Document:

Merus Labs International Inc. - Exhibit 4.5 - Filed by newsfilecorp.com

	 
	Pursuant to 17 CFR 240.24b-2, confidential information has been omitted in places marked “* * *” and has been filed separately with the Securitites and Exchange Commission pursuant to a Confidential Treatment Application filed with the Commission.

      CREDIT
      AGREEMENT 

dated as of July 10, 2012 

among 

MERUS LABS INTERNATIONAL INC., 

as Borrower, 

     MERUS LABS LUXCO S.À R.L, 

MERUS LABS INC., 

ECG HOLDINGS INC., 

and 

MERUS LABS NETHERLANDS B.V. 

as Loan Parties, 

PDL BIOPHARMA, INC., 

as Lender, 

and 

PDL BIOPHARMA, INC., 

	as Agent 
	 

TABLE OF CONTENTS 

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

i 

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

ii 

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

iii 

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

iv 

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

v 

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

vi 

CREDIT AGREEMENT 

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

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

Section 1.    Definitions;
Interpretation. 

                    1.1.    
Definitions. When used herein the following terms shall have the
following meanings: “Acceleration Event” means the occurrence of any of
the following: (i) an Event of Default under Section 8.1.3; (ii) an Event
of Default under Section 8.1.1 and the termination of the Commitments
pursuant to Section 8.2; or (iii) any other Event of Default under
Section 8.1 and the election by the Lender to declare the Obligations to
be due and payable pursuant to Section 8.2. 

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

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

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

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

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

1 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

2 

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

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

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

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

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

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

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

3 

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

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

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

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

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

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

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

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

4 

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

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

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

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

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

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

5 

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

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

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

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

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

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

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

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

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

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

6 

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

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

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

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

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

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

7 

          “ERISA”
means the Employee Retirement Income Security Act of 1974, as amended. “Event
of Default” means any of the events described in Section 8.1. 

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

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

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

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

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

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

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

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

8 

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

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

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

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

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

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

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

9 

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

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

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

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

          “Indemnified
Liabilities” has the meaning set forth in Section 10.5. “Initial
Loan” has the meaning given in the definition of “Loans”. 

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

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

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

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

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

10 

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

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

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

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

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

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

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

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

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

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

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

11 

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

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

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

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

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

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

          “Maturity
Date” means March 31, 2015. 

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

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

          “Net
Cash Proceeds” means: 

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

12 

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

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

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

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

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

13 

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

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

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

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

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

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

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

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

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

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

          (a)     
with respect to an acquisition involving Consideration of greater than
CDN$2,500,000, the Agent shall receive not less than twenty (20) days’ prior
written notice of such acquisition or such lesser number of days as the Agent
may agree, which notice shall include a reasonably detailed description of the
proposed terms of such acquisition and identify the anticipated closing date
thereof; 

          (b)      with
respect to an acquisition involving Consideration of greater than
CDN$10,000,000, the Agent shall receive, not less than five (5) Business Days
prior to the consummation of such acquisition, a due diligence package with
respect to the Proposed Acquisition Target; 

14 

          (c)     
if applicable, the Agent shall receive an officer’s certificate from the
Borrower that (i) (x) the Proposed Acquisition Target has in place or will have
within 30 days following the closing of such acquisition insurance satisfying
the provisions of Section 6.3 and (y) pursuant to endorsements and/or
assignments in form and substance reasonably satisfactory to the Agent, the
Agent has been named as lender’s loss payee, for its benefit and the benefit of
the Lender, in the case of casualty insurance, and the Agent has been named as
additional insured, for its benefit and the benefit of the Lender, in the case
of all liability insurance, or will have been within 30 days following the
closing of such acquisition or (ii) the Borrower’s insurance will cover the
Proposed Acquisition Target or the acquired assets following the acquisition and
the requirements in clause (y) are satisfied; 

          (d)      if
applicable, the Agent, for the benefit of the Lender, (i) receives a guaranty of
payment of the Obligations of the Borrower from the Proposed Acquisition Target
and is granted Liens satisfying the provisions of Section 6.9, and (ii)
will be provided such other documents and instruments as the Agent shall
reasonably request to perfect or maintain the perfection of its Lien on all
personal property of the applicable Proposed Acquisition Target, as the case may
be; 

          (e)      at
the time of, and after giving effect to, such acquisition and the incurrence of
any Debt in connection therewith, (i) no Default or Event of Default shall exist
and (ii) (x) the Borrower and its Subsidiaries shall be in compliance, on a Pro
Forma Basis, with the financial covenants set forth in Section 7.13 (but,
in the case of the Maximum Total Leverage Ratio, determining the maximum
permissible Maximum Total Leverage Ratio as 0.25 less than the applicable
Maximum Total Leverage Ratio set forth in Section 7.13.2 for the
applicable Computation Period), in each case for the most recently ended
Computation Period for which financial statements are available (and
disregarding the qualifications in Section 7.13 that limit the
applicability of the financial covenants therein to Computation Periods ending
on or after March 31, 2013), and (y) with respect to any acquisition involving
Consideration in excess of CDN$2,500,000, the Borrower can demonstrate to the
Agent projected compliance, on a Pro Forma Basis, with the financial covenants
set forth in Section 7.13 (but, in the case of the Maximum Total Leverage
Ratio, determining the maximum permissible Maximum Total Leverage Ratio as 0.25
less than the applicable Maximum Total Leverage Ratio set forth in Section
7.13.2 for the applicable Computation Period), for the Computation Period
immediately following the consummation of the proposed acquisition based on the
combined operating results of the applicable Proposed Acquisition Target and of
the Borrower and its Subsidiaries for the most recently ended Computation Period
for which financial statements are available (and disregarding the
qualifications in Section 7.13 that limit the applicability of the
financial covenants therein to Computation Periods ending on or after March 31,
2013); 

          (f)      all
material consents necessary for such acquisition have been acquired, and such
acquisition shall not be hostile and shall have been approved by the Proposed
Acquisition Target’s board of directors or similar governing body, if
applicable; 

15 

          (g)      the
Proposed Acquisition Target must be engaged in a business satisfying the
requirements of Section 7.10; 

          (h)      with
respect to an acquisition involving Consideration of greater than CDN$1,000,000,
as soon as practicable after the closing of such acquisition, and in any event
within twenty (20) Business Days after such closing, the Borrower shall deliver
copies of all documents executed in connection with such acquisition to the
Agent; and 

          (i)      promptly
after obtaining knowledge thereof, the Borrower shall provide notice of any
material change to any of the documents or information previously provided
pursuant to clauses (a) through (h) above. 

