Document:

EX-10.49: LOAN AGREEMENT

 

CONFORMED COPY

Exhibit 10.49

Dated July 14, 2004

US$50,000,000

LOAN AGREEMENT

BETWEEN

VERNALIS PLC

as Parent

VERNALIS DEVELOPMENT LIMITED

as Borrower

and

ENDO PHARMACEUTICALS INC.

as Lender

Skadden, Arps, Slate, Meagher & Flom LLP

4 Times Square

New York, NY 10036

 

 

CONFORMED COPY

THIS AGREEMENT (this
“Agreement”) is made the 14th day of July, 2004.

BETWEEN:

	(1)	 	VERNALIS PLC a limited liability company incorporated in England and
Wales with its registered office at Oakdene Court, 613 Reading Road,
Winnersh, Wokingham, Berkshire RG41 5UA, United Kingdom (the “Parent”);
	 
	(2)	 	VERNALIS DEVELOPMENT LIMITED a limited liability company incorporated in
England and Wales with its registered office at Oakdene Court, 613 Reading
Road, Winnersh, Wokingham, Berkshire RG41 5UA, United Kingdom (“VDL”); and
	 
	(3)	 	ENDO PHARMACEUTICALS INC. whose principal place of business is at 100
Painters Drive, Chadds Ford, PA 19317, USA (“Endo”).

WHEREAS Endo has agreed to make available to VDL a loan (the “Loan”) in
accordance with the terms hereof. VDL agrees, inter alia, to grant Endo
security over the Secured Assets in accordance with the terms of the Security
Agreement as a condition precedent to Endo agreeing to advance the Loan.

IT IS AGREED AS FOLLOWS:

	1.	 	DEFINITIONS AND INTERPRETATION
	 
	1.1	 	Definitions
	 
	 	 	In this Agreement:
	 
	 	 	“Act” means the Companies Act 1985, a United Kingdom statute.
	 
	 	 	“Advance” means the single drawing under this Agreement or (as the
context requires) the aggregate of (i) the principal amount outstanding
under this Agreement; and (ii) the aggregate of all Deemed Advances made
available under this Agreement and then outstanding.
	 
	 	 	“Availability Period” means the period from the date hereof, and ending
on the earlier of (i) 30 days after the Closing Date (as that expression
is defined in the License Agreement) and (ii) the date on which the
License Agreement is terminated pursuant to clause 2.2 of the License
Agreement.
	 
	 	 	“Business Day” means a day (other than a Saturday, Sunday or public
holiday) on which banks are customarily open for business in London and
New York.
	 
	 	 	“Capital Stock” means any and all shares, interests, participations,
rights or other equivalents (however designated) of corporate stock,
including, without limitation, partnership interests.
	 
	 	 	“Certified Copy” means a copy, certified to be a true, complete and
up-to-date copy by or on behalf of the Parent and/or VDL (as the case
may be) and the term “Certified Copies” shall be construed accordingly.
	 
	 	 	“Change of Control” means a situation where any person or group of
persons acting in concert obtains control of the Parent where:

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	(a)	 	“acting in concert” has the meaning given to it in the City
Code on Takeovers and Mergers; and
	 
	(b)	 	“control” has the meaning given to it in section 416 of the
Income and Corporations Taxes Act of 1988, a United Kingdom statute.

	 	 	“Default” means an Event of Default or a Potential Event of Default.
	 
	 	 	“Deemed Advance” means, on any Interest Payment Date (as defined in
Clause 5.1.1) an amount equal to the interest accrued on the Advance but
unpaid on that Interest Payment Date.
	 
	 	 	“Drawdown Date” has the meaning given to that term in Clause 4(a).
	 
	 	 	“Drawdown Notice” means a drawdown notice in the form set out in
Schedule 1.
	 
	 	 	“Elan Outstanding Liability” means the aggregate of all amounts owing
(whether or not then due) to Elan Pharma International Limited by either
or both of the Parent and VDL at the Drawdown Date.
	 
	 	 	“Endo” has the meaning given to that term in the preamble.
	 
	 	 	“Endo Group” means Endo, any person that holds 20% or more of the equity
share capital of Endo and any direct or any indirect subsidiary of Endo
(as such terms are defined in the Act).
	 
	 	 	“Event of Default” means any of the events specified in Clause 10.1.
	 
	 	 	“Existing Floating Charge” means the floating charge dated 18 May 2004
and entered into between Elan Pharma International Limited and VDL.
	 
	 	 	“Facility Amount” has the meaning given to it in Clause 3.1.
	 
	 	 	“Final Repayment Date” means the fifth anniversary of the date hereof;
provided, that if prior to the fifth anniversary of the date hereof the
License Agreement is terminated either (i) by VDL, exercising its rights
as a Terminating Party under (and as that expression is defined in)
Clause 17.2 of the License Agreement or (ii) by Endo on expiry of twelve
(12) months’ notice given under Clause 17.3 of the License Agreement,
the Final Repayment Date shall mean the fifth anniversary of the date
hereof or, if later, the earlier of (x) the date falling five (5) years
and six (6) months after the date hereof and (y) the date falling twelve
(12) months after the date on which the License Agreement is terminated.
	 
	 	 	“Finance Documents” means each of this Agreement, the Security
Agreement, a Drawdown Notice, any document executed by VDL pursuant to
Clause 7(r), any notice or other document given under the Security
Agreement and any other document designated as a “Finance Document” by
Endo and VDL.
	 
	 	 	“Group” means the Parent, VDL and each of its other subsidiaries from
time to time.
	 
	 	 	“Insolvency Event” means in relation to any person, each of the
following:

	 	 (a)	 	Such person is unable or admits inability to pay its debts as
they fall due or is deemed to or declared to be unable to pay its
debts under applicable law, suspends or threatens to suspend making
payments on any of its debts or, by reason of actual or

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	 	 	anticipated
financial difficulties, commences negotiations with one or more of
its creditors with a view to rescheduling any of its indebtedness.
	 
	(b)	 	The value of the assets of that person is less than its
liabilities (taking into account contingent and prospective
liabilities).
	 
	(c)	 	A moratorium is declared in respect of any indebtedness of
that person. If a moratorium occurs, the ending of the moratorium
will not remedy any Event of Default caused by that moratorium.
	 
	(d)	 	Any corporate action, legal proceedings or other procedure or
step is taken in relation to:

	(i)	 	the suspension of payments, a moratorium of any
indebtedness, winding-up, dissolution, administration or
reorganisation (by way of voluntary arrangement, scheme of
arrangement or otherwise) of that person other than a solvent
liquidation or reorganisation of any person which is not an
Obligor;
	 
	(ii)	 	a composition, compromise, assignment or
arrangement with any creditor of that person;
	 
	(iii)	 	the appointment of a liquidator (other than in
respect of a solvent liquidation of a person which is not an
Obligor), receiver, administrative receiver, administrator,
compulsory manager or other similar officer in respect of that
person or any of its assets; or
	 
	(iv)	 	enforcement of any security over any assets of
that person,

	 	 	or any analogous procedure or step is taken in any jurisdiction.
	 
	(e)	 	Paragraph (d) shall not apply to any winding-up petition
which is frivolous or vexatious and is discharged, stayed or
dismissed within 14 days of commencement or, if earlier, the date on
which it is advertised; or
	 
	(f)	 	Any expropriation, attachment, sequestration, distress or
execution or any analogous process in any jurisdiction affects any
asset or assets of that person having an aggregate value of $500,000
and is not discharged within 7 days.

	 	 	“Interest Rate” means five percent (5%) per annum.
	 
	 	 	“License Agreement” means the License Agreement entered into between VDL
and Endo on the date hereof in the agreed form.
	 
	 	 	“Listing Rules” means the listing rules of the UK Listing Authority.
	 
	 	 	“MAM Approval Date” means the date of receipt of the Marketing
Authorization in the USA of the Product for MAM (each term as defined in
the License Agreement).
	 
	 	 	“MAM Approval Date Prepayment Amount” has the meaning given to that term
in Clause 3.3(b).
	 
	 	 	“Material Adverse Effect” means, subject to the provisions of Clause
3.6, a material adverse effect on:

	 	 (a)	 	the business, operations, property or financial condition of
the Obligors taken as a whole (after taking into account the status
of the Obligors as biotechnology

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	 	 	companies having regard to their
earnings since the first date of the period covered by the most
recently published audited annual accounts of an Obligor and the
ability to access capital markets they have at the time this
definition is applied); or
	 
	(b)	 	the ability of an Obligor to perform its obligations under
the Finance Documents; or
	 
	(c)	 	the validity or enforceability of, or the effectiveness or
ranking of any security granted or purporting to be granted pursuant
to any of the Finance Documents or the rights or remedies of Endo
under any of the Finance Documents.

	 	 	“Milestone Payments” means the payment pursuant to Section 11.5.1 of the
License Agreement.
	 
	 	 	“Net Disposal Proceeds” has the meaning given to that term in Clause
3.3(c).
	 
	 	 	“Obligations” means all present and future obligations (whether actual
or contingent) of VDL to Endo under the Finance Documents.
	 
	 	 	“Obligors” means the Parent and/or VDL, and “Obligor” shall be construed
accordingly.
	 
	 	 	“Payment Date” has the meaning given to that term in Clause 3.3(a).
	 
	 	 	“Permitted Lien” means:

	(a)	 	liens for Taxes provided such Taxes are not overdue;
	 
	(b)	 	liens arising by operation of law in the ordinary course of
trading or day to day business in whatever jurisdiction and
statutory liens of landlords and liens of carriers, warehousemen,
mechanics, materialmen and other similar liens, in each case,
incurred in the ordinary course of business, provided such liens are
not securing any amount more than 30 days overdue;
	 
	(c)	 	any security arising under the Security Agreement;
	 
	(d)	 	any right of a bank to set-off deposits against debts owed to
such bank existing as a matter of law or arising pursuant to any
agreement customarily entered into by such bank and its depositors
in connection with a cash management scheme;
	 
	(e)	 	any title transfer or retention of title arrangement entered
into by VDL in the normal course of its trading activities on the
counterparty’s standard or usual terms;
	 
	(f)	 	any security created or subsisting with the prior consent of
Endo;
	 
	(g)	 	up to and including the Drawdown Date, the Existing Floating
Charge; and
	 
	(h)	 	the mortgage on VDL’s property at Watlington Road, Oxford OX4
6LY England (the “Mortgaged Real Estate") in favour of Canada Life
Assurance Company, provided that the amount secured thereby does not
exceed £2 million at any time, recourse in respect of such debt is
just to the Mortgaged Real Estate and such mortgage is discharged
and released and the debt which it secures is repaid in full out of
(i) the proceeds of the disposal of the Oxford Property plus (ii)
not more than £500,000 from other resources.

	 	 	“Potential Event of Default” means any event or circumstance which, with
the giving of notice, lapse of time or making of any determination,
would become an Event of Default.

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	 	 	“Qualifying Lender” means a company which at the time the payment is
made is beneficially entitled to the interest payable to it under the
Finance Documents and is entitled under a double taxation agreement in
force at that date (subject only to the completion of any necessary
formalities or administrative procedures, (including, without
limitation, the matters referred to in Clause 12.3(c)) to receive any
payments of interest under the Finance Documents without a Tax
Deduction.
	 
	 	 	“Relevant Assets” means the Vernalis IP (as defined in the License
Agreement) and the payments to be made by Endo to VDL pursuant to Clause
11 of the License Agreement.
	 
	 	 	“Royalty Payment” has the meaning given to that term in Clause 3.3(a).
	 
	 	 	“Satisfactory Purchaser” has the meaning given to that term in Clause
3.3(e).
	 
	 	 	“Security Agreement” means the security deed to be entered into between
VDL and Endo in the form set out in Schedule 2 as a condition precedent
to Endo making the Advance.
	 
	 	 	“Secured Assets” means the assets subject to the security constituted by
the Security Agreement.
	 
	 	 	“Tax” means any tax, levy, impost, duty, or other fee, charge or
withholding of a similar nature (including any penalty or interest
payable in connection with any failure to pay or any delay in paying the
same), and “Taxes” and “Taxing” shall be construed accordingly.
	 
	 	 	“Tax Deduction” means a withholding or deduction for or on account of
Tax.
	 
	 	 	“Term” means the period beginning on the date hereof and ending on the
date on which all amounts outstanding under the Finance Documents are
repaid.
	 
	 	 	“Transaction Documents” means each of the Finance Documents and the
License Agreement.
	 
	 	 	“UK Listing Authority” means the Financial Services Authority acting in
its capacity as the competent authority for the purposes of Part VI of
the Financial Services and Markets Act 2000, a United Kingdom statute.
	 
	 	 	“VDL” has the meaning given to that term in the preamble.
	 
	1.2	 	Headings
	 
	 	 	In this Agreement, the headings shall not affect its interpretation and
are for ease of reference only.
	 
	1.3	 	Interpretation
	 
	 	 	In this Agreement (unless otherwise provided):

	(a)	 	words importing the singular shall include the plural and
vice versa;
	 
	(b)	 	words importing one gender shall include all genders;
	 
	(c)	 	references to Clauses and Schedules are to be construed as
references to the Clauses of, and Schedules to, this Agreement
unless otherwise specifically provided;

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	(d)	 	references to this Agreement or any other document shall be
construed as references to this Agreement or that other document, as
amended, varied, novated or supplemented from time to time;
	 
	(e)	 	references to any statute or statutory provision include any
statute or statutory provision which amends, extends, consolidates
or replaces the same, or which has been amended, extended,
consolidated or replaced by the same, and shall include any orders,
regulations, instruments or other subordinate legislation made under
the relevant statute;
	 
	(f)	 	the words “including” and “in particular” shall be construed
as being by way of illustration or emphasis only and shall not be
construed as, nor shall they take effect as, limiting the generality
of any preceding words;
	 
	(g)	 	the words “other” and “otherwise” shall not be construed
ejusdem generis with any foregoing words where a wider construction
is possible;
	 
	(h)	 	references to a person shall be construed so as to include
that person’s assigns, transferees or successors in title and shall
be construed as including references to an individual, firm,
partnership, joint venture, company, corporation, body corporate,
unincorporated body of persons or any state or any agency of a
state;
	 
	(i)	 	references to a “drawing” are to the drawing of the Advance
under this Agreement;
	 
	(j)	 	references to a document in “agreed form” are to the form of
the relevant document which has been initialled for the purposes of
identification by or on behalf of Endo and VDL on or prior to the
date of this Agreement;
	 
	(k)	 	the terms “subsidiary” and “holding company” have the meaning
ascribed thereto in the Act;
	 
	(l)	 	“indebtedness” means any indebtedness for or in respect of:

	(i)	 	moneys borrowed;
	 
	(ii)	 	any amount raised by acceptance under any acceptance credit
facility;
	 
	(iii)	 	any amount raised pursuant to any note purchase
facility or the issue of bonds, notes, debentures, loan stock,
preferred stock, redeemable stock or any similar instrument;
	 
	(iv)	 	the amount of any liability in respect of any
lease or hire purchase contract which would, in accordance
with generally accepted accounting principles in England, be
treated as a finance or capital lease;
	 
	(v)	 	receivables sold or discounted (other than any
receivables to the extent they are sold on a non-recourse
basis);
	 
	(vi)	 	any amount raised under any other transaction
(including any forward sale or purchase agreement) having the
commercial effect of a borrowing;
	 
	(vii)	 	for the purposes of Clause 10.1(g) only, any
derivative transaction entered into in connection with
protection against or benefit from fluctuation in any rate or
price (and, when calculating the value of any derivative
transaction, only the

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	 	 	marked to market value shall be taken
into account);
	 
	(viii)	 	any counter-indemnity obligation in respect of a guarantee,
indemnity, bond, standby or documentary letter of credit or
any other instrument issued by a bank or financial
institution; and
	 
	(ix)	 	the amount of any liability in respect of any
guarantee or indemnity for any of the items referred to in
paragraphs (i) to (viii) inclusive above.

	(m)	 	“lien” shall have the meaning given to that expression by
English law.
	 
	(n)	 	“security” means mortgage, charge, pledge, lien or other
security interest securing any obligation of any person or any other
agreement or arrangement having a similar effect;
	 
	(o)	 	“assets” includes present and future properties, revenues and
rights of every description; and
	 
	(p)	 	“US$” and “Dollars” shall mean the lawful currency of the
United States of America (“USA”).

	2.	 	CONDITIONS PRECEDENT
	 
	2.1	 	Conditions precedent - General
	 
	 	 	The obligations of Endo with respect to the making of the Advance
hereunder are subject to the conditions precedent that Endo shall have
received the following in form and substance reasonably satisfactory to
it:

	(a)	 	an original copy of this Agreement duly signed by VDL and the
Parent;
	 
	(b)	 	Certified Copies of each of the Parent’s and VDL’s
certificate of incorporation, certificate of incorporation on change
of name (if any) and Memorandum and Articles of Association;
	 
	(c)	 	Certified Copies of the resolutions of each of the Parent’s
and VDL’s board of directors authorising the execution and delivery
of the Transaction Documents to which it is a party and the
performance of the transactions contemplated thereby;
	 
	(d)	 	written confirmation from Elan Pharma International Limited
dated no earlier than the Drawdown Date of the amount of the Elan
Outstanding Liability (being an amount less than the Facility
Amount), of the account details to which such payment should be
made, and that upon payment of such amount the Existing Floating
Charge shall be immediately discharged and released;
	 
	(e)	 	a deed of discharge and release in respect of the Existing
Floating Charge executed by Elan Pharma International Limited held
to its order on terms that are reasonably satisfactory to Endo but
which in any event are irrevocable and provide for the automatic and
immediate release and delivery of the deed of discharge to VDL upon
payment of the amount referred to in paragraph 2.1(d);
	 
	(f)	 	two originals of the Security Agreement, duly executed and
delivered by VDL, and the security constituted by the Security
Agreement being in full force and effect and perfected in accordance
with its terms;

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	(g)	 	two originals of the License Agreement, duly executed by VDL;
	 
	(h)	 	a certificate from an officer of VDL confirming that the
Closing Date under and as defined in the License Agreement has
occurred;
	 
	(i)	 	evidence that, VDL will discharge all Elan Outstanding
Liability out of the Advance (which evidence may take the form of an
appropriately completed Drawdown Notice);
	 
	(j)	 	a Certified Copy of the most recently prepared consolidated
monthly management accounts of, the Parent (comprising at least a
balance sheet, income statement and cash flow statement for such
month and the year to date);
	 
	(k)	 	legal opinions from Morrison & Foerster MNP and Morrison &
Foerster LLP, (respectively) counsel to VDL and the Parent, in
respect of the Finance Documents; and
	 
	(l)	 	an ordinary resolution of the shareholders of VDL authorizing
the Advance.

	2.2	 	Further Conditions precedent to the Advance
	 
	 	 	The obligations of Endo with respect to the making of the Advance under
this Agreement are subject to the further conditions precedent that:

	(a)	 	Endo shall have received a duly completed Drawdown Notice;
and
	 
	(b)	 	both at the date of the relevant Drawdown Notice and the
Drawdown Date:

	(i)	 	the matters represented and warranted by
each Obligor in Clause 6 are true and correct at that
time as if made at that time and will be true and
correct immediately after the drawing has been made;
	 
	(ii)	 	no Default has occurred and is continuing;
and
	 
	(iii)	 	the principal amount of the proposed
drawing, does not exceed the Facility Amount.

	3.	 	AMOUNT, REPAYMENT, CANCELLATION AND PURPOSE
	 
	3.1	 	Facility Amount
	 
	 	 	The aggregate principal amount available to be drawn under this
Agreement is US$50,000,000 (fifty million Dollars) (the “Facility
Amount”). In addition to the Facility Amount, Endo shall also make the
Deemed Advances available to VDL but only on the basis set out in Clause
5.
	 
	3.2	 	Repayment
	 
	 	 	The Advance shall be repaid in full on or before the Final Repayment
Date. Voluntary repayments are permitted in whole or in part without
premium, make-whole or penalty.

