Each Lender hereby appoints PDL BIOPHARMA, INC. as its
collateral agent under the Guarantee and Collateral Agreement and agrees that in
so acting PDL BIOPHARMA, INC. will have all the rights, protections,
exculpations, indemnities and other benefits provided to PDL BIOPHARMA, INC.
under Section 9 hereof, and authorizes and directs PDL BIOPHARMA, INC. to
take or refrain from taking any and all action that it deems necessary or
advisable in fulfilling its role as Collateral Agent under each Guarantee and
Collateral Agreement. 

[signature pages follow] 

70 

























ANNEX I 

Commitments 
 

I-1 




ANNEX II 

Addresses 

LOAN PARTIES 

Address for Notices: 
Merus Labs International Inc.
30
St. Patrick St., Ste. 301,
Toronto, Ontario M5T 3A3 
Attention: Chief
Executive Officer 

  Facsimile: (416) 593-4434 

Copy to: 
Clark Wilson LLP
Suite 800 – 885 West Georgia
Street 
Vancouver, British Columbia V6C 3H1 
Attention: Stewart Muglich


  Facsimile: (604) 687-6314

AGENT 

PDL BioPharma, Inc., 
as Agent and the Lender 
Address
for Notices: 
932 Southwood Boulevard 
Incline Village, NV 89451

Attention: General Counsel 
Telephone: (775) 832-8500 

  Facsimile: (775) 832-8501 

Bank:
 


II-1