          “Permitted
Joint Venture” means any partnership, association, community of interest or
joint venture entered into by the Borrower or any other Loan Party with an
unrelated, non-Affiliated third party on an arm’s length basis to engage in the
joint undertaking of a business, which business shall be in the same, or in a
substantially similar or related, line of business as the Loan Parties, or any
business reasonably related thereto; provided (a) the maximum liability
of the Loan Parties with respect thereto (including any liability it may have as
a general partner) shall be limited to, as a matter of contract and applicable
requirements of law, to Investments permitted to be made pursuant Section
7.11(h) and (j), and (b) the Person in whom such Investment is
made is not a Subsidiary. 

          “Permitted
Lien” means any Lien expressly permitted by Section 7.2. 

          “Permitted
Refinancing” means any replacement, renewal, refinancing or extension of any
existing Debt, in any such case, permitted by this Agreement that (i) does not
exceed the aggregate principal amount (plus accrued interest and any applicable
premium and associated fees and expenses) of the Debt being replaced, renewed,
refinanced or extended, (ii) does not have a weighted average life to maturity
at the time of such replacement, renewal, refinancing or extension that is less
than the weighted average life to maturity of the Debt being replaced, renewed,
refinanced or extended, (iii) does not rank at the time of such replacement,
renewal, refinancing or extension senior to the Debt being replaced, renewed,
refinanced or extended, and (iv) does not contain terms (including, without
limitation, terms relating to security, amortization, interest rate, premiums,
fees, covenants, subordination, event of default and remedies) that are less
favorable to any Loan Party or adverse to the interests of the Agent and the
Lender than those applicable to the Debt being replaced, renewed, refinanced or
extended.

          “Permitted
Seller Debt” means unsecured Debt of the Borrower incurred in connection
with, and as part of the consideration payable in respect of, any Permitted
Acquisition; provided that (i) there shall be no scheduled payments of
principal in respect of such Debt prior to the first anniversary of the Maturity
Date, (ii) the final maturity of such Debt shall not be earlier than the first
anniversary of the Maturity Date, (iii) interest or yield (including payment in
kind interest and original issue discount) payable in respect of such Debt shall
not exceed 12% per annum and (iv) such Debt is subordinated in right of payment
to the Obligations on terms acceptable to the Agent. 

16 

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

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

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

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

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

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

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

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

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

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

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

          “Seller”
means Novartis Pharma AG. 

          “Sinking
Fund Account” means a deposit account of Borrower that is subject to a
Control Agreement in favor of the Agent that is satisfactory to the Agent in its
sole discretion, which Control Agreement shall provide that (1) the Group
Members shall have no right to issue any instructions to the depository
concerning the funds credited to such deposit account, and (2) all funds credited to such deposit account shall be used solely to
satisfy the Obligations (x) upon an optional prepayment of Loans, at the option
of Borrower, permitted by Section 2.4.1., (y) upon an Event of Default,
at the option of Agent, or (z) upon and in connection with Payment in Full of
all Obligations, in each case with any excess remaining after Payment in Full of
all Obligations to be returned to Borrower or such other party as may be
entitled thereto. 

17 

          “Sinking
Fund Deposit Cure Notice” has the meaning set forth in Section
7.13.4. 

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

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

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

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

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

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

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

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

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

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

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

18 

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

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

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

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

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

19 

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

                    1.4.   
 Pro Forma Calculation.

                    (a)     
For purposes of calculating EBITDA, Fixed Charges Coverage Ratio, Maximum Total
Leverage Ratio and Net Sales, any Specified Transactions (and the incurrence or
repayment of any Debt in connection therewith) that have been made (i) during
the applicable Computation Period and (ii) (except when calculating EBITDA,
Maximum Total Leverage Ratio and Net Sales for purposes of determining actual compliance
(and not pro forma compliance or compliance on a pro forma basis) with
  Section 7.13) subsequent to such Computation Period and prior to or
simultaneously with the event for which the calculation of any such ratio is
made shall be calculated on a pro forma basis, in accordance with this Section 1.4, assuming that all such Specified Transactions (and any
increase or decrease in EBITDA and the component financial definitions used
therein attributable to any Specified Transaction) had occurred on the first day
of the applicable Computation Period. If since the beginning of any applicable
Computation Period any Person (each, an “Acquired Person”) that
subsequently became a Subsidiary of the Borrower or was merged, amalgamated or
consolidated with or into the Borrower or any of its Subsidiaries since the
beginning of such Computation Period shall have made any Specified Transaction
(treating for this purpose references to the Borrower in such definition as a
reference to such Acquired Person) that would have required adjustment pursuant
to this Section 1.4, then EBITDA, Fixed Charges Coverage Ratio, Maximum
Total Leverage Ratio and Net Sales shall be calculated to give pro forma effect
thereto in accordance with this Section 1.4.

20 

                    (b)      Whenever
pro forma effect is to be given to a Specified Transaction, the pro forma
calculations shall be made in good faith by, and shall be set forth in a
reasonably detailed certificate (to be delivered to the Agent) of, a responsible
financial or accounting officer of the Borrower, and include as an increase to
EBITDA, for the avoidance of doubt, the amount of cost savings, operating
expense reductions and synergies projected by the Borrower in good faith to be
realized as a result of specified actions taken during such period (calculated
on a pro forma basis as though such cost savings, operating expense reductions
and synergies had been realized on the first day of such period as if such cost
savings, operating expense reductions and synergies were realized during the
entirety of such period) relating to such Specified Transaction, net of the
amount of actual benefits realized during such period from such actions;
provided, that (i) such amounts are reasonably identifiable and factually
supportable in the good faith judgment of the Borrower, (ii) such actions are
taken within six (6) months after the date of such Specified Transaction, (iii)
any cost savings, operating expense reductions and synergies that are not
actually realized during such period may no longer be added pursuant to this
clause (iii) after the end of the second full fiscal quarter ending after the
date of such Specified Transaction, (iv) no amounts shall be added pursuant to
this clause (c) to the extent duplicative of any amounts that are otherwise
added back in computing EBITDA, whether through a pro forma adjustment or
otherwise, with respect to such period, and (v) such amounts added to or
included in EBITDA pursuant to this Section 1.4 for any Computation
Period shall not exceed an amount equal to 10% of the amount of EBITDA for the
relevant Computation Period without giving effect to any pro forma adjustments
pursuant to this Section 1.4. 