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	3.3	 	Mandatory Prepayment and Set-off

	(a)	 	Endo may, by written notice to VDL at least five (5) Business
Days prior to any payment pursuant to clause 11.9 of the License
Agreement (a “Royalty Payment”) require VDL to make a mandatory
prepayment of all or any part of the Advance on the date such
Royalty Payment is due under the License Agreement (each a “Payment
Date”), in an amount (the “Mandatory Prepayment Amount”) not greater
than fifty percent (50%) (or, following the occurrence of a Material
Adverse Effect, not greater than seventy five percent (75%)) of the
Royalty Payment then due on that date. VDL and Endo agree that any
Mandatory Prepayment Amount then due on such Payment Date from VDL
shall be set-off against and reduce the Royalty Payment then due by
Endo to VDL, the balance of which Royalty Payment shall be paid to
VDL or otherwise dealt with in accordance with the terms of the
License Agreement or as those parties shall have otherwise agreed.
	 
	(b)	 	On the MAM Approval Date, if Endo so requires by giving not
less than five (5) Business Days written notice to VDL, VDL shall be
required to make a mandatory prepayment of an amount not greater
than fifty percent (50%) (or, following the occurrence of a Material
Adverse Effect, not greater than seventy five percent (75%)) of the
Milestone Payment due on such date pursuant to Clause 11.5 of the
License Agreement (the “MAM Approval Date Prepayment
Amount”). VDL
and Endo
agree that the MAM Approval Date Prepayment Amount then due to Endo
from VDL shall be set-off against and reduce the amounts then due
by Endo to VDL as the Milestone Payment due on the MAM Approval
Date and the balance of any such moneys then due and payable by
Endo to VDL shall be paid to VDL or otherwise dealt with in
accordance with the terms of the License Agreement or as those
parties shall have otherwise agreed.
	 
	(c)	 	Without prejudice to any other provisions of the Finance
Documents, VDL and the Parent shall apply fifty percent (50%) of all
Net Disposal Proceeds in mandatory prepayment of the Advance and all
other sums outstanding under the Finance Documents immediately upon
receipt of the same by any member of the Group. For these purposes:
	 
	 	 	“Net Disposal Proceeds” means all cash and other consideration (and
in respect of non-cash consideration, the market value thereof
shall be taken into account) including the assumption or repayment
of debt paid to or to the order of any member of the Group in
connection with an MP Disposal by it less any costs, expenses and
taxes incurred to persons other than members of the Group in
connection with such MP Disposal which are documented and
reasonably and properly incurred and which are customary in nature
and amount for such type of disposal; and
	 
	 	 	“MP Disposal” means any voluntary or involuntary sale, lease,
transfer or other disposal of any asset of any member of the Group
save for (i) the granting of intellectual property licenses in the
ordinary course of business, (ii) a disposal of the type permitted
by Clause 7(l), (iii) the disposal of VDL’s property at Watlington
Road, Oxford OX4 6LY England, (iv) MP Disposals not referred to in
paragraphs (i)-(iii) where the aggregate Net Disposal Proceeds of
all such MP Disposals in any financial year does not exceed $1
million provided that, for the avoidance of doubt, only such excess
shall be taken into account for the purposes of this Clause 3.3(c),
and (v) any disposition where the provisions of Clause 3.3(e)
apply.

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	(d)	 	If VDL defaults in the payment of any amount of principal or
interest or otherwise on the due date for such payment, Endo may,
without prejudice to any other remedy which may be available to it,
reduce any amounts owing or due to be made by Endo under the License
Agreement by an amount equal to the amount in default, and, so long
as no Event of Default is outstanding, Endo agrees to notify VDL in
writing promptly upon so doing.
	 
	(e)	 	Immediately upon the occurrence of the sale of the whole or
substantially the whole of the Group’s or VDL’s business and assets
other than to a single Satisfactory Purchaser (in which event the
terms of Clause 3.3(c) shall not apply and no payment otherwise
required thereby shall be due), Endo’s commitment hereunder shall be
cancelled in full and VDL shall repay the Advance in full together
with interest thereon and all other amounts accrued and owing by the
Obligors under the Finance Documents.
	 
	 	 	A “Satisfactory Purchaser” shall mean a company which:

	(i)	 	having regard to all the circumstances,
including its assets and liabilities (actual and
contingent), has, and provides, Endo with evidence that
such company has a credit worthiness such that its
ability to meet the payment obligations under the
Finance Documents is at least equal to that of VDL
and the Parent, and
	 
	(ii)	 	(x) acquires all rights and obligations in
respect of the Relevant Assets and acquires all VDL’s
rights and obligations under the License Agreement,
this Agreement and the other Finance Documents, (y)
expressly confirms (and executes such documents as Endo
reasonably requires to evidence) (1) the continuation
or novation of all the terms of such Transaction
Documents (including any principles of set-off), and
(2) that the security over the Secured Assets survives
and remains unaffected by the acquisition or is
replaced with substantially equivalent security over
the Secured Assets with the Satisfactory Purchaser as
grantor of such replacement security (or with such
variations as Endo reasonably agrees) (and with Endo
being satisfied that any such new security will not be
subject to any “hardening” or “suspect” periods (as
those expressions are generally understood by United
Kingdom insolvency practitioners)), and (z) provides
Endo with such opinion of outside counsel as Endo
reasonably requires (in form and content reasonably
satisfactory to Endo) confirming the corporate status
of such acquiring company, the legality, validity,
binding effect and enforceability of the Transaction
Documents (or replacements thereof) on the acquiring
company, and that the continuation of the security
remains unaffected by the acquisition or (in the case
of the replacement of such security) that the new
security provides substantially equivalent security
over the Secured Assets; and Endo has received
satisfactory legal advice that its rights to set-off
are not adversely affected by such acquisition;

	 	 	provided that if there is any dispute as to whether a person meets
the test in paragraph (i) of the definition of a “Satisfactory
Purchaser”, such matter shall be referred to a “Panel” (as defined
in Clause 3.6 below) and a person shall only be regarded as
satisfying the test in paragraph (i) above once the Panel has so
determined and for

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	 	 	these purposes, the procedures specified in
Clause 3.6 for determining a Material Adverse Effect shall apply
mutatis mutandis (with the procedure being capable of being started
by either VDL or Endo) save that under all circumstances the fees
and expenses shall be paid by VDL;
	 
	(f)	 	No Advance prepaid may be re-drawn. Notice of prepayment is
irrevocable.

	3.4	 	Cancellation
	 
	 	 	For the avoidance of doubt, VDL shall not be permitted to draw down any
undrawn portion of the Facility Amount following the expiry of the
Availability Period, and thereafter, Endo shall have no obligation to
make any further advances hereunder.
	 
	3.5	 	Purpose
	 
	 	 	VDL shall use the proceeds of the Advance first to discharge all Elan
Outstanding Liability and thereby effect a release and discharge of the
Existing Floating Charge and, thereafter, the balance for general
corporate purposes.

	 
	3.6	 	Panel
	 
	 	 	As used herein, the term “Expert” means the London branch or office of
an independent investment bank regulated in both the United States and
the United Kingdom with specific expertise in both the United States and
United Kingdom capital markets for biotechnology and pharmaceutical
companies.
	 
	 	 	If Endo believes that events constituting a Material Adverse Effect have
occurred and are continuing, or if there is a dispute as to whether a person
is a “Satisfactory Purchaser”, Endo shall promptly notify VDL making express
reference to this Clause 3.6, and provide a written explanation in
reasonable detail of the basis therefor to VDL. Unless VDL acknowledges
that it agrees with Endo, both VDL and Endo shall arrange for an in-person
meeting or a telephone conference call between their respective presidents
or chief executive officers or officers of similar status within five (5)
Business Days after VDL’s receipt of such notice. If following such meeting
or call, the parties continue to disagree, each of Endo and VDL shall,
within five (5) Business Days after such meeting, by giving written notice
to the other party, propose a party as an “Expert”. The Endo Expert and the
VDL Expert shall together choose a third Expert and all decisions shall be
made by a majority of the three Experts so chosen (the three Experts, are
hereinafter referred to as the “Panel”). The Panel shall be provided with
such information as it shall reasonably request, subject to applicable
confidentiality restrictions. The Panel shall be instructed to make a
decision as to whether a Material Adverse Effect shall have occurred as soon
as reasonably practicable after receiving all relevant data and information,
but in any event not more than fourteen (14) days after its engagement. The
Panel shall be instructed to give a full written explanation of its
decision. All communications between the parties
hereto and the Panel shall be made in writing and a copy thereof provided
simultaneously to the other parties hereto. No meeting between the Panel
and the parties hereto shall take place unless all the parties have a
reasonable opportunity to attend such meeting. Except as set forth in
Clause 3.3(e), all fees and expenses of the Panel shall be paid by Endo,
provided that if the Panel determines that a Material Adverse Effect has
occurred, all such fees and expenses shall be paid by VDL.
	 
	4.	 	DRAWING
	 
	 	 	Subject to Clause 2:

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	(a)	 	VDL may make a drawing under this Agreement on one Business
Day during the Availability Period, provided that VDL shall inform
Endo of such proposed date of drawing (the “Drawdown Date”), by
delivery to Endo of a Drawdown Notice by no later than 11.00 a.m. on
the fifth Business Day prior to the Drawdown Date. Once notice has
been given it may not be revoked and shall oblige VDL to borrow the
stated amount on the Drawdown Date specified in the Drawdown Notice;
	 
	(b)	 	the drawing shall be in a single amount not exceeding
US$50,000,000 (fifty million Dollars); and
	 
	(c)	 	only one drawing may be made.

	5.	 	INTEREST AND COMMITMENT FEES
	 
	5.1	 	Interest rate

	5.1.1	 	Interest shall accrue at the Interest Rate on the principal
amount drawn down plus the aggregate amount of Deemed Advances made
available under Clause 5.1.2 below. Interest will be paid
semi-annually in arrear on each 31 July and 31 January throughout
the Term (each an “Interest Payment Date”), provided that accrued
interest on the Advance shall be paid on the Final Repayment Date or
the date on which the Advance is prepaid in full, if earlier, in
respect of the period from the most recent Interest Payment Date to
the date of such repayment or prepayment. Interest shall accrue
from day to day and shall be calculated on the basis of a year of
365 days and for the actual number of days elapsed.
	 
	5.1.2	 	Subject as provided elsewhere in this Agreement, provided
VDL has given Endo written notice (the “Deemed Advance Notice”) of
its intention to exercise its option under this Clause 5.1.2 at
least five (5) Business Days before the relevant Interest Payment
Date, Endo shall (subject always to the provisions of Clauses 5.1.3
and 5.1.4) make to VDL on the relevant Interest Payment Date a
Deemed Advance in an amount equal to the amount of interest accrued
under Clause 5.1.1 above but unpaid on that Interest Payment Date
(such interest being “Accrued Interest”).
	 
	5.1.3	 	Each Deemed Advance is made available on its relevant
Interest Payment Date subject to satisfaction of each of the
following conditions:

	(a)	 	the Deemed Advance shall be applied only by way
of set-off against the Accrued Interest due on that Interest
Payment Date (which application is irrevocably authorized by
VDL); and
	 
	(b)	 	notwithstanding anything else contained in the
Finance Documents, Endo shall not be required to make any part
of any Deemed Advance available by the disbursement of money
or otherwise than by set-off as referred to in 5.1.3(a); and
	 
	(c)	 	no Event of Default has occurred and is
outstanding on the relevant Interest Payment Date.

	5.1.4	 	If any of the conditions in Clause 5.1.3 are not met in
respect of a Deemed Advance on an Interest Payment Date (including,
for the avoidance of doubt, if for any reason the set-off
arrangements described therein are not effective), the provisions of
Clause 5.1.2 shall not apply and the Deemed Advance shall not be
made available.

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	5.2	 	Default interest

	5.2.1	 	If VDL fails to pay any amount payable by it under this
Agreement, VDL shall pay default interest on an Advance to Endo from
the due date to the date of actual payment (but exclusive of such
dates) in full before, as well as after, judgment at the rate per
annum of the Interest Rate plus one percent (1%).
	 
	5.2.2	 	So long as the default set out in Clause 5.2.1 continues,
unpaid interest then payable but unpaid under this Clause shall be
compounded quarterly but shall remain payable on demand.

	6.	 	REPRESENTATIONS AND WARRANTIES
	 
	6.1	 	Representations and warranties
	 
	 	 	Each Obligor represents and warrants on the date of this Agreement and
(other than in respect of 6.1(h), which representation shall be repeated
in respect of those accounts delivered pursuant to Clauses 2.1(k) and 7
only on the date of delivery of such accounts) on each Interest Payment
Date throughout the period of the Term in relation to which a Deemed
Advance Notice has been given that:

	(a)	 	it is and will remain a company duly incorporated under the
laws of England and Wales, validly existing and having full
corporate capacity to carry on its business as conducted at any
time, to own its assets, to enter into and perform its obligations
under each of the Transaction Documents to which it is a party which
constitute and will constitute its legal, valid and binding
obligations, and to incur the indebtedness contemplated by this
Agreement;
	 
	(b)	 	it has obtained and shall maintain in effect all necessary
corporate, shareholder and other authorisations and all other
necessary consents, licenses, exemptions and authorisations in
connection with the Transaction Documents to which it is a party;
	 
	(c)	 	execution of this Agreement, execution and delivery of the
Security Agreement and the utilisation of the Facility Amount and
the performance of its obligations under the Transaction Documents
to which it is a party does not and shall not constitute a default
(howsoever described) or a breach of any law or regulation or of its
memorandum and articles of association or of any limitation on the
powers of its directors or of the terms of any charge, agreement,
undertaking or restriction to which it is a party or which is
binding on it;
	 
	(d)	 	no Default has occurred and is continuing;
	 
	(e)	 	it is not in default under any agreement to which it is a
party or which is binding upon it or any of its assets which is
reasonably likely to have a material and adverse effect on its
business, financial condition, assets or its ability to perform its
obligations under this Agreement;
	 
	(f)	 	no litigation, arbitration or proceeding is taking place,
pending, or to the best of the its knowledge and belief, threatened
in writing against it or any of its assets which is reasonably
likely to be adversely determined against it and which if adversely
determined would have a material and adverse effect on its ability
to perform its obligations under the Transaction Documents or its
assets, financial condition or prospects; provided, that when
repeated, this representation and warranty shall be repeated as if
the words “or prospects” were deleted;

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	(g)	 	it has taken no action, and no steps have been taken or legal
proceedings started or (to the actual knowledge of any of its
directors) threatened against it, for an administration or
winding-up order to be made against it or for its dissolution or
reorganisation or for the appointment of a receiver, administrative
receiver, administrator, liquidator, supervisor, trustee or similar
officer over, or for the taking into possession or enforcement of
security by any person, mortgagee or chargee in respect of, all or
any part of its assets, undertaking or revenues nor has any
analogous event occurred in any jurisdiction nor (to the actual
knowledge of any of its directors) are there any circumstances which
would entitle any person or the court to take any such action nor
has any event occurred causing or which may cause any floating
charge created by it to crystallise over any of its assets or any
charge created by it to become enforceable over any of its assets
nor has any such crystallisation occurred nor is any such
enforcement in process;
	 
	(h)	 	the annual accounts most recently published prior to the date
of this Agreement and the accounts delivered to Endo pursuant to
Clauses 2.1(k) and 7 present a true and fair view of (in the case of
audited accounts) or disclose with reasonable accuracy (in other
cases) its financial condition during the period for which such
accounts were prepared and have been prepared in accordance with
accounting practices and principles generally accepted in the United
Kingdom and consistently applied;
	 
	(i)	 	for the purposes of The Council of the European Union
Regulation No. 1346/2000 on Insolvency Proceedings (the
“Regulation”), its centre of main interest (as that term is used in
Article 3(1) of the Regulation) is and will remain situated in
England and Wales; and
	 
	(j)	 	the amount of the Elan Outstanding Liability is less than the
Facility Amount and upon payment of such amount to Elan Pharma
International Limited, neither Obligor shall have any outstanding
actual liability to Elan Pharma International Limited.

	7.	 	UNDERTAKINGS AND COVENANTS
	 
	 	 	Each Obligor agrees, throughout the duration of the Term:

	(a)	 	to give Endo notice in writing immediately upon becoming
aware of the occurrence of any event or circumstance, which
constitutes or which, with the giving of notice, lapse of time or
making of any determination, is reasonably likely to lead to the
occurrence of an Event of Default together with reasonable details
of what steps it is taking to avoid or cure such event or
circumstance;
	 
	(b)	 	as soon as they become available but in any event within 180
days after the end of each financial year to provide Endo with a
copy of its published annual audited accounts and (in the case of
the Parent or a Satisfactory Purchaser only) as soon as they become
available but in any event within 120 days of the end of the first
six months of each financial year to provide Endo with a copy of its
half yearly accounts for the half year then ended as presented to
its board of directors,
	 
	(c)	 	as soon as they become available but in any event within 30
days of the end of each month the Parent and any Satisfactory
Purchaser shall provide Endo with a copy of its monthly management
accounts for the month then ended;
	 
	(d)	 	(i) (in the case of the Parent and any Satisfactory Purchaser
only) to procure that each set of its annual audited accounts
provided pursuant to Clause 7(a) and each set of its half yearly
accounts provided pursuant to Clause 7(b) are consolidated and
comply in

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	 	 	form, substance and content with the requirements of (A)
in the case of a Satisfactory Purchaser which is a UK listed and
incorporated corporate entity, the Act and the Listing Rules or (B)
in the case of any other Satisfactory Purchaser, the laws and
generally accepted accounting principles in its jurisdiction of
incorporation consistently applied; and that each set of its monthly
management accounts provided pursuant to Clause 7(c) are
consolidated and contain a balance sheet, income statement and
cashflow statement and related notes to such financial statements
and are otherwise in the same form and have the same content as is
provided to its board of directors and; (ii) to procure that each
set of the annual audited accounts of VDL comply in form, substance
and content with the requirements of the Act;
	 
	(e)	 	prior to the beginning of each financial year, to deliver to
Endo a copy of its annual budget;
	 
	(f)	 	to provide Endo promptly with such other financial
information relating to it as Endo may from time to time require to
comply (i) with any regulatory requests or requirements or (ii) with
any reasonable requests or requirements from financial institutions
making financial facilities available to Endo provided that (A)
those institutions have agreed with Endo to keep such information
confidential (save for customary exceptions such as requirement of
law or regulatory requirements) and (B) such Obligor would not
thereby be in breach of any restrictions contained in (i) any
confidentiality obligation binding on it at the date of this
Agreement or (ii) any law or governmental or quasi-governmental
regulation then binding on it or (iii) the Listing Rules to the
extent then applicable to it but provided further that, at Endo’s
request, such Obligor shall use reasonable endeavors to seek a
waiver of such restrictions;
	 
	(g)	 	prior to the MAM Approval Date, it will not and will ensure
that each of its subsidiaries will not incur or permit to remain
outstanding any indebtedness whatsoever save for:

	(i)	 	indebtedness owing by a subsidiary
acquired after the date of this Agreement provided that
(a) such indebtedness was not created in contemplation
of that acquisition, (b) such indebtedness is not
increased after the date of that acquisition and (c)
neither the Parent nor VDL nor any of the Parent’s
other subsidiaries assumes any obligation or liability
(whether by guarantee or otherwise) for such
indebtedness;
	 
	(ii)	 	indebtedness incurred pursuant to the
Transaction Documents;
	 
	(iii)	 	trade indebtedness incurred in the
ordinary course of its business; and
	 
	(iv)	 	indebtedness not otherwise excluded by
paragraphs (i)-(iii) above incurred or outstanding to
the Parent, VDL and each of the Parent’s other
subsidiaries which in aggregate does not exceed $10
million at any time;

	(h)	 	save with respect to Permitted Liens, it will not, without
the prior written consent of Endo, create, or permit to subsist any
security over:

	(i)	 	prior to the MAM Approval Date, any of its
assets or any of the assets of its subsidiaries;

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	(ii)	 	on and after the MAM Approval Date, (A)
any of the Secured Assets or other Relevant Assets; or
(B) any book and other debts and monetary claims
relating to the Secured Assets or other Relevant Assets
and any proceeds of such debts and claims (including
without limitation, any claims or sums of money
deriving from or in relation to the Secured Assets or
other Relevant Assets, any court order or judgment, any
contract or agreement to which VDL is party and any
other assets, property rights or undertaking of the
Company in each case in or relating to the Secured
Assets or other Relevant Assets);