                    (c)      In
the event that the Borrower or any of its Subsidiaries incurs (including by
assumption or guarantees) or repays (including by redemption, repayment,
retirement or extinguishment) any Debt included in the calculations of the
Maximum Total Leverage Ratio and Fixed Charges Coverage Ratio, (i) during the
applicable Computation Period and (ii) (except when calculating Maximum Total
Leverage Ratio for purposes of determining actual compliance (and not pro forma
compliance or compliance on a pro forma basis) with Section 7.13)
subsequent to the end of the applicable Computation Period and prior to or
simultaneously with the event for which the calculation of any such ratio is
made, then the Maximum Total Leverage Ratio and Fixed Charges Coverage Ratio
shall be calculated giving pro forma effect to such incurrence or repayment of Debt, to the extent required, as if
the same had occurred on the last day of the applicable Computation Period. 

21 

          For
purposes of this Section 1.4, “Specified Transaction” means any
Permitted Acquisition, any permitted Investment constituting an acquisition of
assets constituting a business unit, line of business or division of another
Person or any Disposition of a business unit, line of business or division of
the Borrower or any of its Subsidiaries, in each case whether by merger,
consolidation, amalgamation or otherwise. 

Section 2.     Credit Facilities. 

                    2.1.   
 Loans.

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

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

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

                    2.2.   
 Loan Accounting. 

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

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

22 

                    2.3.   
 Interest.

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

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

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

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

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

23 

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

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

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

                    2.4.    
Prepayment.

                    2.4.1.  
Voluntary Prepayment.

                    (a)      Borrower
may, beginning on June 30, 2014, on at least three (3) Business Days’ written
notice to Agent, not later than 12:00 noon New York City time on such day,
without penalty or premium, prepay the Initial Loan so long as the aggregate
principal amount of the Initial Loan outstanding after any such prepayment equal
at least $12,500,000. Such notice to Agent shall specify the date and amount of
prepayment. Any such prepayment shall be in an amount greater than or equal to
$1,000,000 or a higher integral multiple of $500,000. For the avoidance of
doubt, Borrower may not make any voluntary prepayment of the Initial Loan prior
to June 30, 2014. 

                    (b)      Borrower
may, beginning on June 30, 2013, on at least one (1) Business Days’ written
notice to Agent, not later than 12:00 noon New York City time on such day,
without penalty or premium, prepay the Additional Loan in full or in part. Such
notice to Agent shall specify the date and amount of prepayment. Any such
prepayment shall be in an amount greater than or equal to $1,000,000 or a higher
integral multiple of $500,000.

                    2.4.2.  
Mandatory Prepayment. Borrower shall prepay the Loans until Paid in Full
at the following times and in the following amounts: (a) concurrently with the
receipt by any Group Member of any Net Cash Proceeds from any Disposition, in an
amount equal to such Net Cash Proceeds; and (b) concurrently with the receipt by
any Group Member of any Net Cash Proceeds from the issuance or incurrence of
Debt (other than Debt permitted by Section 7.1 hereof), in an amount
equal to such Net Cash Proceeds. 

                    2.4.3.  
Prepayments. Mandatory prepayments on the Loans shall be applied first to
reduce the next scheduled repayment (and not any subsequent scheduled repayment)
of the Initial Loan under Section 2.6, and then, if the amount of the
next scheduled repayment of the Initial Loan is fully satisfied, to reduce the
principal amounts outstanding of the Additional Loan.

24 

Any prepayment of a Loan, whether voluntary or mandatory, on
any day other than the first day of a calendar month shall include interest on
the principal amount being repaid. 

                    2.5.    
Scheduled Repayment.

                    2.5.1.  
First Scheduled Payment of the Initial Loan. The lesser of (a) $5,000,000
in aggregate principal amount of the Initial Loan and (b) the aggregate
principal amount of the Initial Loan then outstanding shall be repaid on
December 31, 2012. 

                    2.5.2.  
Second Scheduled Payment of the Initial Loan. The lesser of (a)
$7,500,000 in aggregate principal amount of the Initial Loan and (b) the
aggregate principal amount of the Initial Loan then outstanding shall be repaid
on June 30, 2013.

                    2.5.3.  
Third Scheduled Payment. The lesser of (a) $10,000,000 in aggregate
principal amount of the Initial Loan and (b) the aggregate principal amount of
the Initial Loan then outstanding shall be repaid on June 30, 2014. 

                    2.5.4 
.. Payment on Maturity Date. The outstanding principal balance of the
Loans shall be Paid in Full on the Maturity Date. 

                    2.6.   
 Payment. 

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

                    2.6.2.  
Application of Payments and Proceeds. 

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

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

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

25 

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

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

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

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

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

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

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

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

26 

Section 3.     Yield Protection.

                    3.1.   
 Taxes. 

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

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

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

27 

                    (d)    
 [Reserved.] 

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

                    3.2.   
 Increased Cost. 

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

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

28 

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

                    3.3.   
 Mitigation of Circumstances. 

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

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

Section 4.     Conditions Precedent.

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

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

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

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

29 

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

                    (a)      Agreement.
This Agreement. 

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

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

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

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

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

30 

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

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

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

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

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

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

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

Section 5.     Representations and
Warranties. 

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

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

31 

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

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

                    5.4.    
Financial Condition. 

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

32 

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

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

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

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

                    5.8.    
Capitalization; Subsidiaries.

33 

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

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

                    5.9.    
Pension Plans.

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

                    (b)     
Canadian Employees.

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

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

34 

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

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

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

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

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

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

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

35 

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

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

36 

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

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

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

37 

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

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

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

                    5.19.  
 Canadian Labour Matters 

                    (a)     
Except as disclosed in Schedule 5.19, 

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

38 

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

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

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

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

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

39 

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

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

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

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

Section 6.    Affirmative Covenants.

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

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

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

40 

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

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

                    6.1.3 
.. [Reserved].

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

                    6.1.5. 
 [Reserved].

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

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

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

                    (c)      [Reserved];

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

41 

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

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

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

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

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

42 

                    6.3.    
Maintenance of Property; Insurance. 

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

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

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

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

                    (a)      Comply,
and cause each other Group Member to comply, in all material respects with all
applicable laws, rules, regulations, decrees, orders, judgments, licenses and
permits and all indentures, agreements and other instruments binding upon it or
its property, except where failure to comply could not reasonably be expected to
have a Material Adverse Effect; (b) without limiting clause (a) above, ensure,
and cause each other Group Member to ensure, that no person who owns a controlling interest in or
otherwise controls a Group Member is or shall be (i) listed on the Specially
Designated Nationals and Blocked Person List maintained by OFAC, Department of
the Treasury, and/or any other similar lists maintained by OFAC pursuant to any
authorizing statute, Executive Order or regulation or (ii) a person designated
under Section 1(b), (c) or (d) of Executive Order 13224,
any related enabling legislation or any other similar Executive Orders; (c)
without limiting clause (a) above, comply and cause each other Group Member to
comply, with all applicable Bank Secrecy Act and anti-money laundering laws and
regulations; and (d) timely prepare and file all Tax Returns required to be
filed by applicable law and pay, and cause each other Group Member to pay, prior
to delinquency, all taxes and other governmental charges against it or any of
its property, as well as claims of any kind which, if unpaid, could become a
Lien on any of its property; provided that the foregoing shall not
require Borrower or any other Group Member to pay any such Tax or charge so long
as it shall promptly contest the validity thereof in good faith by appropriate
proceedings and shall set aside on its books adequate reserves with respect
thereto in accordance with IFRS; 6.5. Maintenance of Existence. Maintain
and preserve, and (subject to Section 7.5) cause each other Loan
Party to maintain and preserve, (a) its existence and good standing (as
applicable) in the jurisdiction of its organization and (b) its qualification to
do business and good standing (as applicable) in each jurisdiction where the
nature of its business makes such qualification necessary, other than any such
jurisdiction where the failure to be qualified or in good standing could not
reasonably be expected to have a Material Adverse Effect. 

43 

                    6.6.    
Employee Benefit Plans. 

                    (a)     
Canadian Employees. 

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

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

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

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

44 

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

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

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

45 

                    6.10.   
Post-Closing Obligations.

                    (a)      Within
thirty (30) days after the Closing Date (subject to extension by the Agent in
its sole discretion), the Loan Parties shall deliver to Agent a deposit account
or securities account, as applicable, Control Agreement for each deposit account
and securities account maintained by any Loan Party Subsidiary (other than zero
balance payroll and similar accounts), in form and substance satisfactory to the
Agent. 

                    (b)     
Each Loan Party shall use commercially reasonable efforts to obtain a Collateral
Access Agreement from the lessor of each leased property, bailee in possession
of any Collateral or mortgage of any owned property with respect to each
location where any Collateral is stored or located, which Collateral Access
Agreement shall be in form and substance reasonably satisfactory to Agent. 

                    (c)      Within
three (3) months after the Closing Date (subject to extension by the Agent in
its sole discretion), the Loan Parties shall cause each Inactive Subsidiary that
is then wholly-owned, directly or indirectly, by the Borrower to wind up,
liquidate, dissolve or otherwise cease to exist other than Orbis Pharma Inc.

46 

                    (d)      Within
five (5) Business Days after the Closing Date (subject to extension by the Agent
in its sole discretion), Borrower and ECG Holdings Inc. shall deliver to Agent,
as Collateral for the Obligations, a certificate evidencing all of the issued
and outstanding Stock of ECG Holdings Inc., along with a stock power duly
executed in blank, in each case in form and substance satisfactory to Agent.

                    (e)      Within
five (5) Business Days after the Closing Date (subject to extension by the Agent
in its sole discretion), the Borrower shall cause the PPSA registration
(Reference File No. 676936017, Registration No. 20120320105815295321) registered
against the Borrower in favor of Royal Bank of Canada in the Ontario Personal
Property Registry, to be discharged, and shall provide the Agent with
satisfactory evidence of such discharge. 

                    (f)      Within
three (3) Business Days after the Closing Date (subject to extension by the
Agent in its sole discretion), the Borrower shall deliver to Agent, in form and
substance satisfactory to Agent, certificates or other evidence of insurance in
effect as required by Section 6.3(b), with endorsements naming Agent as
lenders’ loss payee and/or additional insured, as applicable. 

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

Section 7.    Negative Covenants. 

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

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

                    (a)      Obligations
under this Agreement and the other Loan Documents; 

47 

                    (b)      Debt
secured by Liens permitted by Section 7.2(d), and any Permitted Refinancings
thereof; provided that the aggregate principal amount of all such Debt at
any time outstanding shall not exceed CDN$1,000,000; 

                    (c)      Debt
which is subordinated to the Obligations under this Agreement and the other Loan
Documents, provided that (i) the holder(s) of such Debt enter into a
subordination agreement with Agent on behalf of the Lender on terms and
conditions satisfactory to Agent and the Lender prior to the incurrence thereof,
(ii) the Borrower and its Subsidiaries shall be in compliance, on a Pro Forma
Basis giving effect to the incurrence of such Debt and the application of the
proceeds thereof, with the financial covenants set forth in Section 7.13
(but, in the case of the Maximum Total Leverage Ratio, determining the maximum
permissible Maximum Total Leverage Ratio as 0.25 less than the applicable
Maximum Total Leverage Ratio set forth in Section 7.13.2 for the
applicable Computation Period), in each case for the most recently ended
Computation Period for which financial statements are available (and
disregarding the qualifications in Section 7.13 that limit the
applicability of the financial covenants therein to Computation Periods ending
on or after March 31, 2013), and (iii) the Fixed Charges Coverage Ratio, on a
Pro Forma Basis giving effect to the incurrence of such Debt and the application
of the proceeds thereof, for the most recently ended Computation Period for
which financial statements are available, shall be not less than the Fixed
Charges Coverage Ratio Requirement for such Computation Period; 