	(i)	 	prior to the MAM Approval Date, it will not pay dividends or
make any distributions on its Capital Stock (other than
distributions in the nature of the allotment of new Capital Stock)
and will not purchase, redeem or otherwise acquire for value any of
its Capital Stock;
	 
	(j)	 	(in respect of the Parent only) it will at all times
throughout the Term own directly or indirectly one hundred percent
(100%) of the issued share capital in VDL and at least 51% of the
Capital Stock of each other company which has been a subsidiary at
any time since the date of this Agreement;
	 
	(k)	 	it will not, and will not permit any subsidiary to, make any
payments, distributions or disposals or incur any liabilities or
grant any security, loans, collateral, guarantee or indemnity to or
for the benefit of any related party other than the other Obligor
and save for (i) payments and liabilities to related parties who are
individuals acting on their own account and not representing any
third party (and who do not account for such payments or liabilities
to any third party) on arm’s length contracts of employment or
consultancy agreements and (ii) dividends and distributions on its
Capital Stock permitted by this Agreement and for the purposes of
this Clause 7(k), “related party” shall have the meaning given in
Chapter 11 of the Listing Rules but as
if the percentage referred to in the definition of “substantial
shareholder” therein was (i) prior to any Change of Control, 5
percent and (ii) following a Change of Control, to any
shareholding;
	 
	(l)	 	save in the circumstances described in Clause 3.3(e), it will
not enter into any single transaction or series of transactions
(whether related or not) and whether voluntary or involuntary to
sell, lease, transfer or otherwise dispose of any interest in the
Secured Assets or other Relevant Assets save as part of the sale of
the whole or substantially the whole of the Group’s or VDL’s
business and assets to be a single Satisfactory Purchaser;
	 
	(m)	 	(in respect of VDL only) immediately on discharge of the
Secured Obligations (under and as defined in the Existing Floating
Charge) it will procure that the Existing Floating Charge is
released and will file a form 403a in respect of that release of the
Companies Registry no later than the Business Day following such
release;
	 
	(n)	 	(in respect of VDL only) it will use the proceeds of an
Advance in accordance with the terms of this Agreement only;
	 
	(o)	 	not to substantially change the general nature of its
business;
	 
	(p)	 	obtain, comply with and do all that is necessary to maintain
in full force and effect any authorisation required under any law or
regulation of its jurisdiction of incorporation to enable it to
perform its obligations under the Finance Documents and

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	 	 	to ensure
the legality, validity, enforceability or admissibility in evidence
in its jurisdiction of incorporation of any Finance Document;
	 
	(q)	 	shall comply in all respects with all laws to which it may be
subject, if failure to so comply would impair its ability to perform
its obligations under the Finance Documents;
	 
	(r)	 	(in respect of VDL only):

	(i)	 	promptly do all such acts or execute all
such documents (including assignments, transfers,
mortgages, charges, notices and instructions) as Endo
may reasonably specify (and in such form as Endo may
reasonably specify) to perfect the security created or
intended to be created under or evidenced by the
Security Agreement (which may include the execution of
a mortgage, charge, assignment or other security over
all or any of the assets which are, or are intended to
be, the subject of the Security Agreement) or for the
exercise of any rights, powers and remedies of Endo
provided by or pursuant to the Finance Documents or by
law;
	 
	(ii)	 	subject to the terms hereof and of the
Security Agreement, and following an Event of Default
and during the continuance thereof to facilitate the
realisation of the assets which are, or are intended to
be, the subject of the Security Agreement;
	 
	(iii)	 	take all such action as is available to
it (including making all filings and registrations) as
may be necessary for the purpose of the creation,
perfection, protection or maintenance of any security
conferred or
intended to be conferred on Endo by or pursuant to
the Finance Documents;

	(s)	 	shall ensure that at all times any unsecured and
unsubordinated claims of Endo against it under the Finance Documents
rank at least pari passu with the claims of all its other unsecured
and unsubordinated creditors except those creditors whose claims are
mandatorily preferred by laws of general application to companies;
	 
	(t)	 	it will not default under any agreement to which it is a
party or which is binding on it or any of its assets where the
nature and consequences of such default are reasonably likely to
have a material adverse effect on its business, financial condition,
assets or its ability to perform its obligations under the Finance
Documents;
	 
	(u)	 	promptly upon becoming aware of the same, it shall notify
Endo of all litigation, arbitration or proceedings taking place,
pending or threatened in writing against it or any of its assets
which is reasonably likely to be adversely determined against it and
which if so adversely determined would have a material adverse
effect on its ability to perform its obligations under the
Transaction Documents or its assets, financial condition or
prospects;
	 
	(v)	 	it will not dispose of any asset or make any acquisition on
terms which are not arm’s length or better for it except with
respect to one or more such transactions which taken as a whole are
not material in the context of the Parent or VDL (as applicable);
	 
	(w)	 	it will not enter into any derivative transaction except for
the purposes of hedging interest rate and currency rate exposures
incurred under the Finance Documents or its

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	 	 	ordinary course of
trading and in any event will not enter into any derivative
transaction for speculative purposes.

	8.	 	GUARANTEE

	(a)	 	The Parent irrevocably and unconditionally:

	(i)	 	guarantees as primary obligor and not as
surety, to Endo performance by VDL of all of the
Obligations;
	 
	(ii)	 	undertakes with Endo, that whenever VDL
does not pay any amount when due under or in connection
with any Finance Document, VDL shall immediately on
demand pay that amount as if it was the principal
obligor; and
	 
	(iii)	 	indemnifies Endo immediately on demand
against any cost, loss or liability suffered by it if
any obligation guaranteed by it hereunder is or becomes
unenforceable, invalid or illegal. The amount of the
cost, loss or liability shall be equal to the amount
which Endo would otherwise have been entitled to
recover.

	(b)	 	The guarantee contained in this Clause 8 is a continuing
guarantee and will extend to the ultimate balance of sums payable by
any Obligor under the Finance Documents, regardless of any
intermediate payment or discharge in whole or in part.
	 
	(c)	 	If any payment by an Obligor or any discharge given by Endo
(whether in respect of the obligations of any Obligor or any
security for those obligations or otherwise) is avoided or reduced
as a result of insolvency or any similar event:

	(i)	 	the liability of each Obligor shall
continue as if the payment, discharge, avoidance or
reduction had not occurred; and
	 
	(ii)	 	Endo shall be entitled to recover the
value or amount of that security or payment from each
Obligor, as if the payment, discharge, avoidance or
reduction had not occurred.

	(d)	 	The obligations of the Parent under this Clause 8 will not be
affected by an act, omission, matter or thing which, but for this
Clause, would reduce, release or prejudice any of its obligations
under this Clause 8 (without limitation and whether or not known to
it) including:

	(i)	 	any time, waiver or consent granted to, or
composition with, any Obligor or other person;
	 
	(ii)	 	the release of any other Obligor or any
other person under the terms of any composition or
arrangement with any creditor of any Obligor;
	 
	(iii)	 	the taking, variation, compromise,
exchange, renewal or release of, or refusal or neglect
to perfect, take up or enforce, any rights against, or
security over assets of, any Obligor or other person or
any non-presentation or non-observance of any formality
or other requirement in respect of any instrument or
any failure to realise the full value of any security;

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	(iv)	 	any incapacity or lack of power, authority
or legal personality of or dissolution or change in the
members or status of an Obligor or any other person;
	 
	(v)	 	any amendment (however fundamental) or
replacement of a Finance Document or any other document
or security;
	 
	(vi)	 	any unenforceability, illegality or
invalidity of any obligation of any person under any
Finance Document or any other document or security; or
	 
	(vii)	 	any insolvency or similar proceedings.

	(e)	 	The Parent waives any right it may have of first requiring
Endo to proceed against or enforce any other rights or security or
claim payment from any person prior to Endo claiming from the Parent
under this Clause 8. This waiver applies irrespective of any law or
any provision of a Finance Document to the contrary.
	 
	(f)	 	Until all amounts which may be or become payable by the
Obligors under or in connection with the Finance Documents have been
irrevocably paid in full, Endo may:

	(i)	 	refrain from applying or enforcing any
other moneys, security or rights held or received by it
(or any trustee or agent on its behalf) in respect of
those amounts, or apply and enforce the same in such
manner and order as it sees fit (whether against those
amounts or otherwise) and the Parent shall not be
entitled to the benefit of the same; and
	 
	(ii)	 	hold in an interest-bearing suspense
account any moneys received from the Parent or on
account of the Parent’s liability under this Clause 8.

	(g)	 	Until all amounts which may be or become payable by the
Obligors under or in connection with the Finance Documents have been
irrevocably paid in full and unless Endo otherwise directs, the
Parent will not exercise any rights which it may have by reason of
performance by it of its obligations under the Finance Documents:

	(i)	 	to be indemnified by VDL; and/or
	 
	(ii)	 	to take the benefit (in whole or in part
and whether by way of subrogation or otherwise) of any
rights of Endo under the Finance Documents or of any
other guarantee or security taken pursuant to, or in
connection with, the Finance Documents by Endo.

	(h)	 	The guarantee in this Clause 8 is in addition to and is not
in any way prejudiced by any other guarantee or security now or
subsequently held by Endo.

	9.	 	STANDSTILL
	 
	9.1	 	Without prejudice to any obligation Endo may have under applicable law
and regulation, under other provisions of this Agreement, pursuant to the
requirements of any government, governmental agency or regulatory or other
authority or body, under The City Code on Takeovers and Mergers (the
“Code") or otherwise, Endo undertakes that so long as the

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	 	 	Obligors are in
compliance with Clauses 7(b)-(e) inclusive it shall not, and shall (so far
as it is legally able) procure that no member of the Endo Group shall,
directly or indirectly, or in concert (as the same would be construed for
the purposes of and in accordance with the Code) with or in conjunction
with any third party, before the earliest to occur of (i) the expiry of
the Term, (ii) the Final Repayment Date, and (iii) the exercise of any
remedy under Clause 10.2 (Acceleration) without the prior written approval
of the board of the Parent:

	(a)	 	acquire, or procure or induce any other person to acquire,
any interest in the shares comprised in the relevant share capital
of the Parent (within the meaning of sections 198 to 210 of the Act)
or enter into any agreement or arrangement (whether legally binding
or not) having a similar affect; or
	 
	(b)	 	make, or procure or induce any other person to make, any
offer for all or any of the shares of the Parent or enter into any
agreement or arrangement (whether legally binding or not) having a
similar affect; or
	 
	(c)	 	announce, or procure or induce any other person to announce,
any offer for all or any of the shares of the Parent or enter into
any agreement or arrangement (whether legally binding or not) having
a similar affect,
	 
	unless, the acquisition, offer or the announcement, as the case may be,
is recommended by a majority of the directors of the Parent at the time
when the acquisition, offer or announcement is made.

	9.2	 	In Clauses 9.1 and 9.3 “offer” means any general, partial, tender or
other type of offer including, without limitation, any takeover or merger
transaction (however effected), reverse takeover, scheme of arrangement or
other court scheme, offer by a parent company for shares in its
subsidiary, share exchange or similar transaction.
	 
	9.3	 	Notwithstanding Clauses 9.1 and 9.2, nothing shall restrict Endo or any
member of its group or any other person from discussing (on a confidential
basis, without any intent to require the public disclosure thereof) with
members of the Parent’s board the possibility of any such persons
acquiring any interest in any shares in the Parent and the basis upon
which the directors of the Parent would recommend such offer or
announcement or acquisition.
	 
	10.	 	EVENTS OF DEFAULT
	 
	10.1	 	Defaults
	 
	 	 	There shall be an Event of Default if any of the following occurs:

	(a)	 	an Obligor does not pay on the due date any amount payable by
it under the Finance Documents unless:

	(i)	 	its failure to pay is caused by
administrative or technical error by a third party
which is not a member of the Group; and
	 
	(ii)	 	payment is made within 3 Business Days of
its due date;

	(b)	 	an Obligor is in breach of any of its other obligations under
any of the Finance Documents unless:

	(i)	 	such breach is not a breach of an
Immediate Default Clause; and

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	(ii)	 	such breach is capable of remedy; and
	 
	(iii)	 	such breach is remedied within 14 days of
Endo giving notice to an Obligor or an Obligor becoming
actually aware of the failure to comply,

	 	 	For these purposes an “Immediate Default Clause” is each of Clauses
3.3 (Mandatory Prepayment and Set-off), 7(g) (indebtedness), 7(h)
(negative pledge), 7(i) (dividends) to 7(m) (release of Existing
Floating Charge) inclusive and 8 (Guarantee);
	 
	(c)	 	an Insolvency Event occurs with respect to an Obligor, a
Satisfactory Purchaser or a parent undertaking of any such person as
defined in the Act;
	 
	(d)	 	it is or becomes unlawful for an Obligor to perform any of
its obligations under the Transaction Documents or any security
created or expressed to be created or evidenced by the Security
Agreement cease to be effective, or any obligation of any Obligor
under any Transaction Document is not or ceases to be legal, valid,
binding or enforceable.
	 
	(e)	 	VDL is the Defaulting Party as defined in and for the
purposes of Clause 17.2 of the License Agreement;
	 
	(f)	 	an Obligor suspends or ceases or threatens to suspend or
cease to carry on its business or all or any substantial part of its
assets are seized or appropriated by or on behalf of any
governmental or other authority or are compulsorily acquired
(provided that any such action is not discharged, stayed or
withdrawn within 10 days of its occurrence);
	 
	(g)	 	any indebtedness (whether in respect of capital or interest)
of an Obligor in excess of US$1,000,000 in aggregate is not paid
when due or is declared to be or otherwise becomes due and payable
prior to its specified maturity;
	 
	(h)	 	any consent or exemption required which is material to
enabling an Obligor to perform its obligations under the Finance
Documents to which it is a party is withdrawn or modified or for any
reason it becomes unlawful for VDL to perform any of its obligations
under the Finance Documents; or
	 
	(i)	 	any representation or warranty made to Endo by an Obligor in
any of the Finance Documents proves to have been incorrect in any
respect when made, deemed made or repeated.

	10.2	 	Acceleration
	 
	 	 	Without prejudice to the provisions of Clause 3.3(d), at any time when any
Event of Default remains unremedied Endo may by notice to VDL:

	(a)	 	require VDL immediately to repay the Advance and all other
sums payable under the Finance Documents, whereupon the same shall
become immediately due and payable;
	 
	(b)	 	place the Advance on demand, whereupon the Advance and all
other sums payable under the Finance Documents shall become
repayable on demand;
	 
	(c)	 	declare that some or all of the commitment hereunder shall be
cancelled forthwith, whereupon the same shall be so cancelled;
and/or

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	(d)	 	exercise any of its rights as a secured creditor under the
Security Agreement provided that prior to the occurrence of any
Insolvency Event (as defined in the License Agreement) or any
analogous event in any jurisdiction, Endo may not sell or assign or
otherwise dispose of (reserving at all times Endo’s right to receive
and apply to the Obligations the proceeds thereof) the Secured
Assets (except in connection with any assignment or transfer of its
rights under and as permitted by this Agreement) unless an Event of
Default has occurred under either Clause 10.1(d) or Clause 10.1(f).

	 	 	Upon the service of any such notice Endo’s obligations under this
Agreement shall be terminated.
	 
	11.	 	SECURITY AND CONFIDENTIALITY

	(a)	 	Any security or guarantee granted to Endo pursuant to any of
the Finance Documents shall be in addition to and without prejudice
to any other security or guarantee which Endo now holds or may in
the future hold as security for the Facility Amount.
	 
	(b)	 	The provisions of Clause 29 and 16 of the License Agreement
shall apply mutatis mutandis to this Agreement, save that disclosure
may also be made by Endo to any person to whom it is permitted to
assign or transfer its rights under this Agreement.

	12.	 	PAYMENTS
	 
	12.1	 	Place
	 
	 	 	All payments to be made by an Obligor pursuant to this Agreement shall
be made in Dollars in immediately available funds to Endo into a bank
account, details of which shall be notified to an Obligor by Endo not
less than five (5) Business Days before payment is due.
	 
	12.2	 	No withholdings
	 
	 	 	All payments by an Obligor under the Finance Documents are to be made
(a) free and clear of and without any Tax Deduction unless the Tax
Deduction is required by law; and (b) without any set-off or
counter-claim whatsoever.
	 
	12.3	 	Grossing-up

	(a)	 	Subject to Clause 12.3(b) below, if a Tax Deduction is
required by law in respect of any sum payable by an Obligor to Endo
under the Finance Documents, that Obligor shall increase such sum so
that the amount received by Endo after the Tax Deduction shall be
equal to the amount which Endo would have been entitled to receive
in the absence of any requirement to make that Tax Deduction.
	 
	(b)	 	An Obligor is not required to make an increased payment to
Endo under Clause 12.3(a) above for a Tax Deduction if on the date
on which the payment is made:

	(i)	 	the payment could have been made to Endo
without a Tax Deduction but for the sole fact that, on
that date, Endo is not or has ceased to be a Qualifying
Lender other than as a result of any change after the
date of this Agreement in (or in the published
interpretation, administration or application of) any
law, directive, treaty or regulation or any published
practice or concession of any relevant Taxing
authority; or

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	(ii)	 	the relevant Obligor could have made the
payment to Endo without a Tax Deduction had Endo
complied with its obligations under Clause 12.3(c)
below, provided that, pending receipt of the
authorisation referred to in Clause 12.3(c) below, this
Clause 12.3(b)(ii) shall not apply (and the relevant
Obligor shall be required to make an increased payment
to Endo under Clause 12.3(a) above for a Tax Deduction)
if Endo has reasonably promptly taken all such steps as
are reasonably practicable to comply with its
obligations under Clause 12.3(c) following the date of
this Agreement or the relevant request from the Obligor
(as applicable).

	(c)	 	Endo and the Obligors shall co-operate in completing, as soon
as reasonably practicable after the date of this Agreement, any
procedural formalities necessary for the Obligors to obtain
authorisation to make a payment under this Agreement without a Tax
Deduction (including, for the avoidance of doubt, the completion and
submission to the Taxing authority in Endo’s country of
incorporation (or, if different, its country of residence for the
purposes of the relevant double taxation agreement) of appropriate
forms and documents that are provided to it by the Obligors).
	 
	(d)	 	If an Obligor makes a payment to Endo without a Tax Deduction
in circumstances where Endo has not notified that Obligor that it
has ceased to be a Qualifying Lender (other than as a result of any
change after the date of this Agreement in, or in the published
interpretation, administration or application of, any law or treaty,
or any published practice or concession of any relevant Taxing
authority):

	(i)	 	where any liability in respect of an amount which
should have been deducted or withheld is imposed, levied or
assessed against an Obligor, Endo shall, within three (3)
Business Days of demand by the relevant Obligor, indemnify
that Obligor against such liability or payment together with
any interest, penalties and expenses payable or incurred in
connection with the same; and
	 
	(ii)	 	Endo authorises the Obligors to withhold amounts
equivalent to the Tax Deduction which should have been made
from subsequent payments to Endo under this Agreement and to
pay such amounts to the relevant Taxing authority

	 	 	provided that any amounts withheld in accordance with Clause
12.3(d)(ii) shall not also be recoverable under Clause 12.3(d)(i)
above.
	 
	(e)	 	If an Obligor makes a payment under Clause 12.3(a) above (a
“Tax Payment") and Endo determines in its sole discretion that:

	(i)	 	a Tax Credit is attributable to that Tax Payment;
and
	 
	(ii)	 	Endo has obtained, utilised and retained that Tax
Credit,

	 	 	Endo shall, to the extent that it can do so without prejudice to
the retention of the Tax Credit, pay such amount to the relevant
Obligor as Endo determines in its absolute discretion to be
attributable to the Tax Payment and will leave it (after that
payment to the Obligor) in the same after-Tax position as it would
have been in had the Tax Payment not been required to be made by
that Obligor. Nothing herein contained shall interfere with the
right of Endo to arrange its Tax affairs in whatever manner it

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	 	 	thinks fit nor oblige it to disclose any information relating to
its Tax affairs or any computations in respect thereof.
	 