                    (d)      Debt
of Borrower to any Loan Party that is a Wholly-Owned Subsidiary of Borrower or
Debt of any Loan Party that is a Wholly-Owned Subsidiary of Borrower to Borrower
or another Loan Party that is a Wholly-Owned Subsidiary of Borrower;
provided that all such Debt shall be evidenced by a global intercompany
demand note in form and substance satisfactory to Agent and pledged and
delivered to Agent pursuant to the applicable Collateral Document as additional
collateral security for the Obligations, and the obligations under such demand
note shall be subordinated to the Obligations hereunder in a manner satisfactory
to Agent; 

                    (e)      Debt
described on Schedule 7.1 as of the Closing Date, and any Permitted
Refinancing thereof; 

                    (f)      Contingent
Obligations arising with respect to customary indemnification obligations in
favor of purchasers in connection with dispositions permitted under Section
7.5; 

                    (g)      Debt
arising from the honoring by a bank or other financial institution of a check,
draft or similar instrument drawn against insufficient funds in the ordinary
course of business, provided that such Debt is extinguished within two
(2) Business Days of notice to Borrower or the relevant Subsidiary of its
incurrence; 

                    (h)      Debt
incurred in connection with the financing of insurance premiums in the ordinary
course of business; 

                    (i)      guaranties
by Borrower of the Debt of any Loan Party that is a Wholly-Owned Subsidiary of
Borrower or guaranties by any Subsidiary thereof of the Debt of Borrower in each
case so long as such Debt is permitted under this Section 7.1;

48 

                    (j)      Debt
arising from agreements of the Borrower or any Loan Party Subsidiary of the
Borrower providing for indemnification, adjustment of purchase price or similar
obligations (including earn-outs), in each case entered into in connection with
Permitted Acquisitions or the disposition of any business, assets or Stock
permitted by this Agreement; 

                    (k)     
Debt of a Loan Party Subsidiary of the Borrower issued and outstanding on the
date on which such Subsidiary was acquired by the Borrower or a Subsidiary of
the Borrower in a transaction constituting a Permitted Acquisition permitted
under Section 7.11(g), together with any Permitted Refinancing thereof;
provided that, (i) such Debt (x) was not incurred in connection with or
in anticipation of such Permitted Acquisition and (y) is not secured by any Lien
created in connection with or in anticipation of such Permitted Acquisition or
on any property other than that which secured it before such Permitted
Acquisition and (ii) the aggregate outstanding principal amount of all such Debt
does not exceed CDN$2,000,000 at any time; and 

                    (l)     
Permitted Seller Debt; provided that (i) the aggregate outstanding
principal amount of all such Permitted Seller Debt does not exceed CDN$2,000,000
at any time and (y) no Group Member other than the Borrower will be obligated in
respect of Permitted Seller Debt. 

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

                    (a)      Liens
for Taxes or other governmental charges not at the time delinquent or thereafter
payable without penalty or being diligently contested in good faith by
appropriate proceedings and, in each case, for which it maintains adequate
reserves in accordance with IFRS and the execution or other enforcement of which
is effectively stayed; 

                    (b)      Liens
arising in the ordinary course of business (such as (i) Liens of carriers,
warehousemen, mechanics, customs brokers, landlords and materialmen and other
similar Liens imposed by law and (ii) Liens consisting of pledges or deposits
incurred in connection with worker’s compensation, unemployment compensation and
other types of social security (excluding Liens arising under ERISA or similar
Canadian Employee Benefits Legislation) or in connection with surety bonds,
bids, performance bonds and similar obligations) for sums not overdue or being
diligently contested in good faith by appropriate proceedings and not involving
any deposits or advances or borrowed money or the deferred purchase price of
property or services and, in each case, for which it maintains adequate reserves
in accordance with IFRS and the execution or other enforcement of which is
effectively stayed; 

                    (c)     
Liens described on Schedule 7.2 as of the Closing Date; 

                    (d)     
(i) Liens arising in connection with Capital Leases (and attaching only to the
property being leased), and (ii) Liens that constitute purchase money security
interests on any property securing debt incurred for the purpose of financing
all or any part of the cost of acquiring such property; provided that any
such Lien attaches to such property within 60 days of the acquisition thereof
and attaches solely to the property so acquired; provided,
further, that the aggregate principal amount of all Debt secured by the Liens
permitted pursuant to this Section 7.2(d) shall at any time
outstanding not exceed CDN$1,000,000; 

49 

                    (e)     
attachments, appeal bonds, judgments and other similar Liens, in connection with
judgments the existence of which do not constitute an Event of Default; 

                    (f)      easements,
encroachments, rights of way, leases, subleases, restrictions, minor defects or
irregularities in title and other similar Liens not interfering in any material
respect with the ordinary conduct of the business of Borrower or any Subsidiary;

                    (g)      any
interest or title of a lessor or sublessor under any lease (other than a Capital
Lease) or of a licensor or sublicensor under any license, in each case permitted
by this Agreement; 

                    (h)     
Liens arising from precautionary uniform commercial code financing statements
filed under any lease (other than a Capital Lease) permitted by this Agreement;

                    (i)      Liens
arising under the Loan Documents; 

                    (j)      the
replacement, extension or renewal of any Lien permitted by clause (c)
above upon or in the same property subject thereto arising out of the Permitted
Refinancing of the Debt secured thereby; 

                    (k)     
Liens securing acquired Indebtedness permitted by this Section 7.1(k);
provided that such Liens do not extend to property not subject to such
Liens at the time of acquisition and were not granted in connection therewith or
anticipation thereof (other than improvements thereon); and 

                    (l)      Liens
on any property of the Borrower or any of its Subsidiaries securing any of their
Debt or their other liabilities; provided, however, that the
aggregate outstanding principal amount of all such Debt and other liabilities
shall not exceed CDN$500,000 at any time. 