	(f)	 	If an Obligor makes any Tax Deduction, it shall pay the full
amount of that Tax Deduction to the relevant Tax authority within
the time allowed for such payment under applicable law and shall
deliver to Endo, as soon as reasonably practicable after such
payment falls due to the applicable authority, any original receipt
(or a certified copy thereof) issued by such authority evidencing
such payment.

	12.4	 	Non-Business Days
	 
	 	 	Any payments which, but for this Clause 12.4, would fall due under this
Agreement on a day other than a Business Day shall be made on the next
succeeding Business Day.
	 
	12.5	 	Set-off
	 
	 	 	Endo may set off any matured obligation due from an Obligor under the
Finance Documents against any matured obligation owed by Endo to that
Obligor, regardless of the place of payment or currency of either
obligation. If the obligations are in different currencies, Endo may
convert either obligation at a market rate of exchange for the purpose of
the set-off.
	 
	13.	 	LAW AND JURISDICTION
	 
	13.1	 	Applicable Law.
	 
	 	 	THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL
BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK INCLUDING GENERAL OBLIGATION LAW 5-1401.
	 
	13.2	 	Consent to Jurisdiction and Service of Process.

	(a)	 	ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY OBLIGOR ARISING
OUT OF OR RELATING HERETO OR ANY OTHER FINANCE DOCUMENT, OR ANY OF
THE OBLIGATIONS, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF
COMPETENT JURISDICTION IN THE STATE, COUNTY AND CITY OF NEW YORK.
BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH OBLIGOR, FOR ITSELF
AND IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (i) ACCEPTS
GENERALLY AND UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND
VENUE OF SUCH COURTS; (ii) WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS; (iii) AGREES THAT, NOTWITHSTANDING CLAUSE 13.2 (b),
SERVICE OF ALL PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY
BE MADE BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED,
TO THE APPLICABLE OBLIGOR AT ITS ADDRESS PROVIDED IN ACCORDANCE WITH
CLAUSE 18; (iv) AGREES THAT SERVICE AS PROVIDED IN CLAUSE (iii) IS
SUFFICIENT TO CONFER PERSONAL JURISDICTION OVER THE APPLICABLE
OBLIGOR IN ANY SUCH PROCEEDING IN ANY SUCH COURT, AND OTHERWISE
CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT; AND (v)
AGREES ENDO RETAINS THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO BRING PROCEEDINGS AGAINST ANY OBLIGOR IN THE
COURTS OR ANY OTHER JURISDICTION; and

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	(b)	 	EACH OBLIGOR HEREBY IRREVOCABLY AND UNCONDITIONALLY APPOINTS
CT CORPORATION, 111 EIGHTH AVENUE, TEAM 6, NEW YORK, NEW YORK 10011,
USA (FAX: 001-212-894-8690) (“THE PROCESS AGENT”), AS ITS AGENT TO
RECEIVE ON BEHALF OF SUCH OBLIGOR AND ITS PROPERTY SERVICE OF COPIES
OF THE SUMMONS AND COMPLAINTS AND ANY OTHER PROCESS WHICH MAY BE
SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY COURT
SPECIFIED IN
CLAUSE 13.2(a), SUCH SERVICE MAY BE MADE BY MAILING OR DELIVERING A
COPY OF SUCH PROCESS TO AN OBLIGOR IN CARE OF THE PROCESS AGENT AT
THE ADDRESS SPECIFIED ABOVE FOR THE PROCESS AGENT, AND EACH OBLIGOR
HEREBY IRREVOCABLY AUTHORIZES AND DIRECTS THE PROCESS AGENT TO
ACCEPT SUCH SERVICE ON ITS BEHALF. EACH OBLIGOR FURTHER CONSENTS
TO MAILING COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO SUCH OBLIGOR AT ITS ADDRESSES FOR NOTICE HEREUNDER,
SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER MAILING. FAILURE OF
THE PROCESS AGENT TO GIVE NOTICE TO ANY OBLIGOR OR FAILURE OF AN
OBLIGOR TO RECEIVE NOTICE OF SUCH SERVICES OF PROCESS SHALL NOT
AFFECT IN ANY WAY THE VALIDITY OF SUCH SERVICE ON THE PROCESS AGENT
OR SUCH OBLIGOR. EACH OBLIGOR COVENANTS AND AGREES THAT IT SHALL
TAKE ANY AND ALL REASONABLE ACTION, INCLUDING THE EXECUTION AND
FILING OF ANY AND ALL DOCUMENTS, THAT MAY BE NECESSARY FOR THE
PROCESS AGENT TO ACT AS SUCH. IN THE EVENT THAT AT ANY TIME SUCH
PROCESS AGENT SHALL FOR ANY REASON CEASE TO MAINTAIN AN OFFICE IN
THE BOROUGH OF MANHATTAN IN NEW YORK CITY, OR CEASE TO ACT AS
PROCESS AGENT, THEN SUCH OBLIGOR IRREVOCABLY CONSENTS TO THE
SERVICE OF ANY AND ALL PROCESS IN ANY SUCH SUIT, ACTION OR
PROCEEDING IN ACCORDANCE WITH THE TERMS CLAUSE (iii) OF CLAUSE
13.2(a). EACH OBLIGOR ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS
CLAUSE 13.2(b) SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO
SUE IN ANY OTHER JURISDICTION.

	13.3	 	Waiver of Jury Trial
	 
	 	 	EACH OF THE PARTIES HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING HEREUNDER
OR UNDER ANY OF THE OTHER FINANCE DOCUMENTS OR ANY DEALINGS BETWEEN THEM
RELATING THE SUBJECT MATTER OF THIS LOAN TRANSACTION OR THE LENDER/BORROWER
RELATIONSHIP THAT IS BEING ESTABLISHED. THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN
ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER
COMMON LAW AND STATUTORY CLAIMS. EACH PARTY HERETO ACKNOWLEDGES THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT
EACH HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT, AND
THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN ITS RELATED FUTURE
DEALINGS. EACH PARTY HERETO FURTHER WARRANTS AND REPRESENTS THAT IT HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL

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CONFORMED COPY

	 	 	AND THAT IT KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED
EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER
SPECIFICALLY REFERRING TO THIS CLAUSE 13.3 AND EXECUTED BY EACH OF THE
PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS HERETO OR ANY OF THE OTHER FINANCE
DOCUMENTS OF TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING TO THE ADVANCE
MADE HEREUNDER. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS
A WRITTEN CONSENT TO A TRIAL BY THE COURT.
	 
	14.	 	SEVERANCE
	 
	 	 	If at any time any provision of this Agreement is or becomes invalid,
illegal or unenforceable in any respect under any law of any
jurisdiction, the validity, legality and enforceability of the remaining
provisions of this Agreement and the validity, legality and
enforceability of those provisions under the law of other jurisdictions
shall not in any way be affected or impaired thereby.
	 
	15.	 	FEES, COSTS AND INDEMNITY
	 
	15.1	 	Costs and expenses
	 
	 	 	Each party shall be liable for its own costs, charges and expenses
arising at any time in connection with the preparation, negotiation and
execution of the Finance Documents and the transactions contemplated
thereby.
	 
	15.2	 	Indemnity
	 
	 	 	Each Obligor shall indemnify Endo on an after tax basis from and against
all losses, costs, expenses, claims, proceedings and damages suffered or
incurred by Endo in consequence of any Event of Default (other than to
the extent the same arise solely under the License Agreement) and/or any
failure to borrow in accordance with any notice given under Clause 4.
	 
	16.	 	NON-WAIVER
	 
	 	 	No failure by Endo to exercise and no delay by Endo in exercising any
right, power or privilege under this Agreement shall operate as a waiver
thereof nor shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies
provided in this Agreement are cumulative and not exclusive of any
rights or remedies provided by law.
	 
	17.	 	SUCCESSORS
	 
	 	 	The agreement evidenced by this Agreement shall enure to the benefit of
Endo and its successors and assigns from time to time. No Obligor may
assign or transfer any of its rights, benefits or obligations under this
Agreement. Endo may assign or transfer its rights and obligations under
this Agreement to any of its subsidiaries, to any holding company of
Endo, to any subsidiary of any such holding company or to any holders of
Endo secured senior debt. Endo or its successor or assignee or
transferee shall pay any stamp duty, transfer registration or similar
Taxes payable on such assignment.

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	18.	 	NOTICE
	 
	18.1	 	Method
	 
	 	 	Each notice or other communication to be given under this Agreement
shall be given in writing and, unless otherwise provided, shall be made
by fax or letter.
	 
	18.2	 	Delivery
	 
	 	 	Any notice or other communication to be given by Endo or an Obligor to
the other under this Agreement shall (unless one party has by fifteen
(15) days’ notice to the other party specified another address) be given
to that other party at the respective addresses given in Clause 18.3.
	 
	18.3	 	Addresses
	 
	 	 	The address and fax number of each Obligor and Endo are:

(A) Endo:

Endo Pharmaceuticals Inc.

100 Painters Dr.

Chadds Ford, PA 19317

Attention: Chief Legal Officer

Telecopy: 610-558-9684

With a copy to:

Skadden, Arps, Slate, Meagher & Flom LLP

Four Times Square

New York, NY 10036

Attention: Eileen Nugent and Bruce Goldner

Telecopy: 212-735-2000

(B) the Parent:

Vernalis PLC

Oakdene Court

613 Reading Road

Winnersh

Wokingham

RG41 5UA

United Kingdom

Attention: Chief Financial Officer

Telecopy: 011-44-118-989-9300

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(C) VDL:

Vernalis Development Limited

Oakdene Court

613 Reading Road

Winnersh

Wokingham

RG41 5UA

United Kingdom

Attention: Chief Financial Officer

Telecopy: 011-44-118-989-9300

	18.4	 	Deemed receipt
	 
	 	 	Any notice or other communication given by an Obligor or Endo shall be
deemed to have been received:

	(a)	 	if sent by fax, with a confirmed receipt of transmission from
the receiving machine, on the day on which transmitted;
	 
	(b)	 	in the case of a written notice given by hand, on the day of
actual delivery; and
	 
	(c)	 	if posted, on the second Business Day following the day on
which it was despatched by first class mail postage prepaid

	 	 	provided that a notice given in accordance with the above but received
on a day which is not a Business Day or after normal business hours in
the place of receipt shall only be deemed to have been received on the
next Business Day.
	 
	19.	 	COUNTERPARTS
	 
	 	 	This Agreement may be executed in any number of counterparts, and this
has the same effect as if the signatures on the counterparts were on a
single copy of this Agreement.
	 
	20.	 	THIRD PARTY BENEFICIARIES
	 
	20.1	 	The terms and provisions of this Agreement are for the purpose of
defining the relative rights and obligations of each party hereto with
respect to the transactions contemplated hereby and no Person shall be a
third party beneficiary of any of the terms and provisions of this
Agreement.

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IN WITNESS WHEREOF the parties have executed this agreement as of the day and
year first above written.

VERNALIS PLC

By: SIMON STURGE

VERNALIS DEVELOPMENT LIMITED

By: SIMON STURGE

ENDO PHARMACEUTICALS INC

By: CAROL AMMON

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CONFORMED COPY

SCHEDULE 1

Drawdown Notice

	To:	 	[                  ]
	 
	From:	 	Vernalis Development Limited

Dear Sirs,

Loan agreement dated [                  ] (the “Agreement”)

Terms defined in the Agreement have the same meaning in this notice.

We request a drawing under the Agreement as follows:

	1.	 	Amount of Advance: US$50,000,000
	 
	2.	 	Drawdown Date: [                  ]
	 
	3.	 	Payment Details:

The Advance should be disbursed on the Drawdown Date to the following persons and accounts:

	 	 	 	 	 
	3.1

	 	Amount:
	 	[sufficient to discharge the Elan Outstanding Liability]
	

	 	Payee:
	 	Elan Pharma International Limited
	

	 	Payee Account	 	 
	 	 	Details:	 	[                  ]

	

	 	 	 	 
	3.2

	 	Amount:
	 	[The balance of $50M]
	

	 	Payee:
	 	Vernalis Development Limited
	

	 	Payee Account	 	 
	

	 	Details:
	 	[                  ]

We confirm that today and on the Drawdown Date:

	(a)	 	the representations and warranties in Clause 6.1 of the Agreement are and
will be correct;
	 
	(b)	 	no Event of Default or Potential Event of Default has occurred and is
continuing or will occur on the making of the drawing.

SIGNED

For and on behalf of

VERNALIS DEVELOPMENT LIMITED

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SCHEDULE 2

Security Deed

[See Attached]

 

 

SECURITY DEED

dated as of July
   , 2004

between

VERNALIS DEVELOPMENT LIMITED,

as the Grantor

and

ENDO PHARMACEUTICALS INC.,

as the Secured Party

32

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	PAGE
	SECTION 1. DEFINITIONS; GRANT OF SECURITY
	 	 	1	 
	1.1 General Definitions
	 	 	1	 
	1.2 Definitions; Interpretation
	 	 	3	 
	1.3 Third Party Rights
	 	 	4	 
	SECTION 2. GRANT OF SECURITY
	 	 	5	 
	2.1 Grant of Security
	 	 	5	 
	2.2 Certain Limited Exclusions
	 	 	5	 
	SECTION 3. SECURITY FOR OBLIGATIONS; GRANTORS REMAIN LIABLE
	 	 	5	 
	3.1 Security for Obligations
	 	 	5	 
	3.2 Continuing Liability Under Collateral
	 	 	7	 
	3.3 Immediate Recourse
	 	 	7	 
	3.4 Additional Security
	 	 	7	 
	SECTION 4. REPRESENTATIONS AND WARRANTIES AND COVENANTS
	 	 	7	 
	4.1 Generally
	 	 	7	 
	4.2 Receivables
	 	 	10	 
	SECTION 5. ACCESS; RIGHT OF INSPECTION AND FURTHER ASSURANCES
	 	 	11	 
	5.1 Access; Right of Inspection
	 	 	11	 
	5.2 Further Assurances
	 	 	12	 
	SECTION 6. SECURED PARTY APPOINTED ATTORNEY-IN-FACT
	 	 	13	 
	6.1 Power of Attorney
	 	 	13	 
	6.2 No Duty on the Part of Secured Party
	 	 	13	 
	SECTION 7. REMEDIES, GENERALLY
	 	 	13	 
	7.1 Generally.
	 	 	13	 
	7.2 Application of Proceeds
	 	 	15	 
	7.3 Sales on Credit
	 	 	15	 
	7.4 Cash Proceeds
	 	 	15	 
	SECTION 8. REMEDIES, UK
	 	 	16	 
	8.1 UK Enforcement of Security, Generally
	 	 	16	 
	8.2 Receiver
	 	 	16	 
	SECTION 9. SECURED PARTY
	 	 	17	 
	SECTION 10. CONTINUING SECURITY INTEREST; TRANSFER OF THE ADVANCE
	 	 	17	 
	SECTION 11. STANDARD OF CARE; SECURED PARTY MAY PERFORM
	 	 	18	 
	SECTION 12. MISCELLANEOUS
	 	 	18	 

i

 

ii

 

Exhibits:

Exhibit A – Form of Pledge Supplement

Exhibit B – Form of Notice

Exhibit C – Powers of Receiver

Schedules:

Schedule 4.1(a)(ii) – Organizational Information

Schedule 4.1(a)(iii) – Other Names of Grantor

Schedule 4.1(a)(iv) – Changes in Organizational Information and Structure

Schedule 4.1(a)(v) – Filing Offices

iii

 

               This SECURITY DEED, dated as of July    , 2004 (this “Security Deed”),
between VERNALIS DEVELOPMENT LIMITED, a limited liability company incorporated
under the laws of England and Wales with company number 2600483 and with a
registered address at Oakdene Court, 613 Reading Road, Winnersh, Workingham,
Berkshire, RG41 5UA, as the grantor (the “Grantor”), and ENDO PHARMACEUTICALS
INC., a Delaware corporation, as the secured party (the “Secured Party”).

RECITALS:

          WHEREAS, reference is made to that certain Loan Agreement, dated as of the
date hereof (as it may be amended, restated, supplemented or otherwise modified
from time to time, the “Loan Agreement”), by and among Vernalis Development
Limited, as borrower, Vernalis PLC, as parent, and Endo Pharmaceuticals Inc.
(“Endo”);

          WHEREAS, in consideration of the extensions of credit and other
accommodations of Endo as set forth in the Loan Agreement, the Grantor has
agreed to secure its obligations under the Finance Documents as set forth
herein; and

          NOW, THEREFORE, in consideration of the premises and the agreements,
provisions and covenants herein contained, the Grantor and the Secured Party
agree as follows:

	21.	 	DEFINITIONS; GRANT OF SECURITY.

21.1 General Definitions. In this Security Deed, the following terms
shall have the meanings provided below:

          “Account Debtor” shall mean each Person who is obligated on a Receivable
or any Supporting Obligation related thereto.

          “Accounts” shall mean all “accounts” as defined in Article 9 of the UCC.

          “Act” shall have the meaning assigned in Section 8.1.

          “Bankruptcy Code” shall mean Title 11 of the United States Code entitled
“Bankruptcy”, as now and hereafter in effect, or any successor statute.

          “Cash Proceeds” shall have the meaning assigned in Section 7.4.

          “Chattel Paper” shall mean all “chattel paper” as defined in Article 9 of
the UCC, including, without limitation, “electronic chattel paper” or “tangible
chattel paper”, as each term is defined in Article 9 of the UCC.

          “Closing Date” means July    , 2004.

          “Collateral” shall have the meaning assigned in Section 2.1.

          “Collateral Account” shall mean any account established by the Secured
Party and details of which have been noticed to the Grantor.

 

 

          “Collateral Support” shall mean all property (real or personal)
collaterally assigned, hypothecated or otherwise securing any Account included
in the Collateral (including the royalty stream payable to the Grantor under
the License Agreement) and shall include any security agreement or other
agreement granting a lien or security interest in such real or personal
property.

          “Endo” shall have the meaning assigned in the recitals.

          “Governmental Authority” shall mean any nation or government, any state or
other political subdivision thereof, and any agency, authority,
instrumentality, regulatory body, court, administrative tribunal, central bank
or other entity exercising executive, legislative, judicial, taxing, regulatory
or administrative powers or functions of or pertaining to government.

          “Grantor” shall have the meaning assigned in the preamble.

          “Instruments” shall mean all “instruments” as defined in Article 9 of the
UCC.

          “License Agreement” shall have the meaning assigned in Section 2.1.

          “Lien” shall mean any lien, mortgage, pledge, collateral assignment,
security interest, charge or encumbrance of any kind (including any agreement
to give any of the foregoing, any conditional sale or other title retention
agreement, and any lease in the nature thereof) and any other agreement,
option, trust or other arrangement having the practical effect of any of the
foregoing.

          “Loan Agreement” shall have the meaning assigned in the recitals.

          “Obligations” shall mean all obligations of every nature of the Grantor
from time to time owed to the Secured Party under any Finance Document, whether
for principal, interest (including interest which, but for the filing of a
petition in bankruptcy with respect to the Grantor, would have accrued on any
obligation, whether or not a claim is allowed against the Grantor for such
interest in the related bankruptcy proceeding), fees, expenses, indemnification
or otherwise.

          “Permitted Sales” shall mean those sales, assignments or other
dispositions permitted by the Loan Agreement.

          “Person” shall mean and include natural persons, corporations, limited
partnerships, general partnerships, limited liability companies, limited
liability partnerships, joint stock companies, joint ventures, associations,
companies, trusts, banks, trust companies, land trusts, business trusts or
other organizations, whether or not legal entities, and Governmental
Authorities.

          “Pledge Supplement” shall mean any supplement to this Security Deed in
substantially the form of Exhibit A attached hereto, together with all
supplements and schedules thereto.

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          “Proceeds” shall mean: (i) all “proceeds” as defined in Article 9 of the
UCC, and (ii) whatever is receivable or received when Collateral or proceeds
are sold, exchanged, collected or otherwise disposed of, whether such
disposition is voluntary or involuntary.