                    7.3.   
 [Omitted].

                    7.4.   
 Restricted Payments. Not, and not suffer or permit any Group Member
to, (i) declare or make any dividend payment or other distribution of assets,
properties, cash, rights, obligations or securities on account of any Stock or
Stock Equivalent, (ii) purchase, redeem or otherwise acquire for value any Stock
or Stock Equivalent now or hereafter outstanding or (iii) make any payment or
prepayment of principal of, premium, if any, interest, fees, redemption,
exchange, purchase, retirement, defeasance, sinking fund or similar payment with
respect to, Debt that is subordinated by its terms to the payment of the
Obligations (the items described in clauses (i), (ii) and
(iii) above are referred to as “Restricted Payments”); except that any
Subsidiary of the Borrower may declare and pay dividends to, repay intercompany
debt owed to, and make internal profit-sharing payments to, the Borrower or any
Loan Party that is a Wholly-Owned Subsidiary of the Borrower, and except that:

50 

                    (a)     
Borrower may repurchase or redeem Qualified Capital Stock of Borrower held by
officers, directors or employees or former officers, directors or employees (or
their transferees, estates or beneficiaries under their estates) of any Loan
Party, upon their death, disability, retirement, severance or termination of
employment or service; provided that the aggregate cash consideration
paid for all such redemptions and payments of Qualified Capital Stock shall not
exceed, in any fiscal year, CDN$1,000,000; 

                    (b)      each
Loan Party may declare and make dividend payments or other distributions solely
in Qualified Capital Stock of such Person; 

                    (c)     
the Borrower may make cashless repurchases of Stock deemed to occur upon
exercise of stock options if such Stock represents a portion of the exercise
price of such options; 

                    (d)     
the Borrower may make cash payments in lieu of the issuance of fractional shares
in connection with the exercise of warrants, options or other securities
convertible into or exchangeable for Stock of the Borrower; and 

                    (e)      the
Borrower may make regularly scheduled payments of interest on subordinated Debt
incurred pursuant to Section 7.1(c) or (d), to the extent such
payments are permitted by the subordination provisions applicable to such Debt.

                    7.5.   
 Mergers; Consolidations; Asset Sales. 

                    (a)      Not,
and not suffer or permit any Group Member to, be a party to any merger,
consolidation or amalgamation, except (1) in connection with a Permitted
Acquisition, (2) for any such merger or consolidation of any Subsidiary of
Borrower into Borrower (so long as the Borrower survives such merger) or any
Loan Party that is a Wholly-Owned Subsidiary of Borrower, as applicable (so long
as such Loan Party that is a Wholly-Owned Subsidiary survives such merger) and
(3) for any amalgamation of any Subsidiary of Borrower with Borrower or any
Wholly-Owned Loan Party Subsidiary of Borrower; provided, in the case of
any amalgamation pursuant to clauses (1) or (3) comprising any Loan Party as an
amalgamating corporation or company, that (x) by operation of law the automatic
result of such amalgamation (without the need for further action by any party)
is that, and the amalgamated corporation confirms to the Agent and the Lender in
writing that, the amalgamated corporation is liable, by operation of law or
otherwise, for the obligations, liabilities and indebtedness of the amalgamating
corporations or companies under the Loan Documents (including the Obligations of
such amalgamating Loan Party thereunder), and (y) the amalgamated corporation
delivers to the Agent any Loan Documents, certificates, opinions and other
documents as the Agent may reasonably request in connection therewith. 

                    (b)      Except
as disclosed in Schedule 7.5, not, and not suffer or permit any Group Member to,
sell, transfer, dispose of, convey or lease any of its assets or Stock and Stock
Equivalents of any Group Member (other than, for the avoidance of doubt,
issuance of Stock and Stock Equivalents by the Borrower in a manner otherwise
permitted by this Agreement), or sell or assign with or without recourse any
receivables, except for (i) sales of inventory or used, worn-out or surplus
equipment, all in the ordinary course of business, (ii) sales and dispositions
of assets (excluding any Stock and Stock Equivalents of
Borrower or any Subsidiary of Borrower) for at least fair market value (as
determined by the board of directors of Borrower) so long as at least 75% of the
purchase price therefor is in cash and the net book value of all assets sold or
otherwise disposed of in any Fiscal Year does not exceed CDN$1,000,000, (iii)
the abandonment or other disposition of Intellectual Property that is no longer
material to the conduct of the business of the Loan Parties as determined by the
Borrower in its reasonable business judgment, (iv) dispositions of cash and Cash
Equivalent Investments, (v) licenses, sublicenses, leases or subleases
(including any license or sublicense of Intellectual Property) granted to third
parties in the ordinary course of business not interfering with the business of
the Loan Parties in any material respect as determined by the Borrower in its
reasonable business judgment, (vi) the granting of Liens permitted under
  Section 7.2, Restricted Payments permitted by Section 7.4,
transactions permitted by Section 7.5(a) and Investments permitted by Section 7.11 and (vii) dispositions resulting from any casualty or
other insured damage to, or any taking under power of eminent domain or by
condemnation or similar proceeding of, any property or asset of any Loan Party
provided the proceeds thereof are applied in accordance with Section 2.4.2(i). 