          “Receivables” shall mean all Accounts, including all rights to payment,
whether or not earned by performance, for property licensed or otherwise
disposed of and all Collateral Support and Supporting Obligations related
thereto and all Receivables Records.

          “Receivables Records” shall mean (i) all original copies of all documents,
instruments or other writings or electronic records or other Records evidencing
the Receivables, (ii) all books, correspondence or other files, Records, ledger
sheets or cards, invoices, and other papers relating to Receivables, including,
without limitation, all tapes, cards, computer tapes, computer discs, computer
runs, record keeping systems and other papers and documents relating to the
Receivables, whether in the possession or under the control of Grantor or any
computer bureau or agent from time to time acting for Grantor or otherwise, and
(iii) any other written or nonwritten forms of information related in any way
to the foregoing or any Receivable.

          “Receiver” shall have the meaning assigned in Section 8.2(a)(i).

          “Record” shall have the meaning specified in Article 9 of the UCC.

          “Relevant Assets” means the Vernalis IP (as defined in the License
Agreement) and the Collateral.

          “Security Deed” shall have the meaning assigned in the preamble.

          “Secured Obligations” shall have the meaning assigned in Section 3.1.

          “Supporting Obligation” shall mean all “supporting obligations” as defined
in Article 9 of the UCC.

          “Secured Party” shall have the meaning assigned in the preamble.

          “UCC” shall mean the Uniform Commercial Code as in effect from time to
time in the State of New York or, when the context implies, the Uniform
Commercial Code as in effect from time to time in any other applicable
jurisdiction.

          “UK” shall mean the United Kingdom.

          “United States” shall mean the United States of America.

21.2 Definitions; Interpretation. All capitalized terms used herein
(including the preamble and recitals hereto) and not otherwise defined herein
shall have the meanings ascribed thereto in the Loan Agreement or, if not
defined therein, in the UCC. References to “Sections,” “Exhibits” and
“Schedules” shall be to Sections, Exhibits and Schedules, as the case may be,
of this Security Deed unless otherwise specifically provided. Section headings
in this Security Deed are included herein for convenience of reference only and
shall not constitute a part of this Security Deed for any other
purpose or be given any substantive effect. Any of the terms defined
herein may, unless the context otherwise requires, be used in the singular or
the plural, depending on the

3

 

reference. The use herein of the word “include”
or “including”, when following any general statement, term or matter, shall not
be construed to limit such statement, term or matter to the specific items or
matters set forth immediately following such word or to similar items or
matters, whether or not nonlimiting language (such as “without limitation” or
“but not limited to” or words of similar import) is used with reference
thereto, but rather shall be deemed to refer to all other items or matters that
fall within the broadest possible scope of such general statement, term or
matter. If any conflict or inconsistency exists between this Security Deed and
the Loan Agreement, the Loan Agreement shall govern. All references herein to
provisions of the UCC shall include all successor provisions under any
subsequent version or amendment to any Article of the UCC.

21.3 Third Party Rights.

	 	(a)	 	Any security granted to the Secured Party pursuant to this
Security Deed shall be in addition to and without prejudice to any
other security which the Secured Party now holds or may in the
future hold as security for the Secured Obligations.
	 
	 	(b)	 	The terms and provisions of this Security Deed are for the
purpose of defining the relative rights and obligations of each
party hereto with respect to the transactions contemplated hereby
and no Person shall be a third party beneficiary of any of the terms
and provisions of this Security Deed.

4

 

	22.	 	GRANT OF SECURITY.

22.1 Grant of Security. To secure the Secured Obligations, the Grantor
hereby grants to the Secured Party a security interest in and continuing lien
on all of the Grantor’s right, title and interest in, to and under those
portions of the License Agreement, dated as of a date on or about the date
hereof, between Vernalis Development Limited and Endo Pharmaceuticals Inc. (as
may be amended, supplemented or modified from time to time, the “License
Agreement”) related to the payments due to the Grantor thereunder, including,
without limitation, the royalty stream payable to the Grantor pursuant to, and
any Receivables and Accounts related to, the License Agreement, and all
Proceeds, products, accessions, rents and profits of or in respect of the
License Agreement (all of which being hereinafter collectively referred to as
the “Collateral”).

22.2 Certain Limited Exclusions. Notwithstanding anything herein to the
contrary, in no event shall the security interest granted under Section 2.1
hereof attach to any lease, license, contract, property rights or agreement to
which the Grantor is a party or any of its rights or interests thereunder if
and for so long as the grant of such security interest shall constitute or
result in (a) the abandonment, invalidation or unenforceability of any right,
title or interest of the Grantor therein or (b) in a breach or termination
pursuant to the terms of, or a default under, any such lease, license, contract
property rights or agreement (other than to the extent that any such term would
be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of
the UCC (or any successor provision or provisions) of any relevant jurisdiction
or any other applicable law
(including the Bankruptcy Code) or principles of equity), provided,
however, that such security interest shall attach immediately at such time as
the condition causing such abandonment, invalidation or unenforceability shall
be remedied and to the extent severable, shall attach immediately to any
portion of such Lease, license, contract, property rights or agreement that
does not result in any of the consequences specified in (a) or (b) above.

	23.	 	SECURITY FOR OBLIGATIONS; GRANTORS REMAIN LIABLE.

23.1 Security for Obligations

	 	(a)	 	Generally. This Security Deed
secures, and the Collateral is collateral security for, the prompt
payment or performance in full when due, whether at stated maturity,
by required prepayment, declaration, acceleration, demand or
otherwise (including the payment of amounts that would become due
but for the operation of the automatic stay under Section 362(a) of
the Bankruptcy Code, 11 U.S.C. §362(a) (and any successor provision
thereof), of all Obligations (the “Secured Obligations”).
	 
	 	(b)	 	Creation of Floating Charge. The Grantor, with full title
guarantee and as further continuing security for the payment and
discharge of the Secured Obligations, charges the Collateral in
favor of the Secured Party by way of first floating charge.
	 
	 	(c)	 	Conversion of Floating Charge

	 	(i)	 	The Secured Party may, by notice to the
Grantor, convert the floating charge created by this
Security Deed, with immediate effect, into a fixed
charge over all or any of the Grantor’s assets
specified in the notice if:

5

 

	 	(a)	 	an Event of Default has occurred and is
continuing; or
	 
	 	(b)	 	the Secured Party reasonably considers those
assets to be in danger of being seized or sold under any form
of distress, attachment, execution or other legal process or
to be otherwise in jeopardy.

	 	(ii)	 	Upon notice being given by the Secured
Party under paragraph 3.1(c)(i) above, the Grantor
will not exercise any rights it has over the
Collateral, other than as provided in this Security
Deed.
	 
	 	(iii)	 	The giving by the Secured Party of a
notice pursuant to paragraph (i) above in relation to
the Collateral shall not be construed as a waiver or
abandonment of the Secured Party’s rights to give
other similar notices in respect of the Collateral.

	 	(d)	 	Miscellaneous. Upon the occurrence and during continuation
of an Event of Default, if the charge of Collateral referred to in
Clause 3.1(c) (Creation of Floating Charge) is found to be
ineffective or any sums payable in respect of such Collateral are
received by the Grantor, the Grantor shall hold the benefit of
such Collateral and any such sums received by it in trust for the
Secured Party and shall account to the Secured Party for or
otherwise apply all such sums as the Secured Party may direct and
shall otherwise, at its own cost, take such action and execute
such documents as the Secured Party may, in its sole discretion,
require.

6

 

23.2 Continuing Liability Under Collateral. Notwithstanding anything
herein to the contrary, (a) the Grantor shall remain liable for all obligations
under the Collateral and nothing contained herein is intended or shall be a
delegation of duties to the Secured Party, (b) the Grantor shall remain liable
under each of the agreements now or hereafter included in the Collateral to
perform all of the obligations undertaken by it thereunder all in accordance
with and pursuant to the terms and provisions thereof and the Secured Party
shall not have any obligation or liability under any of such agreements by
reason of or arising out of this Security Deed or any other document related
thereto nor shall the Secured Party have any obligation to make any inquiry as
to the nature or sufficiency of any payment received by it or have any
obligation to take any action to collect or enforce any rights under any
agreement now or hereafter included in the Collateral and (c) the exercise by
the Secured Party of any of its rights hereunder shall not release the Grantor
from any of its duties or obligations under the contracts and agreements now or
hereafter included in the Collateral.

23.3 Immediate Recourse. The Grantor waives any right it may have of
first requiring the Secured Party to proceed against or enforce any other
rights or security before enforcing the security constituted hereby.

23.4 Additional Security. The security constituted by this Security Deed
is in addition to, and not in any way prejudiced by, any other security now or
hereafter held by the Secured Party.

	24.	 	REPRESENTATIONS AND WARRANTIES AND COVENANTS.

24.1 Generally

	 	(a)	 	Representations and Warranties of the Grantor. The Grantor
hereby represents and warrants, on the Closing Date and on each
Interest Payment Date throughout the period of the Term in relation
to which a Deemed Advance Notice has been given is made available,
that:

	 	(i)	 	it is the sole and exclusive owner of
the entire right, title, and interest in the
Collateral, as to all Collateral whether now existing
or hereafter acquired, will continue to have such
rights in the Collateral (except with respect to
Proceeds), in each case free and clear of any and all
Liens, rights or claims of all other Persons to the
extent not otherwise included above, including,
without limitation, liens arising as a result of the
Grantor
becoming bound (as a result of merger of otherwise)
as a debtor under a security agreement entered into
by another Person, other than Permitted Liens;
	 
	 	(ii)	 	as indicated on Schedule 4.1(a)(ii), it
is a limited liability company incorporated solely
under the laws of England and Wales and remains duly
existing as such. The Grantor has not filed any
certificates of domestication, transfer or continuance
in any other jurisdiction. The Grantor has also
indicated on Schedule 4.1(a)(ii) (as such schedule may
be amended or supplemented from time to time): (w) the
full legal name of the Grantor, (x) its organizational
identification number (as

7

 

	 	 	 	applicable), (y) the
jurisdiction where the chief executive office is
located, and for the one-year period preceding the
date hereof has been located, and (z) its notice
address.
	 
	 	(iii)	 	it has not done in the last five (5)
years, and does not do, business under any other name
(including any trade-name or fictitious business name)
except for those names set forth on Schedule
4.1(a)(iii) (as such schedule may be amended or
supplemented from time to time);
	 
	 	(iv)	 	except as provided on Schedule
4.1(a)(iv) (as such schedule may be amended or
supplemented from time to time), it has not changed
its name, jurisdiction of organization, or chief
executive office within the past five (5) years;
	 
	 	(v)	 	upon the filing of (x) all UCC financing
statements naming the Grantor as “debtor” and the
Secured Party as “secured party”, and (y) all relevant
filings in the UK, describing the Collateral in the
filing office set forth on Schedule 4.1(a)(v) hereof
(as such schedule may be amended or supplemented from
time to time), the security interest granted to the
Secured Party hereunder constitutes a valid, legal,
enforceable and perfected first priority Lien (subject
in the case of priority only to Permitted Liens);
	 
	 	(vi)	 	all actions and consents, including all
filings, notices, registrations and recordings
necessary or desirable for the exercise by the Secured
Party of the rights provided for in this Security Deed
or the exercise of remedies in respect of the
Collateral have been made or obtained;
	 
	 	(vii)	 	other than the financing statements
filed in favor of the Secured Party, no effective UCC
financing statement or other instrument similar in
effect under any applicable law covering all or any
part of the Collateral is on file in any filing or
recording office except for (y) financing statements
for which proper termination statements have been
delivered to the Secured Party for filing
and (z) financing statements filed in connection
with Permitted Liens;
	 
	 	(viii)	 	no authorization, approval or other action by, and
no notice to or filing with, any Governmental
Authority or regulatory body is required for either
(y) the grant by the Grantor of the Lien purported to
be created in favor of the Secured Party hereunder or
(z) the exercise by the Secured Party of any rights or
remedies in respect of the Collateral (whether
specifically granted or created hereunder or created
or provided for by applicable law), except for the
filings contemplated by clause (v) above;

8

 

	 	(ix)	 	as of the Closing Date, it has delivered
notice, substantially in the form of Exhibit C
attached hereto, of the Lien created by this Security
Deed to Endo.

	 	(b)	 	Covenants and Agreements of the Grantor. The Grantor hereby
covenants and agrees that:

	 	(i)	 	save with respect to Permitted Liens, it
will not, without the prior written consent of Secured
Party, create, or permit to subsist any security over:

                         (a) prior to the MAM Approval Date, any of its assets or any of the
assets of its subsidiaries; and

	 	                 (b) on and after the MAM Approval Date: (A) any of the Collateral or
other Relevant Assets; or (B) any book and other debts and monetary
claims relating to the Collateral or other Relevant Assets and any
proceeds of such debts and claims (including without limitation, any
claims or sums of money deriving from or in relation to the Collateral or
other Relevant Assets, any court order or judgment, any contract or
agreement to which the Grantor is party and any other assets, property
rights or undertaking of the Grantor in each case in or relating to the
Collateral or other Relevant Assets);

	 	(ii)	 	except with the prior consent of the
Secured Party or as permitted under the Loan Agreement
the Grantor shall not execute, and there will not be
on file in any public office, any financing statement
or other documents or instruments, except financing
statements or other documents or instruments filed or
to be filed in favor of the Secured Party and the
Grantor shall not (except as permitted by the Loan
Agreement) sell, assign, transfer, license, grant any
option, or create or suffer to exist any Lien upon or
with respect to, or otherwise dispose of (by operation
of law or otherwise) the Collateral, except Permitted
Liens and the Lien created by and under this Security
Deed and other Finance Documents, and the Grantor
shall defend the Collateral against all Persons at any
time claiming any interest therein;
	 
	 	(iii)	 	it shall not change the Grantor’s name,
chief executive office, type of organization or
jurisdiction of organization unless it shall have (y)
notified the Secured Party in writing, by executing
and delivering to the Secured Party a completed Pledge
Supplement, at least thirty (30) days prior to any
such change or establishment, identifying such new
proposed name, chief executive office or jurisdiction
of organization and providing such other information
in connection therewith as the Secured Party may
reasonably request and (z) taken all actions necessary
or advisable in the reasonable opinion of the Secured
Party to maintain the continuous validity, perfection
and the same or

9

 

	 	 	 	better priority of the Secured Party’s
security interest in the Collateral intended to be
granted and agreed to hereby;
	 
	 	(iv)	 	it shall pay promptly when due all
property and other taxes, assessments and governmental
charges or levies imposed upon, and all claims
against, the Collateral, except to the extent the
validity thereof is being contested in good faith;
provided, the Grantor shall in any event pay such
taxes, assessments, charges, levies or claims not
later than five (5) days prior to the date of any
proposed sale under any judgment, writ or warrant of
attachment entered or filed against the Grantor or any
of the Collateral as a result of the failure to make
such payment;
	 
	 	(v)	 	upon the Grantor obtaining actual
knowledge thereof, it shall promptly notify the
Secured Party in writing of any event that is
reasonably likely to have a material and adverse
effect on the ability of the Grantor or the Secured
Party to dispose of the Collateral or any portion
thereof following an Event of Default, including,
without limitation, the levy of any legal process
against the Collateral or any portion thereof; and
	 
	 	(vi)	 	it shall not take or permit any action
which is reasonably likely to impair the Secured
Party’s rights in the Collateral.

24.2 Receivables.

	 	(a)	 	Representations and Warranties. The Grantor represents and
warrants, on the Closing Date and on each Interest Payment Date
throughout the period of the Term in relation to which a Deemed
Advance Notice has been given is made available, that no Receivable
requires the consent of the Account Debtor in respect thereof in
connection with the pledge hereunder, except any consent which has
been obtained.
	 
	 	(b)	 	Covenants and Agreements. The Grantor hereby covenants and
agrees that:

	 	(i)	 	it shall keep and maintain at its own
cost and expense satisfactory and complete records of
the Receivables, including, but not limited to, the
originals of all documentation with
respect to all Receivables and records of all
payments received and all credits granted on the
Receivables;
	 
	 	(ii)	 	it shall not evidence Receivables as
Chattel Paper or Instruments except with the prior
consent of the Secured Party, and it shall mark
conspicuously, in form and manner reasonably
satisfactory to the Secured Party, all Chattel Paper
and Instruments hereafter created with an appropriate
reference to the fact that the Secured Party has a
security interest therein;

10

 

	 	(iii)	 	except as otherwise provided in this
subsection, the Grantor shall continue to collect all
amounts due or to become due to the Grantor under the
Receivables and any Supporting Obligation.
Notwithstanding anything in the foregoing, at any time
following the occurrence and during the continuation
of an Event of Default, the Secured Party may: (y)
direct the Account Debtors under any Receivables to
make payment of all amounts due or to become due to
the Grantor thereunder directly to the Secured Party;
and (z) notify, or require the Grantor to notify, each
Person (if any) maintaining a lockbox or similar
arrangement to which Account Debtors under any
Receivables have been directed to make payment to
remit all amounts representing collections on checks
and other payment items from time to time sent to or
deposited in such lockbox or other arrangement
directly to the Secured Party. If following the
occurrence and continuance of an Event of Default the
Secured Party notifies the Grantor that it has elected
to collect the Receivables in accordance with the
preceding sentence, any payments of Receivables
received by the Grantor shall be forthwith (and in any
event within two (2) Business Days) deposited by the
Grantor thereafter in the exact form received, duly
indorsed by the Grantor to the Secured Party if
required, in the Collateral Account maintained under
the sole dominion and control of the Secured Party,
and until so turned over, all amounts and proceeds
(including checks and other instruments) received by
the Grantor in respect of the Receivables, any
Supporting Obligation or Collateral Support shall be
received in trust for the benefit of the Secured Party
hereunder and shall be segregated from other funds of
the Grantor and the Grantor shall not adjust, settle
or compromise the amount or payment of any Receivable,
or release wholly or partly any Account Debtor or
obligor thereof, or allow any credit or discount
thereon.

	 	(c)	 	Delivery and Control of Receivables. With respect to any
Receivables that are evidenced by, or constitute, Chattel Paper or
Instruments, the Grantor shall cause each originally executed copy
thereof to be delivered to the Secured Party (or its agent or
designee) appropriately indorsed to the Secured Party or indorsed in
blank within ten (10) days of the Grantor acquiring rights therein.
With respect to any Receivables which at anytime hereafter would
constitute “electronic
chattel paper” under Article 9 of the UCC, the Grantor shall take
all steps necessary to give the Secured Party control over such
Receivables (within the meaning of Section 9-105 of the UCC)
within ten (10) days of the Grantor acquiring rights therein.

	25.	 	ACCESS; RIGHT OF INSPECTION AND FURTHER ASSURANCES.

25.1 Access; Right of Inspection. The Secured Party and its
representatives shall at all times following the occurrence and during the
continuation of an Event of Default, have full and free

11

 

access during normal
business hours to all the books, correspondence and records of the Grantor that
are related to the Collateral, and the Secured Party and its representatives
may examine the same, take extracts therefrom and make photocopies thereof, and
the Grantor agrees to render to the Secured Party, at the Grantor’s cost and
expense, such clerical and other assistance as may be reasonably requested with
regard thereto.

25.2 Further Assurances

	 	(a)	 	The Grantor agrees that from time to
time, at its expense, that it shall promptly execute and deliver all
further instruments and documents, and take all further action, that
may be necessary or that the Secured Party may reasonably request,
in order to create and/or maintain the validity, perfection or
priority of and protect any security interest granted hereby or,
upon the occurrence and during the continuance of an Event of
Default, to enable the Secured Party to exercise and enforce its
rights and remedies hereunder with respect to the Collateral.
Without limiting the generality of the foregoing, the Grantor shall:

	 	(i)	 	file (x) such financing or continuation
statements (or similar documents) or (y) such other
agreements, instruments, endorsements, powers of
attorney or notices as may be necessary under UK law,
or as the Secured Party may reasonably request, in
order to perfect and preserve the security interests
granted or purported to be granted hereby;
	 
	 	(ii)	 	at the Secured Party’s request, appear
in and defend any action or proceeding that is
reasonably likely to affect such Grantor’s title to or
the Secured Party’s security interest in all or any
part of the Collateral.