51 

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

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

                    7.8.    
Transactions with Affiliates. Not, and not suffer or permit any Group
Member to, enter into any transaction with any Affiliate of the Borrower or of
any such Group Member, except: (a) Restricted Payments permitted by
Section 7.4, Loans permitted by Section 7.1(d),
transactions permitted by Section 7.5(a) and Investments permitted by
Section 7.11(a) and (e); (b) in the ordinary course of business
and pursuant to the reasonable requirements of the business of such Loan Party
or such Subsidiary; provided that, in the case of this clause (b), such
transaction shall be upon fair and reasonable terms no less favorable to such
Loan Party or such Subsidiary than would be obtained in a comparable arm’s
length transaction with a Person not an Affiliate of the Borrower or such
Subsidiary and which are disclosed in writing to the Agent; 

52 

                    (c)      payment
of compensation and benefits (including customary indemnities) to officers,
directors and employees for actual services rendered to the Loan Parties in the
ordinary course of business; 

                    (d)     
payment of reasonable and customary fees to members of the boards of directors
(or similar governing body) of the Loan Parties, and the reimbursement of actual
out of pocket expenses incurred in connection with attending board of director
meetings; and 

                    (e)     
advances for reasonable travel and entertainment expenses and reasonable
relocation costs and expenses and other reasonable loans and advances in the
ordinary course of business. 

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

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

                    7.11. 
 Investments. Not, and not suffer or permit any Group Member to,
make or permit to exist, any Investment in any other Person, except the
following: (a) Investments between or among the Loan Parties; 

53 

                    (b)     
Investments constituting Debt permitted by Section 7.1(d); 

                    (c)      Contingent
Obligations constituting Debt permitted by Section 7.1; 

                    (d)     
Cash Equivalent Investments; 

                    (e)     
loans and advances to employees in the ordinary course of business not to exceed
CDN$100,000 in aggregate principal amount at any time outstanding; 

                    (f)     
Investments listed on Schedule 7.11 as of the Closing Date; 

                    (g)      Permitted
Acquisitions; 

                    (h)     
Investments in Permitted Joint Ventures in the aggregate at any time outstanding
for all such Investments not to exceed CDN$1,000,000; 

                    (i)      extensions
of trade credit in the ordinary course of business; 

                    (j)      other
Investments (excluding any Investments consisting of general partnership
interests or other Stock of non-wholly owned Persons in respect of which there
is unlimited equity holder liability) in an aggregate amount not to exceed
CDN$1,000,000 at any time outstanding. 

                    7.12.    
Fiscal Year. Not, and not suffer or permit any other Group Member to,
change its Fiscal Year. 

                    7.13.   
 Financial Covenants. 

                    7.13.1.
EBITDA. Not and not suffer or permit EBITDA for any Computation Period
ending on or after March 31, 2013, to be less than the applicable amount set
forth below for such Computation Period (subject to adjustment as described in
Section 7.13.5); provided, that with respect to any incurrence of
subordinated Debt pursuant to Section 7.1(c), and any Permitted
Acquisition, in each case to be consummated prior to the availability of
financial statements for the Fiscal Quarter ending March 31, 2013, EBITDA shall
not be less than CDN$* * *: 

54 

	Computation Period 	Amount 
	March 31, 2013 	CDN$* * *
	June 30, 2013 	CDN$* * *
	September 30, 2013 	CDN$* * *
	December 31, 2013 	CDN$* * *
	March 31, 2014 	CDN$* * *
	June 30, 2014 	CDN$* * *
	September 30, 2014 	CDN$* * *
	December 31, 2014 	CDN$* * *
	March 31, 2015 	CDN$* * *

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

55 

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

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

56 

	Computation Period 	Amount 
	March 31, 2013 	CDN$* * *
	June 30, 2013 	CDN$* * *
	September 30, 2013 	CDN$* * *
	December 31, 2013 	CDN$* * *
	March 31, 2014 	CDN$* * *
	June 30, 2014 	CDN$* * *
	September 30, 2014 	CDN$* * *
	December 31, 2014 	CDN$* * *
	March 31, 2015 	CDN$* * *

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

                     (a)      If
such deposit is made after the end of a Fiscal Quarter and prior to 30 days
after the date on which financial statements are required to be delivered
pursuant to Section 6.1.1 or 6.1.2 with respect to such
Fiscal Quarter (such 30th day, the “Required Deposit Date”; and the
Computation Period ending on the same date as the last date of such Fiscal
Quarter, the “Reference Computation Period”), then Borrower may by
written notice to the Agent declare the deposit to be a “Retroactive Effect
Deposit” (such notice, the “Sinking Fund Deposit Cure
Notice”). No later than the date on which financial statements are
required to be delivered pursuant to Section 6.1.1 or 6.1.2 for
the applicable Reference Computation Period, the Borrower shall deliver the
Sinking Fund Deposit Cure Notice to the Agent declaring the intention to make a
Retroactive Effect Deposit . 

                    (b)      Solely
in the case of a Retroactive Effect Deposit, for purposes of determining the
Maximum Total Leverage Ratio for the Reference Computation Period, the amount of
Excess Cash shall be calculated as though the Sinking Fund Deposit Amount were
deposited into the Sinking Fund Account on the last date of the Reference
Computation Period. 

                    (c)      Solely
in the case of a Retroactive Effect Deposit, for purposes of determining EBITDA
for the Reference Computation Period, the required EBITDA shall be reduced by
CDN$500,000 for each CDN$5,000,000 of new Excess Cash deposited in the Sinking
Fund Account after the end of the applicable Fiscal Quarter by the Required
Deposit Date. 

57 

                   (d)     
Solely in the case of a Retroactive Effect Deposit, for purposes of determining
Net Sales for the Reference Computation Period, the required Net Sales shall be
reduced by CDN$850,000 for each CDN$5,000,000 of new Excess Cash deposited in
the Sinking Fund Account after the end of the applicable Fiscal Quarter by the
Required Deposit Date. 

                    7.13.5.
Principal Repayment and Excess Cash in Sinking Fund.

                    (a)     
The amount set forth opposite each Computation Period in the chart in Section
7.13.1, commencing with the next following Computation Period ending after a
repayment or prepayment of any principal amount of the Loans in accordance with
the terms of this Agreement, any deposit of Excess Cash in the Sinking Fund
Account or the termination in full of the Additional Commitment (without any
advance of Additional Loans) as a result of the expiration of the Novartis
Letter of Credit without having been drawn, shall be decreased by CDN$500,000
for each CDN$5,000,000 in aggregate of (i) principal of the Loans so repaid or
prepaid, (ii) Excess Cash so deposited in the Sinking Fund Account, and (iii)
the amount of the Additional Commitment so terminated, and compliance with the
financial covenant in Section 7.13.1 for each Computation Period
shall be determined by reference to such new amounts. 