	 	(b)	 	The Grantor hereby authorizes the Secured Party to file a
Record, including, without limitation, financing or continuation
statements, and amendments thereto, in any jurisdictions and with
any filing offices as the Secured Party may determine, in its
reasonable discretion, are necessary or advisable to perfect the
security interest granted to the Secured Party herein. Such
financing statements may describe the Collateral in the same manner
as described herein or may contain an indication or description of
collateral that describes such property in any other manner as the
Secured Party may determine, in its reasonable
discretion, is necessary, advisable or prudent to ensure the
perfection of the security interest in the Collateral granted to
the Secured Party herein. The Grantor shall furnish to the
Secured Party from time to time statements and schedules further
identifying and describing the Collateral as the Secured Party may
reasonably request, all in reasonable detail.

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	26.	 	SECURED PARTY APPOINTED ATTORNEY-IN-FACT.

26.1 Power of Attorney. The Grantor, by way of security, irrevocably
appoints the Secured Party and any of its delegates and sub-delegates to be its
attorney to take, at any time after the security constituted by this Security
Deed has become enforceable, any action which the Grantor is obliged to take
under this Security Deed. The Grantor ratifies and confirms whatever any
attorney does or purports to do pursuant to its appointment under this Clause.

26.2 No Duty on the Part of Secured Party. The powers conferred on the
Secured Party hereunder are solely to protect its interests in the Collateral
and shall not impose any duty upon the Secured Party to exercise any such
powers. The Secured Party shall be accountable only for amounts that it
actually receive as a result of the exercise of such powers, and neither the
Secured Party nor any of its officers, directors, employees or agents shall be
responsible to the Grantor for any act or failure to act hereunder, except for
the own gross negligence or willful misconduct.

	27.	 	REMEDIES, GENERALLY.

27.1 Generally.

	 	(a)	 	If any Event of Default shall have occurred and be
continuing, the Secured Party may exercise in respect of the
Collateral, in addition to all other rights and remedies provided
for herein or otherwise available to it at law or in equity, all the
rights and remedies of the Secured Party on default under the UCC
(whether or not the UCC applies to the affected Collateral) to
collect, enforce or satisfy any Secured Obligations then owing,
whether by acceleration or otherwise, and also may pursue any of the
following separately, successively or simultaneously:

	 	(i)	 	require the Grantor to, and the Grantor
hereby agrees that it shall at its expense and
promptly upon request of the Secured Party forthwith,
assemble all or part of the Collateral as directed by
the Secured Party and make it available to the Secured
Party at a place to be designated by the Secured Party
that is reasonably convenient to both parties;
	 
	 	(ii)	 	take possession of the Collateral with
or without judicial process;
	 
	 	(iii)	 	prior to the disposition of the
Collateral, prepare the Collateral for disposition in
any manner to the extent the Secured Party deems
appropriate; and
	 
	 	(iv)	 	subject to the terms of Section 10.2 of
the Loan Agreement, without notice except as specified
below or under the UCC, sell, assign, lease, license
(on an exclusive or nonexclusive basis) or otherwise
dispose of the Collateral or any part thereof in one
or more parcels at public or private sale, at any of
the Secured Party’s offices or elsewhere, for cash, on
credit or for future delivery, at such time or times
and at such price or prices and

13

 

	 	 	 	upon such other terms
as the Secured Party may deem commercially reasonable.

	 	(b)	 	The Secured Party may be the purchaser of any or all of the
Collateral at any public or private (to the extent to the portion of
the Collateral being privately sold is of a kind that is customarily
sold on a recognized market or the subject of widely distributed
standard price quotations) sale in accordance with the UCC and the
Secured Party shall be entitled, for the purpose of bidding and
making settlement or payment of the purchase price for all or any
portion of the Collateral sold at any such sale made in accordance
with the UCC, to use and apply any of the Secured Obligations as a
credit on account of the purchase price for any Collateral payable
by the Secured Party at such sale. Each purchaser at any such sale
shall hold the property sold absolutely free from any claim or right
on the part of the Grantor, and the Grantor hereby waives (to the
extent permitted by applicable law) all rights of redemption, stay
and/or appraisal which it now has or may at any time in the future
have under any rule of law or statute now existing or hereafter
enacted. The Grantor agrees that, to the extent notice of sale
shall be required by law, at least ten (10) days notice to the
Grantor of the time and place of any public sale or the time after
which any private sale is to be made shall constitute reasonable
notification. The Secured Party shall not be obligated to make any
sale of Collateral regardless of notice of sale having been given.
The Secured Party may adjourn any public or private sale from time
to time by announcement at the time and place fixed therefor, and
such sale may, without further notice, be made at the time and place
to which it was so adjourned. The Grantor hereby waives any claims
against the Secured Party arising by reason of the fact that the
price at which any Collateral may have been sold at such a private
sale was less than the price which might have been obtained at a
public sale, even if the Secured Party accepts the first offer
received and does not offer such Collateral to more than one
offeree. If the proceeds of any sale or other disposition of the
Collateral are insufficient to pay all the Secured Obligations, the
Grantor shall be liable for the deficiency and the fees of any
attorneys employed by the Secured Party to collect such deficiency.
The Grantor further agrees that a breach of any of the covenants
contained in this Section will cause irreparable injury to the
Secured Party, that the Secured Party has no adequate remedy at law
in respect of such breach and, as a consequence, that each and every
covenant contained in this Section shall be specifically enforceable
against the Grantor, and the Grantor hereby waives and agrees not to
assert any defenses against an action for specific performance of
such covenants
except for a defense that no default has occurred giving rise to
the Secured Obligations becoming due and payable prior to their
stated maturities. Nothing in this Section shall in any way alter
the rights of the Secured Party hereunder.
	 
	 	(c)	 	The Secured Party may sell the Collateral without giving any
warranties as to the Collateral. The Secured Party may specifically
disclaim or modify any warranties of title or the like. This
procedure will not be considered to adversely affect the commercial
reasonableness of any sale of the Collateral.
	 
	 	(d)	 	The Secured Party shall have no obligation to marshal any of
the Collateral.

14

 

27.2 Application of Proceeds. Except as expressly provided elsewhere in
this Security Deed, all proceeds received by the Secured Party in respect of
any sale, any collection from, or other realization upon all or any part of the
Collateral shall be applied in full or in part by the Secured Party against,
the Secured Obligations in the following order of priority:

	 	(a)	 	first, to the payment of all costs and expenses of such sale,
collection or other realization, including reasonable compensation
to the Secured Party’s agents and counsel, and all other expenses,
liabilities and advances made or incurred by the Secured Party in
connection therewith, and all amounts for which the Secured Party is
entitled to indemnification hereunder and all advances made by the
Secured Party hereunder for the account of the Grantor;
	 
	 	(b)	 	second, to the payment of all other costs and expenses paid
or incurred by the Secured Party in connection with the exercise of
any right or remedy hereunder or under the Loan Agreement, all in
accordance with the terms hereof or thereof;
	 
	 	(c)	 	third, to the extent of any excess of such proceeds, to the
payment of all other Secured Obligations; and
	 
	 	(d)	 	fourth, to the extent of any excess of such proceeds, to the
payment to or upon the order of the Grantor or to whosoever may be
lawfully entitled to receive the same or as a court of competent
jurisdiction may direct.

27.3 Sales on Credit. If Secured Party sells any of the Collateral upon
credit, the Grantor will be credited only with payments actually made by
purchaser and received by Secured Party and applied to indebtedness of the
purchaser. In the event the purchaser fails to pay for the Collateral, the
Secured Party may resell the Collateral and the Grantor shall be credited with
proceeds of the sale.

27.4 Cash Proceeds.

          In addition to the rights of the Secured Party specified in Section 4.2
with respect to payments of Receivables, all proceeds of any Collateral
received by the Grantor after the occurrence and during the continuation of an
Event of Default consisting of cash, checks and other non-cash items
(collectively, “Cash Proceeds”) shall be held by the Grantor in trust for the
Secured Party, segregated from other funds of the Grantor, and shall, forthwith
upon receipt by the Grantor, be turned over to the Secured Party in the exact
form received by the Grantor (duly indorsed by the Grantor to the Secured
Party, if required) and held by the Secured Party. Any Cash Proceeds received
by the Secured Party (whether from the Grantor or otherwise), if an Event of
Default shall have occurred and be continuing, may, in the sole discretion of
the Secured Party, (a) be held by the Secured Party for the benefit as
collateral security for the Secured Obligations (whether matured or unmatured)
or (b) then or at any time thereafter may be applied by the Secured Party
against the Secured Obligations then due and owing.

          For the avoidance of doubt, so long as no Event of Default has occurred
and is continuing, nothing contained herein shall limit the rights of the
Grantor to use and apply Cash Proceeds as it sees fit.

15

 

	28.	 	REMEDIES, UK.

28.1 UK Enforcement of Security, Generally

          Without limiting anything contained in this Security Deed, for the
purposes of all powers implied by UK statute, the Secured Obligations are
deemed to have become due and payable on the date of this Security Deed and
Section 103 of the Law of Property Act (Eng.) (the “Act”) (restricting the
power of sale) and Section 93 of the Act (restricting the right of
consolidation) do not apply to the security constituted by this Security Deed.
The statutory powers of leasing conferred on the Secured Party are extended so
as to authorize the Secured Party to lease, make agreements for leases, accept
surrenders of leases and grant options as the Secured Party may think fit and
without the need to comply with any provision of Sections 99 or 100 of the Act;
and further

	 	(a)	 	Contingencies. If the Secured Party enforces the security
constituted by this Security Deed at a time when no amounts are due
under any Finance Document but at a time when amounts may or will
become so due, the Secured Party (or the Receiver) may pay the
proceeds of any recoveries effected by it into any account
established for such purpose upon documentary terms and conditions
satisfactory to the Secured Party;
	 
	 	(b)	 	No Liability as Mortgagee in Possession. Neither the Secured
Party nor any Receiver will be liable, by reason of entering into
possession of all or any of the Collateral, to account as mortgagee
in possession or for any loss on realization or for any default or
omission for which a mortgagee in possession might be liable;
	 
	 	(c)	 	Agent of the Grantor. Each Receiver is deemed to be the
agent of the Grantor for all purposes and accordingly is deemed to
be in the same position as a Receiver duly appointed by a mortgagee
under the Act. The Grantor alone shall be responsible for his
contracts, engagements, acts, omissions, defaults and losses and for
liabilities incurred by him and the Secured Party shall not incur
any liability (either to the Grantor or to any other Person) by
reason of the Secured Party making his appointment as a Receiver
or for any other reason; and
	 
	 	(d)	 	Privileges. Each Receiver and the Secured Party is entitled
to all the rights, powers, privileges and immunities conferred by
the Act on mortgagees and receivers when such receivers have been
duly appointed under the Act, except that Section 103 of the Act
does not apply.

28.2 Receiver

	 	(a)	 	Appointment of Receiver.

	 	(i)	 	Subject to paragraph (iii) below at any
time after the occurrence and during the continuation
of an Event of Default and after the security
constituted by this Security Deed becomes enforceable
or the Secured Party may without further notice
appoint by deed, under seal or in writing, under its
hand any one or more persons to be a receiver (a
“Receiver”) of all or any part of the

16

 

	 	 	 	Collateral in
like manner in every respect as if the Secured Party
had become entitled under the Act to exercise the
power of sale conferred under the Act (subject to
Clause 10.2 of the Loan Agreement);
	 
	 	(ii)	 	Section 109(1) of the Act shall not
apply to this Security Deed; and
	 
	 	(iii)	 	the Secured Party shall be entitled to
appoint a Receiver save to the extent prohibited by
Section 72A of the Insolvency Act 1986 (Eng.); and
	 
	 	(iv)	 	any duly appointed Receiver has, until
removed, the powers set forth on Exhibit D attached
hereto.

	 	(b)	 	Removal. The Secured Party may by notice remove from time to
time any Receiver appointed by it (subject to the provisions of
Section 45 of the Insolvency Act 1986 (Eng.) in the case of any
administrative receivership if applicable) and, whenever it may deem
appropriate, appoint a new Receiver in the place of any Receiver
whose appointment has terminated for whatever reason;
	 
	 	(c)	 	Remuneration. The Secured Party may fix the remuneration of
any Receiver appointed by it and the maximum rate specified in
Section 109(6) of the Act shall not apply; and
	 
	 	(d)	 	Relationship with the Secured Party. To the fullest extent
permitted by law, any right, power or discretion conferred by this
Security Deed (either expressly or impliedly) upon a Receiver of the
Collateral may after the continuation and during the continuation of
an Event of Default and after the security created by this Security
Deed becomes enforceable, be exercised by the Secured Party in
relation to any of the Collateral without first appointing a
Receiver or notwithstanding the appointment of a Receiver.

	29.	 	SECURED PARTY.

          The Secured Party has the right hereunder, to make demands, to give
notices, to exercise or refrain from exercising any rights, and to take or
refrain from taking any action (including, without limitation, the release or
substitution of Collateral), solely in accordance with the Finance Documents
and any statutory provisions related therewith.

	30.	 	CONTINUING SECURITY INTEREST; TRANSFER OF THE ADVANCE.

          This Security Deed shall create a continuing security interest in the
Collateral and shall remain in full force and effect until the payment in full
of all Secured Obligations and the cancellation or termination of the Loan
Agreement, be binding upon the Grantor, its successors and assigns, and inure,
together with the rights and remedies of the Secured Party hereunder, to the
benefit of the Secured Party and its successors, transferees and assigns (to
the extent permitted by the Loan Agreement). Without limiting the generality
of the foregoing, but

17

 

subject to the terms of the Loan Agreement, the Secured
Party may assign or otherwise transfer the Advance held by it to any other
Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to the Secured Party herein or otherwise.
Upon the payment in full of all Secured Obligations and the cancellation or
termination of the Loan Agreement, the security interest granted hereby shall
terminate hereunder and of record and all rights to the Collateral shall revert
to the Grantor. Upon any such termination the Secured Party shall, at the
Grantor’s expense, execute and deliver to the Grantor such documents as it
shall reasonably request to evidence such termination.

	31.	 	STANDARD OF CARE; SECURED PARTY MAY PERFORM.

          The powers conferred on the Secured Party hereunder are solely to protect
its interest in the Collateral and shall not impose any duty upon it to
exercise any such powers. Except for the exercise of reasonable care in the
custody of any Collateral in its possession and the accounting for moneys
actually received by it hereunder, the Secured Party shall have no duty as to
any Collateral or as to the taking of any necessary steps to preserve rights
against prior parties or any other rights pertaining to any Collateral. The
Secured Party shall be deemed to have exercised reasonable care in the custody
and preservation of Collateral in its possession if such Collateral is accorded
treatment substantially equal to that which the Secured Party accords its own
property. Neither the Secured Party nor any of its directors, officers,
employees or agents shall be liable for failure to demand, collect or realize
upon all or any part of the Collateral or for any delay in doing so or shall be
under any obligation to sell or otherwise dispose of any Collateral upon the
request of the Grantor or otherwise. If the Grantor fails to perform any
agreement contained herein, the Secured Party may itself perform, or cause
performance of, such agreement, and the reasonable expenses of the Secured
Party incurred in connection therewith shall be immediately due and payable by
the Grantor.

	32.	 	MISCELLANEOUS.

          Any notice required or permitted to be given under this Security Deed
shall be given in accordance with Section 18 of the Loan Agreement. No failure
or delay on the part of
the Secured Party in the exercise of any power, right or privilege
hereunder or under any other Finance Document shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence
therein, nor shall any single or partial exercise of any such power, right or
privilege preclude other or further exercise thereof or of any other power,
right or privilege. All rights and remedies existing under this Security Deed
and the other Finance Documents are cumulative to, and not exclusive of, any
rights or remedies otherwise available. In case any provision in or obligation
under this Security Deed shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby. All
covenants hereunder shall be given independent effect so that if a particular
action or condition is not permitted by any of such covenants, the fact that it
would be permitted by an exception to, or would otherwise be within the
limitations of, another covenant shall not avoid the occurrence of a Potential
Event of Default or an Event of Default if such action is taken or condition
exists. This Security Deed shall be binding upon and inure to the benefit of
the Secured Party and the Grantor and their respective successors and assigns.
The Grantor shall not, without the prior written consent of the Secured Party
given in accordance with the Loan Agreement, assign any right, duty or
obligation hereunder, except as contemplated by the Loan Agreement. This
Security Deed and the other Finance Documents

18

 

embody the entire agreement and
understanding between the Grantor and the Secured Party and supersede all prior
agreements and understandings between such parties relating to the subject
matter hereof and thereof. Accordingly, the Finance Documents may not be
contradicted by evidence of prior, contemporaneous or subsequent oral
agreements of the parties. There are no unwritten oral agreements between the
parties. This Security Deed may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.

     THIS SECURITY DEED AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ITS CONFLICTS OF LAW
PROVISIONS (OTHER THAN SECTION 5-1401 AND SECTION 5-1402 OF THE NEW YORK
GENERAL OBLIGATION LAWS).

19

 

     IN WITNESS WHEREOF, the Grantor and the Secured Party have caused this
Security Deed to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.

	 	 	 	 	 
	 	Executed as a Deed, by:

VERNALIS DEVELOPMENT LIMITED,

as the Grantor

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	Director 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	Director/Secretary 	 
	 

	 	 	 	 	 
	 	ENDO PHARMACEUTICALS INC.,

as the Secured Party

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

20

 

Exhibits to Security Deed

EXHIBIT A

FORM OF PLEDGE SUPPLEMENT

          This PLEDGE SUPPLEMENT, dated [mm/dd/yy], is delivered by VERNALIS
DEVELOPMENT LIMITED a limited liability company incorporated in England and
Wales (the “Grantor”) pursuant to the Security Deed, dated as of July    , 2004
(as it may be from time to time amended, restated, modified or supplemented,
the “Security Deed”), among the Grantor, and ENDO PHARMACEUTICALS INC., as the
Secured Party. Capitalized terms used herein not otherwise defined herein
shall have the meanings ascribed thereto in the Security Deed.

          Grantor hereby confirms the grant to the Secured Party of, and does hereby
grant to the Secured Party, a security interest in all of Grantor’s right,
title and interest in and to all Collateral to secure the Secured Obligations,
in each case whether now or hereafter existing or in which Grantor now has or
hereafter acquires an interest and wherever the same may be located. Grantor
represents and warrants that the attached supplements to schedules accurately
and completely set forth all additional information required pursuant to the
Security Deed and hereby agrees that such supplements to schedules shall
constitute part of the schedules to the Security Deed.

          IN WITNESS WHEREOF, Grantor has caused this Pledge Supplement to be duly
executed and delivered by its duly authorized officer as of the date first
written above.

	 	 	 	 	 
	 	VERNALIS DEVELOPMENT LIMITED

 	 
	 	By:  	 	 
	 	Name:  	 	 	 
	 	Title:  	 	 	 
	 

 

 

Exhibits to Security Deed

EXHIBIT B

FORM OF NOTICE

NOTICE OF CHARGE

	 	 	 
	To:

	 	Endo Pharmaceuticals Inc.
	 
	 	 
	

	 	100 Painters Drive
	 
	 	 
	

	 	Chadds Ford, PA 19317
	 
	 	 
	

	 	United States of America
	 
	 	 
	

	 	(as licensee under the License Agreement (as defined below))

Dear Sir or Madam,

We hereby give you notice that pursuant to a security deed dated as of July    ,
2004 (the “Security Deed”) we have charged to Endo Pharmaceuticals Inc. (as
secured party under the Security Deed) (the “Secured Party”) all our right,
title and interest in, to and in respect of all payments made by the licensee
under the license agreement (the “License Agreement”), dated as of July    ,
2004, between Vernalis Development Limited and Endo Pharmaceuticals Inc.

With effect from your receipt of this notice we hereby give you notice that we
have agreed that upon the occurrence and during the continuation of an Event of
Default, the Secured Party shall have certain rights and remedies under the
Security Deed, including, without limitation:

	(a)	 	all payments to be made to us under or arising from the License Agreement
should be made to the Secured Party or to its order as it may specify from
time to time;
	 
	(b)	 	all remedies provided for in the License Agreement or available at law or
in equity shall be exercisable by the Secured Party;
	 
	(c)	 	all rights to compel performance of the License Agreement shall be
exercisable by the Secured Party (although we shall remain liable to
perform all the obligations assumed by us under the License Agreement);
and
	 
	(d)	 	all rights, interests and benefits whatsoever accruing to or for the
benefit of ourselves arising from the License Agreement belong to the
Secured Party and no changes may be made to the terms of the License
Agreement, nor may the License Agreement be terminated, without the
Secured Party’s prior written consent.

 

 

You are hereby authorized and instructed, without requiring further approval
from us, to provide the Secured Party with such information related to the
License Agreement as it may from time to time request and to send it copies of
all notices issued by you under the License Agreement to the Secured Party, as
well as to us.

These instructions may not be revoked, nor may the terms of the License
Agreement be amended, varied or waived without the prior written consent of the
Secured Party.

Yours faithfully,

For and on behalf of

VERNALIS DEVELOPMENT LIMITED

 

 

Exhibits to Security Deed

EXHIBIT C

POWERS OF RECEIVER

General.

	 	(a)	 	Each Receiver has, and is entitled to exercise, all of the
rights, powers and discretions set out below in this Exhibit D in
addition to those conferred by the Act on any receiver appointed
under the Act;
	 
	 	(b)	 	If there is more than one Receiver holding office at the same
time, each Receiver may (unless the document appointing him states
otherwise) exercise all of the powers conferred on a Receiver under
this Security Deed individually and to the exclusion of any other
Receivers;
	 
	 	(c)	 	Each Receiver has all the rights, powers and discretions set
out in schedule 1 to the Insolvency Act 1986 (Eng.); and
	 
	 	(d)	 	A Receiver who is an administrative receiver of the Grantor
has all the rights, powers and discretions of an administrative
receiver under the Insolvency Act 1986 (Eng.).

Possession. Receiver may take immediate possession of, get in and collect any
of the Collateral.

Protection of Assets. A Receiver may do all acts which the Grantor might do in
the ordinary conduct of its business as well for the protection as for the
improvement of the Collateral, in each case as he may think fit.

Employees. A Receiver may appoint and discharge managers, the officers, the
Secured Party, accountants, servants, workmen and others for the purposes of
this Security Deed upon such terms as to remuneration or otherwise as he may
think proper and discharge any such persons appointed by the Grantor.

Borrow Money. A Receiver may raise and borrow money either unsecured or on the
securing of any of the Collateral either in priority to the security
constituted by this Security Deed or otherwise and generally on any terms and
for whatever purpose he thinks fit. No person lending that money shall be
concerned to enquire as to the propriety or purpose of the exercise of that
power or to check the application of any money so raised or borrowed.

Sale of Assets. Subject to the provisions of Clause 10.2 of the Loan
Agreement, a Receiver may sell, exchange, convert into money and realise any of
the Collateral by public auction or private contract and generally in any
manner and on any terms that he thinks proper. The consideration for any such
transaction may consist of cash, debentures or other obligations, shares, stock

 

 

or other valuable consideration and any such consideration may be payable in a
lump sum or by instalments spread over such period as he thinks fit.

Compromise. A Receiver may settle, adjust, refer to arbitration, compromise
and arrange any claims, accounts, disputes, questions and demands with or by
any person who is or claims to be a creditor of the Grantor or relating in any
way to any of the Collateral.

Legal Actions. A Receiver may bring, prosecute, enforce, defend and abandon
all actions, suits and proceedings in relation to any of the Collateral that
may seem to him to be expedient.

Receipts. A Receiver may give valid receipts for all moneys and execute all
assurances and things that may be proper or desirable for realising any of the
Collateral.

Other Powers

Any Receiver may:

do all other acts and things which he may consider desirable or necessary
for realising any of the Collateral or incidental or conducive to any of the
rights, powers or discretions conferred on a Receiver under or by virtue of
this Security Deed;

exercise in relation to any of the Collateral all the powers, authorities
and things which he would be capable of exercising if he were the absolute
beneficial owner of the same, and

and may use the name of the Grantor for any of the above purposes.

 

 

SCHEDULE 4.1(a)(ii)

ORGANIZATIONAL INFORMATION

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	Chief
	 	 	 	 	 	 	Organization	 	Executive Office
	 Grantor’s	 	Type of	 	Jurisdiction of	 	Identification	 	and
	 Full Legal Name
	 	Organization
	 	Organization
	 	Number
	 	Notice Address

	VERNALIS DEVELOPMENT

	 	Limited
	 	England and Wales
	 	 	2600483	 	 	Chief Executive Office:
	LIMITED

	 	Liability

Company	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	Notice Address:
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	Vernalis Development Limited
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	Oakdene Court
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	613 Reading Road
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	Winnersh
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	Wokingham
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	RG41 5UA
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	United Kingdom
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	Attention: Head of Legal
	

	 	 	 	 	 	 	 	 	 	Affairs/Chief Financial Officer
	 
	 	 	 	 	 	 	 	 	 	 
	

	 	 	 	 	 	 	 	 	 	Telecopy: 0118-989-98300

 

 

SCHEDULE 4.1(a)(iii)

OTHER NAMES OF GRANTOR

 

 

SCHEDULE 4.1(a)(iv)

CHANGES IN ORGANIZATIONAL INFORMATION AND STRUCTURE

Changes in Name:

	 	 	 
	Date of Change
	 	Description of Change

	 

	 	 

Changes in Jurisdiction of Organization:

	 	 	 
	Date of Change
	 	Description of Change

	 

	 	 

Changes in Chief Executive Office:

	 	 	 
	Date of Change
	 	Description of Change

	 

	 	 

 

 

SCHEDULE 4.1(a)(v)

FILING OFFICES

Recorder of Deeds, District of Columbia

Companies House, London, England<PAGE>
                                                                   EXHIBIT 10.15

                 THIRD AMENDMENT AND WAIVER TO CREDIT AGREEMENT

                  This THIRD AMENDMENT AND WAIVER TO CREDIT AGREEMENT (this
"AMENDMENT") is entered into as of June 22, 2004, among WESTLAKE CHEMICAL
CORPORATION ("WESTLAKE") and certain of its domestic subsidiaries listed as
Borrowers to the Credit Agreement described below (collectively, the
"BORROWERS"), Required Lenders under the Credit Agreement, BANK OF AMERICA,
N.A., in its capacity as Agent for Lenders under the Credit Agreement (the
"AGENT"), and Guarantors under the Credit Agreement (hereinafter defined).

                  Reference is made to the Credit Agreement, dated as of July
31, 2003 (as amended, modified, and supplemented, the "CREDIT AGREEMENT"), among
the Borrowers, the Agent, and Lenders party thereto. Unless otherwise defined in
this Amendment, capitalized terms used herein shall have the meanings set forth
in the Credit Agreement; all Section references herein are to Sections in the
Credit Agreement; and all Paragraph references herein are to Paragraphs in this
Amendment.

                                    RECITALS

         A. Westlake or one of its Subsidiaries (the "BUYER") plans to
consummate an Acquisition of the domestic assets of Bristolpipe Corporation (the
"SELLING ENTITY") for a Purchase Price of approximately $35,000,000 (subject to
adjustment as set forth in that certain Asset Purchase Agreement dated June 30,
2004 by and between the Buyer and the Selling Entity (the "ASSET PURCHASE
AGREEMENT")) (the "BRISTOLPIPE ACQUISITION"), which Purchase Price exceeds the
amount permitted by SECTION 7.26.

         B. Westlake proposes to consummate an initial public offering of its
common stock (the "IPO"). In connection with the IPO, Westlake Polymer &
Petrochemical, Inc., a Delaware corporation ("WPPI"), and Gulf Polymer &
Petrochemical, Inc., a Delaware corporation ("GPPI"), will merge with and into
Westlake (or, alternatively, will merge with each other prior to merging with
and into Westlake), with Westlake as the surviving entity (collectively, the
"IPO MERGERS").

         C. Westlake has requested that Required Lenders waive certain
provisions of the Credit Agreement with respect to the solvency of certain Loan
Parties.

         D. Westlake has requested certain amendments relating to the solvency
of the Loan Parties and certain notice requirements.

         E. Westlake has requested certain amendments and waivers in connection
with the Bristolpipe Acquisition, the IPO, and the IPO Mergers.

         F. Subject to the terms and conditions of this Amendment, Lenders are
willing to agree to such amendments and waivers.

         Accordingly, for adequate and sufficient consideration, the parties
hereto agree, as follows:

                                                      THIRD AMENDMENT AND WAIVER
<PAGE>

PARAGRAPH 1. AMENDMENTS. By execution of this Amendment, the Credit Agreement is
hereby amended as follows:

1.1 NOTICE. SECTION 5.3(g) is amended in its entirety to read as follows:

         "Immediately after receipt by a Responsible Officer of any Loan Party
         of (i) any notice of any violation by any Loan Party of any
         Environmental Law or (ii) any writing from any Governmental Authority
         asserting that (x) any Loan Party is not in compliance with any
         Environmental Law or (y) any Loan Party is being investigated for its
         compliance with the Environmental Law, provided that any such
         violation, noncompliance or investigation could reasonably be expected
         to have a Material Adverse Effect;"

1.2 SUBSIDIARIES AND AFFILIATES. The reference to "Parent" in line 3 of SECTION
6.5 is deleted and the term "Westlake" is substituted therefor.

1.3 CAPITALIZATION. SECTION 6.7 is deleted in its entirety.

1.4 DISTRIBUTIONS; CAPITAL CHANGES; RESTRICTED INVESTMENTS. The reference to
"$100,000,000" in SECTION 7.10(a) is deleted and the amount "$80,000,000" is
substituted therefor.

1.5 TRANSACTIONS WITH AFFILIATES. The first sentence of SECTION 7.15 is amended
by (a) deleting the word "and" immediately prior to CLAUSE (b) thereof, and (b)
inserting the following as CLAUSE (c) thereof immediately after CLAUSE (b):

         ", and (c) transactions between Westlake and WPPI and between Westlake
         and GPPI in connection with the IPO Mergers"

1.6 PERMITTED ACQUISITIONS. The reference to "Potential Default" in SECTION
7.26(f) is deleted and the term "Event of Default" is substituted therefor.

1.7 EVENTS OF DEFAULT. SECTION 9.1(e) is amended in its entirety to read as
follows:

         "(e) (i) Westlake or any of its Subsidiaries shall (A) file a voluntary
petition in bankruptcy or file a voluntary petition or an answer or otherwise
commence any action or proceeding seeking reorganization, arrangement, or
readjustment of its debts or for any other relief under the federal Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency act or law, state
or federal, now or hereafter existing, or consent to, approve of, or acquiesce
in, any such petition, action, or proceeding; (B) apply for or acquiesce in the
appointment of a receiver, assignee, liquidator, sequestrator, custodian,
monitor, trustee or similar officer for it or for all or any part of its
property; (C) make an assignment for the benefit of creditors; (D) be unable
generally to pay its debts as they become due; or (E) not be Solvent; or (ii)
the Loan Parties, on a consolidated basis, shall not be Solvent."

1.8 DEFINITIONS.

         (a) The following definitions are added alphabetically to ANNEX A to
the Credit Agreement:

                  (i) GPPI means Gulf Polymer & Petrochemical, Inc., a Delaware
         corporation.

                  (ii) WPPI means Westlake Polymer & Petrochemical, Inc., a
         Delaware corporation.

                                                      THIRD AMENDMENT AND WAIVER
                                       2
<PAGE>

                  (iii) IPO MERGERS means the mergers of GPPI and WPPI with and
         into Westlake in connection with the initial public offering of common
         stock of Westlake or, alternatively, the merger of GPPI and WPPI (the
         "FIRST MERGER") and the merger of the surviving corporation of the
         First Merger with and into Westlake.

         (b) The definition of "Parent" in ANNEX A to the Credit Agreement is
deleted in its entirety.

         (c) The definition of "Solvent" in ANNEX A to the Credit Agreement is
amended by inserting the following sentence at the end of such definition:

         "Notwithstanding the foregoing, except with respect to SECTION
         9.1(e)(II) and the last proviso of each of Sections 2(f) and 2(g) of
         the Third Amendment and Waiver to Credit Agreement, debt of any Loan
         Party owed to any other Loan Party shall not be included for purposes
         of calculating whether a Loan Party is Solvent."

PARAGRAPH 2. WAIVERS. By execution of this Amendment, certain provisions of the
Credit Agreement shall be waived as follows:

         (a) In connection with the Bristolpipe Acquisition, the requirement set
forth in SECTION 7.26(i)(A) that the Purchase Price for each individual
Acquisition be less than or equal to $20,000,000 is hereby waived and Required
Lenders hereby agree not to exercise their rights and remedies under the Loan
Documents solely as a result of any Default or Event of Default arising under
SECTIONS 7.26(i)(A) or 9.1(c) as a result of the Bristolpipe Acquisition;
provided that the Purchase Price for the Bristolpipe Acquisition does not exceed
$35,000,000 (subject to adjustment as set forth in the Asset Purchase Agreement
so long as such adjustment does not increase the Purchase Price more than 20%).

         (b) With respect to the IPO Mergers, (i) the requirement set forth in
SECTION 7.26(i)(A) that the Purchase Price for each individual Acquisition be
less than or equal to $20,000,000 is hereby waived and Required Lenders hereby
agree not to exercise their rights and remedies under the Loan Documents solely
as a result of any Default or Event of Default arising under SECTIONS 7.26(i)(A)
or 9.1(c) as a result of the IPO Mergers, and (ii) the requirement set forth in
SECTION 7.26(c) that prior to the closing of any Acquisition, the Person to be
acquired is Solvent is hereby waived and Required Lenders hereby agree not to
exercise their rights and remedies under the Loan Documents solely as a result
of any Default or Event of Default arising under SECTIONS 7.26(c) or 9.1(c) as a
result of the Acquisition of Westlake International Corporation as a result of
the IPO Mergers so long as the Loan Parties, on a consolidated basis, are
Solvent immediately prior to such Acquisition and are Solvent after giving
effect to such Acquisition.

         (c) With respect to the Bristolpipe Acquisition and the IPO Mergers,
the requirement set forth in SECTION 7.26(i)(B) that the Purchase Price for all
Acquisitions consummated during the same Fiscal Year be less than or equal to
$50,000,000 is hereby waived and Required Lenders hereby agree not to exercise
their rights and remedies under the Loan Documents solely as a result of any
Default or Event of Default arising under SECTIONS 7.26(i)(B) or 9.1(c) as a
result of the Bristolpipe Acquisition, the IPO Mergers, and the Acquisition of
Westlake International Corporation and Westlake Technology Corporation as a
result of the IPO Mergers; provided that the Purchase Price for the Bristolpipe
Acquisition (but not for the IPO Mergers) shall be included in any calculation
of the $50,000,000 Purchase Price limit set forth in SECTION 7.26(i)(B) for
Acquisitions during the applicable Fiscal Year.

         (d) For the avoidance of doubt, after giving effect to the waivers set
forth in PARAGRAPHS 2(a) through 2(c), the Bristolpipe Acquisition and the IPO
Mergers shall be deemed Acquisitions permitted by SECTION 7.26.

                                                      THIRD AMENDMENT AND WAIVER
                                       3
<PAGE>

         (e) Westlake has advised the Agent and the Lenders that Westlake
Overseas Corporation had been dissolved. The representation set forth in SECTION
6.5 in connection with Westlake Overseas Corporation is hereby waived and
Required Lenders agree not to exercise their rights and remedies under the Loan
Documents solely as a result of any Default or Event of Default arising under
SECTIONS 6.5 or 9.1(b) as a result of the dissolution of Westlake Overseas
Corporation.

         (f) Westlake has advised the Agent and the Lenders that, to the extent
intercompany payables are included within debt for the purposes of calculating
whether or not a Person is Solvent, as of the Closing Date and as of and through
the Effective Date (as defined in PARAGRAPH 3(a)), Geismar Vinyls Company LP,
Westlake Management Services, Inc., Westlake Polymers LP, Westlake PVC
Corporation, Westlake Vinyl Corporation and Westech Building Products, Inc. were
not, are not, and will not be Solvent. The representation set forth in SECTIONS
6.8 that each Loan Party is Solvent and the provision set forth in former
SECTION 9.1(e)(v) that it constitutes an Event of Default if Westlake or any of
its Subsidiaries shall not be Solvent are hereby waived and Required Lenders
hereby agree not to exercise their rights and remedies under the Loan Documents
solely as a result of any Default or Event of Default arising under SECTIONS
6.8, 9.1(b), or former 9.1(e)(v) as a result of any such insolvency; so long as
the Loan Parties, on a consolidated basis, were, are, and will be Solvent as of
the Closing Date and as of and through the Effective Date.

         (g) Westlake has advised the Agent and the Lenders that after Westlake
International Corporation has become a Restricted Subsidiary as a result of its
Acquisition by Westlake as a result of the IPO Mergers, Westlake International
Corporation will not be Solvent. The representation set forth in SECTIONS 6.8
that each Loan Party is Solvent and the provision set forth in SECTION
9.1(e)(i)(E) (which amends former SECTION 9.1(e)(v)) that it constitutes an
Event of Default if Westlake or any of its Subsidiaries shall not be Solvent are
hereby waived solely with respect to Westlake International Corporation and
Required Lenders hereby agree not to exercise their rights and remedies under
the Loan Documents solely as a result of any Default or Event of Default arising
under SECTIONS 6.8, 9.1(b), or 9.1(e)(i)(E) (which amends former SECTION
9.1(e)(v)) as a result of such insolvency so long as the Loan Parties, on a
consolidated basis, are Solvent immediately prior to such Acquisition and are
Solvent after giving effect to such Acquisition.

PARAGRAPH 3. CONDITIONS.

         (a) Notwithstanding any contrary provision, this Amendment is not
effective until the date (the "EFFECTIVE DATE") upon which (i) the
representations and warranties in this Amendment are true and correct; (ii) the
Agent has received counterparts of this Amendment executed by each Borrower,
each Guarantor, and Required Lenders; and (iii) Borrowers have paid Attorney
Costs of the Agent incurred in connection with the Loan Documents, including any
outstanding Attorney's Costs of the Agent on the date hereof.

         (b) The effectiveness of the waiver in PARAGRAPH 2(a) is also subject
to receipt of the following documents and items from Westlake to the
satisfaction of the Agent:

                  (i) UCC lien searches on the Selling Entity from each
         jurisdiction in which the Selling Entity owns assets and is organized,
         together with any lien releases with respect to any Liens on the
         acquired assets other than Permitted Liens;

                  (ii) certified resolutions of the Buyer, authorizing the
         Bristolpipe Acquisition;

                  (iii) revised schedules to the Credit Agreement:

                                                      THIRD AMENDMENT AND WAIVER

                                       4
<PAGE>

                        Schedule 6.4      -        Prior Corporate Names
                        Schedule 6.12     -        Proprietary Rights
                        Schedule 6.13     -        Trade Names
                        Schedule 6.14     -        Litigation
                        Schedule 6.16     -        Environmental;

                  (iv) revised schedules to the Security Agreement of the Buyer
         to reflect the Bristolpipe Acquisition:

                        Schedule I        -        Location of Collateral
                        Schedule III      -        Proprietary Rights;

                  (v) certificates of good standing, existence, qualification,
         and/or authority for the Selling Entity from each jurisdiction in which
         the Selling Entity does business or owns assets;

                  (vi) to the extent delivered in connection with the
         Bristolpipe Acquisition, legal opinions dated as of the date of the
         closing of the Bristolpipe Acquisition (the "ACQUISITION CLOSING DATE")
         relating to the Bristolpipe Acquisition rendered by counsel to the
         Buyer and counsel to the Selling Entity;

                  (vii) the Asset Purchase Agreement certified, as of the
         Acquisition Closing Date, as true and correct by Westlake;

                  (viii) evidence that any additional required consents to the
         Bristolpipe Acquisition have been obtained, including, without
         limitation, any consents under the Bond Debt or the Fixed Asset Loan;

                  (ix) evidence satisfactory to the Agent that (a) the
         Bristolpipe Acquisition will be contemporaneously consummated in
         compliance, in all material respects, with all conditions and
         requirements contained in the Asset Purchase Agreement; (b) after
         giving effect to the Bristolpipe Acquisition, the Buyer will acquire
         and become the owner of all of the property or assets to be acquired
         thereby free and clear of any Liens, except Permitted Liens; and (c) in
         connection with the Bristolpipe Acquisition, no Loan Party has assumed
         any Debt or other liabilities that should be reflected on a balance
         sheet in accordance with GAAP other than the liabilities assumed under
         the Asset Purchase Agreement and reflected on the balance sheet for the
         Selling Entity delivered to the Agent and the Lenders; and

                  (x) such other agreements, documents, instruments, opinions,
         certificates, and evidences as the Agent or Required Lenders may
         reasonably request.

         (c) The effectiveness of all of the amendments in PARAGRAPH 1 (other
than the amendment in PARAGRAPHS 1.1, 1.6, and 1.8(c)) and the waivers in
PARAGRAPHS 2(b), 2(c), 2(d), and 2(g) is also subject to receipt of the
following documents and items from Westlake and satisfaction of the other
conditions precedent to the satisfaction of the Agent:

                  (i) UCC lien searches on each of WPPI, GPPI, Westlake
         International Corporation, and Westlake Technology Corporation from
         each jurisdiction in which such entity owns assets and is organized,
         together with any lien releases with respect to any Liens on the assets
         of such entities other than Permitted Liens;

                                                      THIRD AMENDMENT AND WAIVER
                                       5
<PAGE>

                  (ii) certified resolutions of Westlake, authorizing the IPO
         and the IPO Mergers;

                  (iii) revised schedules to the Credit Agreement:

                           Schedule 6.4     -       Prior Corporate Names
                           Schedule 6.5     -       Subsidiaries and Affiliates
                           Schedule 6.12    -       Proprietary Rights
                           Schedule 6.13    -       Trade Names;

                  (iv) revised schedules to the Security Agreement of Westlake
         to reflect the IPO Mergers:

                           Schedule I       -       Location of Collateral
                           Schedule III     -       Proprietary Rights;

                  (v) Obligation Guaranty dated as of the effective date of the
         IPO Mergers (the "IPO MERGER DATE"), executed by each of Westlake
         International Corporation and Westlake Technology Corporation (the "NEW
         SUBSIDIARIES"), as Guarantors;

                  (vi) Security Agreements dated as of the IPO Merger Date,
         executed by each of the New Subsidiaries, as Debtors, together with
         completed Schedules thereto;

                  (vii) Copyright Security Agreements dated as of the IPO Merger
         Date, executed by each of the New Subsidiaries, as Debtors, together
         with completed Schedules thereto;

                  (viii) Trademark Security Agreements dated as of the IPO
         Merger Date, executed by each of the New Subsidiaries, as Debtors,
         together with completed Schedules thereto;

                  (ix) Financing Statements showing each of the New
         Subsidiaries, as Debtors, prepared for recordation in Delaware;

                  (x) officers' certificate of each of the New Subsidiaries,
         certifying the incumbency of officers, together with the indicated
         Annexes:

                             Annex A - Resolutions
                             Annex B - Bylaws
                             Annex C - Articles of Incorporation;

                  (xi) certificates of incorporation of each of the New
         Subsidiaries, certified by the appropriate authority in the
         jurisdiction of incorporation;

                  (xii) certificates of good standing, existence, qualification,
         and/or authority for each of the New Subsidiaries from each
         jurisdiction in which such New Subsidiary does business or owns assets;

                  (xiii) legal opinion reasonably satisfactory to the Agent,
         dated as of the IPO Merger Date relating to the IPO Mergers by counsel
         to Westlake;

                  (xiv) (i) a fully-executed copy of all documents and
         agreements executed and delivered in connection with the IPO Mergers,
         together with all schedules and exhibits thereto (collectively, the
         "IPO MERGER DOCUMENTS"), certified as true, correct, and complete by a
         Responsible Officer of

                                                      THIRD AMENDMENT AND WAIVER
                                       6
<PAGE>

         Westlake; (ii) evidence satisfactory to the Agent and its counsel that
         the IPO Mergers will be consummated in accordance with the terms of the
         IPO Merger Documents, and that all material conditions stated therein
         have been satisfied without waiver; and (iii) evidence of filing of all
         Certificates of Merger related to the IPO Mergers;

                  (xv) evidence that any additional required consents to the IPO
         Mergers have been obtained, including, without limitation, any consents
         under the Bond Debt or the Fixed Asset Loan;

                  (xvi) certification from Westlake that (a) the Debt assumed by
         Westlake as a result of the IPO Mergers is not secured by any Loan
         Parties' assets and otherwise satisfies the requirements of SECTION
         7.13(g) and delivery to the Agent of all documents related to such Debt
         and (b) the anticipated repayment of the Bond Debt or Fixed Asset Loan
         from the proceeds of the IPO will be permitted by SECTIONS 7.14(c)(ii)
         or 7.14(c)(iii), as applicable;

                  (xvii) after giving effect to the issuance of shares of common
         stock in the IPO and the IPO Mergers, the Agent shall be reasonably
         satisfied with the corporate and capital structure and management of
         Westlake and its Subsidiaries; and

                  (xii) such other agreements, documents, instruments, opinions,
         certificates, and evidences as the Agent or Required Lenders may
         reasonably request.

PARAGRAPH 4. ACKNOWLEDGMENT AND RATIFICATION. As a material inducement to the
Agent and Lenders to execute and deliver this Amendment, each Borrower and each
Guarantor (a) consent to the agreements in this Amendment and (b) agree and
acknowledge that the execution, delivery, and performance of this Amendment
shall in no way release, diminish, impair, reduce, or otherwise affect the
respective obligations of Borrowers or Guarantors under their respective Loan
Documents, which Loan Documents shall remain in full force and effect, and all
Liens, guaranties, and rights thereunder are hereby ratified and confirmed.

PARAGRAPH 5. REPRESENTATIONS. As a material inducement to Lenders to execute and
deliver this Amendment, each Borrower and each Guarantor represent and warrant
to Lenders (with the knowledge and intent that Lenders are relying upon the same
in entering into this Amendment) that as of each Effective Date and as of the
date of execution of this Amendment, (a) all representations and warranties in
the Loan Documents are true and correct in all material respects as though made
on the date hereof, except to the extent that (i) any of them speaks to a
different specific date or (ii) the facts on which any of them were based have
been changed by transactions contemplated or permitted by the Credit Agreement,
or (iii) any of them is waived herein and (b) no Default or Event of Default
exists other than as waived herein.

PARAGRAPH 6. EXPENSES. Borrowers shall pay all reasonable costs, fees, and
expenses paid or incurred by Agent in connection with this Amendment, including,
without limitation, Attorney Costs of Agent in connection with the negotiation,
preparation, delivery, and execution of this Amendment and any related
documents.

PARAGRAPH 7. MISCELLANEOUS.

         7.1 This Amendment is a "Loan Document" referred to in the Credit
Agreement, and the provisions relating to Loan Documents in ARTICLE 13 of the
Credit Agreement are incorporated in this Amendment by reference. Unless stated
otherwise (a) the singular number includes the plural and vice versa and words
of any gender include each other gender, in each case, as appropriate, (b)
headings and

                                                      THIRD AMENDMENT AND WAIVER
                                       7
<PAGE>

captions may not be construed in interpreting provisions, (c) this Amendment
must be construed, and its performance enforced, under New York law, (d) if any
part of this Amendment is for any reason found to be unenforceable, all other
portions of it nevertheless remain enforceable, and (e) this Amendment may be
executed in any number of counterparts with the same effect as if all
signatories had signed the same document, and all of those counterparts must be
construed together to constitute the same document.

         7.2 The Loan Documents shall remain unchanged and in full force and
effect, except as provided in this Amendment, and are hereby ratified and
confirmed. On and after the Effective Date, all references to the "Credit
Agreement" shall be to the Credit Agreement as herein amended. The execution,
delivery, and effectiveness of this Amendment shall not, except as expressly
provided herein, operate as a waiver of any rights of Lenders under any Loan
Document, nor constitute a waiver under any of the Loan Documents.

PARAGRAPH 8. ENTIRE AGREEMENT. THIS AMENDMENT REPRESENTS THE FINAL AGREEMENT
BETWEEN THE PARTIES ABOUT THE SUBJECT MATTER OF THIS AMENDMENT AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.

PARAGRAPH 9. PARTIES. This Amendment binds and inures to Borrowers, Guarantors,
Agent, Lenders, and their respective successors and assigns.

         The parties hereto have executed this Amendment in multiple
counterparts to be effective as of the Effective Date.

                     REMAINDER OF PAGE INTENTIONALLY BLANK.
                           SIGNATURE PAGES TO FOLLOW.

                                                      THIRD AMENDMENT AND WAIVER
                                       8
<PAGE>

Signature Page to that certain Third Amendment and Waiver to Credit Agreement
dated as of the date first stated above, among Westlake Chemical Corporation and
certain of its domestic subsidiaries, as Borrowers, Bank of America, N.A., in
its capacity as Agent, Required Lenders, and Guarantors.

BANK OF AMERICA, N.A., as Agent and a Lender

By:    /s/ Robert Mostert
       -------------------------------
Name:  Robert Mostert
Title: Vice President

                  SIGNATURE PAGE TO THIRD AMENDMENT AND WAIVER
<PAGE>

Signature Page to that certain Third Amendment and Waiver to Credit Agreement
dated as of the date first stated above, among Westlake Chemical Corporation and
certain of its domestic subsidiaries, as Borrowers, Bank of America, N.A., in
its capacity as Agent, Required Lenders, and Guarantors.

GENERAL ELECTRIC CAPITAL CORPORATION,
as a Lender

By:     /s/ John Hanley
        -----------------------------
Name:   John Hanley
Title:  Its Duly Authorized Signatory

                  SIGNATURE PAGE TO THIRD AMENDMENT AND WAIVER
<PAGE>

Signature Page to that certain Third Amendment and Waiver to Credit Agreement
dated as of the date first stated above, among Westlake Chemical Corporation and
certain of its domestic subsidiaries, as Borrowers, Bank of America, N.A., in
its capacity as Agent, Required Lenders, and Guarantors.

THE CIT GROUP/BUSINESS CREDIT, INC.,
as a Lender

By:    /s/ C. Graham Sones
       -----------------------------
Name:  C. Graham Sones
Title: Vice President

                  SIGNATURE PAGE TO THIRD AMENDMENT AND WAIVER
<PAGE>

Signature Page to that certain Third Amendment and Waiver to Credit Agreement
dated as of the date first stated above, among Westlake Chemical Corporation and
certain of its domestic subsidiaries, as Borrowers, Bank of America, N.A., in
its capacity as Agent, Required Lenders, and Guarantors.

PNC BANK, NATIONAL ASSOCIATION,
as a Lender

By:    /s/ Paul R. Frank
       ---------------------------
Name:  Paul R. Frank
Title: Vice President

                  SIGNATURE PAGE TO THIRD AMENDMENT AND WAIVER
<PAGE>

Signature Page to that certain Third Amendment and Waiver to Credit Agreement
dated as of the date first stated above, among Westlake Chemical Corporation and
certain of its domestic subsidiaries, as Borrowers, Bank of America, N.A., in
its capacity as Agent, Required Lenders, and Guarantors.

WELLS FARGO FOOTHILL, LLC,
as a Lender

By:    /s/ Juan Barrera
       --------------------------
Name:  Juan Barrera
Title: Vice President

                  SIGNATURE PAGE TO THIRD AMENDMENT AND WAIVER
<PAGE>

Signature Page to that certain Third Amendment and Waiver to Credit Agreement
dated as of the date first stated above, among Westlake Chemical Corporation and
certain of its domestic subsidiaries, as Borrowers, Bank of America, N.A., in
its capacity as Agent, Required Lenders, and Guarantors.

LASALLE BUSINESS CREDIT, LLC,
as a Lender

By:    /s/ Joseph Fudacz
       --------------------------
Name:  Joseph Fudacz
Title: Senior Vice President

                  SIGNATURE PAGE TO THIRD AMENDMENT AND WAIVER

<PAGE>

Signature Page to that certain Third Amendment and Waiver to Credit Agreement
dated as of the date first stated above, among Westlake Chemical Corporation and
certain of its domestic subsidiaries, as Borrowers, Bank of America, N.A., in
its capacity as Agent, Required Lenders, and Guarantors.

UBS AG, STAMFORD BRANCH,
as a Lender

By:    /s/ Wilfred V. Saint
       ---------------------------------------
Name:  Wilfred V. Saint
Title: Director, Banking Products Services, US

By:    /s/ Juan Zuniga
       ---------------------------------------
Name:  Juan Zuniga
Title: Banking Products Services, US

                  SIGNATURE PAGE TO THIRD AMENDMENT AND WAIVER

<PAGE>

Signature Page to that certain Third Amendment and Waiver to Credit Agreement
dated as of the date first stated above, among Westlake Chemical Corporation and
certain of its domestic subsidiaries, as Borrowers, Bank of America, N.A., in
its capacity as Agent, Required Lenders, and Guarantors.

CREDIT SUISSE FIRST BOSTON, ACTING THROUGH
ITS CAYMAN ISLANDS BRANCH, as a Lender

By:    /s/ Denise L. Alvarez
       -----------------------------------
Name:  Denise L. Alvarez
Title: Associate

                  SIGNATURE PAGE TO THIRD AMENDMENT AND WAIVER
<PAGE>

Signature Page to that certain Third Amendment and Waiver to Credit Agreement
dated as of the date first stated above, among Westlake Chemical Corporation and
certain of its domestic subsidiaries, as Borrowers, Bank of America, N.A., in
its capacity as Agent, Required Lenders, and Guarantors.

CREDIT SUISSE FIRST BOSTON, ACTING THROUGH
ITS CAYMAN ISLANDS BRANCH, as a Lender

By:    /s/ Alain Daoust
       -----------------------------
Name:  Alain Daoust
Title: Director

                  SIGNATURE PAGE TO THIRD AMENDMENT AND WAIVER
<PAGE>

Signature Page to that certain Third Amendment and Waiver to Credit Agreement
dated as of the date first stated above, among Westlake Chemical Corporation and
certain of its domestic subsidiaries, as Borrowers, Bank of America, N.A., in
its capacity as Agent, Required Lenders, and Guarantors.

DEUTSCHE BANK TRUST COMPANY AMERICAS,
as a Lender

By:    /s/ Albert Fischetti
       -------------------------------
Name:  Albert Fischetti
Title: Director

                  SIGNATURE PAGE TO THIRD AMENDMENT AND WAIVER
<PAGE>

Signature Page to that certain Third Amendment and Waiver to Credit Agreement
dated as of the date first stated above, among Westlake Chemical Corporation and
certain of its domestic subsidiaries, as Borrowers, Bank of America, N.A., in
its capacity as Agent, Required Lenders, and Guarantors.

                           BORROWERS AND GUARANTORS:

                              WESTLAKE CHEMICAL CORPORATION,
                              a Delaware corporation
                              WESTLAKE PVC CORPORATION, a Delaware corporation
                              WESTLAKE VINYLS, INC., a Delaware corporation

                              By: /s/ Albert Chao
                                  ----------------------------------------------
                                  Albert Chao
                                  President of the above Borrowers

                  SIGNATURE PAGE TO THIRD AMENDMENT AND WAIVER
<PAGE>

Signature Page to that certain Third Amendment and Waiver to Credit Agreement
dated as of the date first stated above, among Westlake Chemical Corporation and
certain of its domestic subsidiaries, as Borrowers, Bank of America, N.A., in
its capacity as Agent, Required Lenders, and Guarantors.

                                NORTH AMERICAN PIPE CORPORATION,
                                a Delaware corporation
                                VAN BUREN PIPE CORPORATION,
                                a Delaware corporation
                                WESTECH BUILDING PRODUCTS, INC.,
                                a Delaware corporation

                                By: /s/ Wayne D. Morse
                                    --------------------------------------------
                                    Wayne D. Morse
                                    President of the above Borrowers

                  SIGNATURE PAGE TO THIRD AMENDMENT AND WAIVER
<PAGE>

Signature Page to that certain Third Amendment and Waiver to Credit Agreement
dated as of the date first stated above, among Westlake Chemical Corporation and
certain of its domestic subsidiaries, as Borrowers, Bank of America, N.A., in
its capacity as Agent, Required Lenders, and Guarantors.

                           GEISMAR VINYLS COMPANY LP,
                           a Delaware limited partnership
                              By: GVGP, Inc., its general partner

                           WESTLAKE PETROCHEMICALS LP,
                           a Delaware limited partnership
                              By: Westlake Chemical Investments, Inc.,
                                  its general partner

                           WESTLAKE POLYMERS LP, a Delaware limited partnership
                              By: Westlake Chemical Investments, Inc.,
                                  its general partner

                           WESTLAKE STYRENE LP, a Delaware limited partnership
                              By: Westlake Chemical Holdings, Inc.,
                                  its general partner

                           WPT LP, a Delaware limited partnership
                              By: Westlake Chemical Holdings, Inc.,
                                  its general partner

                              By: /s/ Albert Chao
                                  ----------------------------------------------
                                  Albert Chao
                                  President of the general partners of the
                                  above Borrowers

                  SIGNATURE PAGE TO THIRD AMENDMENT AND WAIVER
<PAGE>

Signature Page to that certain Third Amendment and Waiver to Credit Agreement
dated as of the date first stated above, among Westlake Chemical Corporation and
certain of its domestic subsidiaries, as Borrowers, Bank of America, N.A., in
its capacity as Agent, Required Lenders, and Guarantors.

                              GUARANTORS:

                              GRAMERCY CHLOR-ALKALI CORPORATION,
                              a Delaware corporation
                              GVGP, INC., a Delaware corporation
                              WESTLAKE CHEMICAL HOLDINGS, INC.,
                              a Delaware corporation
                              WESTLAKE CHEMICAL INVESTMENTS, INC.,
                              a Delaware corporation
                              WESTLAKE MANAGEMENT SERVICES, INC.,
                              a Delaware corporation
                              WESTLAKE OLEFINS CORPORATION,
                              a Delaware corporation
                              WESTLAKE RESOURCES CORPORATION,
                              a Delaware corporation
                              WESTLAKE VINYL CORPORATION,
                              a Delaware corporation

                              By: /s/ Albert Chao
                                  ----------------------------------------
                                  Albert Chao
                                  President of the above entities

                  SIGNATURE PAGE TO THIRD AMENDMENT AND WAIVER
<PAGE>

Signature Page to that certain Third Amendment and Waiver to Credit Agreement
dated as of the date first stated above, among Westlake Chemical Corporation and
certain of its domestic subsidiaries, as Borrowers, Bank of America, N.A., in
its capacity as Agent, Required Lenders, and Guarantors.

                                        NORTH AMERICAN PROFILES, INC.,
                                        a Delaware corporation

                                        By: /s/ Wayne D. Morse
                                            ------------------------------------
                                            Wayne D. Morse
                                            President

                  SIGNATURE PAGE TO THIRD AMENDMENT AND WAIVER
<PAGE>

Signature Page to that certain Third Amendment and Waiver to Credit Agreement
dated as of the date first stated above, among Westlake Chemical Corporation and
certain of its domestic subsidiaries, as Borrowers, Bank of America, N.A., in
its capacity as Agent, Required Lenders, and Guarantors.

                                 GEISMAR HOLDINGS, INC., a Delaware corporation
                                 WESTLAKE CHEMICAL MANUFACTURING, INC.,
                                 a Delaware corporation
                                 WESTLAKE CHEMICAL PRODUCTS, INC.,
                                 a Delaware corporation
                                 WESTLAKE DEVELOPMENT CORPORATION,
                                 a Delaware corporation

                                 By: /s/ R. Michael Looney
                                     -------------------------------------------
                                     R. Michael Looney
                                     President of the above entities

                  SIGNATURE PAGE TO THIRD AMENDMENT AND WAIVER

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