                    (b)      The
amount set forth opposite each Computation Period in the chart in Section
7.13.3, commencing with the next following Computation Period ending after a
repayment or prepayment of any principal amount of the Loans in accordance with
the terms of this Agreement, any deposit of Excess Cash in the Sinking Fund
Account or the termination in full of the Additional Commitment (without any
advance of Additional Loans) as a result of the expiration of the Novartis
Letter of Credit without having been drawn, shall be decreased by CDN$850,000
for each CDN$5,000,000 in aggregate of (i) principal of the Loans so repaid or
prepaid, (ii) Excess Cash so deposited in the Sinking Fund Account, and (iii)
the amount of the Additional Commitment so terminated, and compliance with the
financial covenant in Section 7.13.3 for each Computation Period
shall be determined by reference to such new amounts. 

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

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

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

58 

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

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

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

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

Section 8.   Events of Default; Remedies. 

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

                    8.1.2.
Default Under Other Debt. 

                    (a)      Any
default for the payment of principal or interest when due shall occur under the
terms applicable to any Debt (other than the Obligations) of any Group Member in
an aggregate amount (for all such Debt so affected and including undrawn
committed or available amounts and amounts owing to all creditors under any
combined or syndicated credit arrangement) exceeding CDN$1,000,000; and (b) Any
default shall occur under the terms applicable to any Debt (other than the
Obligations) of any Group Member in an aggregate amount (for all such Debt so
affected and including undrawn committed or available amounts and amounts owing
to all creditors under any combined or syndicated credit arrangement) exceeding
CDN$1,000,000 and such default shall result in the acceleration of the maturity
of such Debt or permit the holder or holders thereof, or any trustee or agent for such holder or holders, to cause such
Debt to become due and payable (or require Borrower or any other Group Member to
purchase or redeem such Debt or post cash collateral in respect thereof) prior
to its expressed maturity. 

59 

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

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

                    8.1.5.
Non-Compliance with Loan Documents. 

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

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

                    8.1.7.
[Reserved].

60 

                    8.1.8.
Canadian Pensions Plans. (a) Any Person institutes steps to terminate a
Canadian Pension Plan or causes such Canadian Pension Plan to no longer be
registered if required to be registered, if as a result of such termination or
de-registration any Loan Party could be required to make a contribution to such
Canadian Pension Plan, or could incur a liability or obligation to such Canadian
Pension Plan, in excess of CDN$50,000; or (b) a contribution failure occurs with
respect to any Canadian Pension Plan sufficient to give rise to a Lien under any
Canadian Employee Benefits Legislation. 

                    8.1.9.
Judgments. 

                    (a)      Final
judgments which exceed an aggregate of CDN$1,000,000 shall be rendered against
any Group Member and shall not have been paid, discharged or vacated or had
execution thereof stayed pending appeal within 30 days after entry or filing of
such judgments; or (b) One or more non-monetary judgments, orders or decrees
shall be rendered against any one or more of the Loan Parties or any of their
respective Subsidiaries which has had or would reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect, and there
shall be any period of ten (10) consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect. 

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

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

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

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

61 

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

Section 9.   Agent. 

                    9.1.   
 Appointment; Authorization. 

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

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

62 

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

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

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

63 

Section 10. Miscellaneous. 

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

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

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

64 

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

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

65 

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

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

                    10.8.  
Anti-Money Laundering. 

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

66 

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

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

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

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

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

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

67 

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

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

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

68 

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

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

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

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

69 

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

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

[signature pages follow] 

70 

ANNEX I 

Commitments 

Closing Date Commitment: $35,000,000.00 

Additional Commitment: $20,000,000.00

I-1 

ANNEX II 

Addresses 

LOAN PARTIES 

Address for Notices: 
Merus Labs International Inc.
30
St. Patrick St., Ste. 301,
Toronto, Ontario M5T 3A3 
Attention: Chief
Executive Officer 
Facsimile: (416) 593-4434 

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

Facsimile: (604) 687-6314

AGENT 

PDL BioPharma, Inc., 
as Agent and the Lender 

Address for Notices: 
932 Southwood Boulevard 
Incline
Village, NV 89451 
Attention: General Counsel 
Telephone: (775) 832-8500

Facsimile: (775) 832-8501 

Bank:
Wells Fargo Bank, N.A. 
San Francisco, CA 94136

Account #:

* * *

ABA Routing #:

* * *

Swift Code:

* * *

II-1 

Schedules to the Credit Agreement 

[See Attached.] 

Schedule 4.1.6 - Material Adverse Changes 

There has been no Material Adverse Change since September 30,
2011, with the exception of the following, both of which were disclosed in the
Company’s recent financing prospectus: 

On December 20, 2011, Health Canada granted a notice of
compliance (“NOC”) to Pharmaceutical Partners of Canada Inc. (“PPC”), which
grants PPC the authority to market their generic version of Vancocin® capsules
in the Canadian market. Merus intends to vigorously pursue all avenues at its
disposal to challenge the entry of the PPC product.

It was recently announced that the pharmaceutical product
DIFICID®, a macrocyclic antibiotic, which may replace the use of Vancocin® will
be launched in the Canadian market. DIFICID® was found to be non-inferior to
vancomycin against C. Difficile in a phase III non-inferiority study reported in
the February 3, 2011 issue of the New England Journal of Medicine. However, the
Corporation expects DIFICID® to be sold in Canada at a much higher price than
that of Oral Vancocin® based on the existing DIFICID® pricing in the U.S.
market.

Schedule 5.4 – Financial Projections 

Attached hereto. 

Schedule 5.6 – Litigation 

None. 

Schedule 5.7 – Real Property 

The Company currently owns no real property.

Real property occupied under operating leases is as follows:

	Merus Labs International Inc. - 30 St. Patrick St., Ste. 301, Toronto,
  Ontario, Canada M5T 3A3
  
	Merus Labs Inc. - 100 Alexis-Nihon, Ste. 910, Ville St. Laurent, Quebec,
  Canada H4M 2P5
  
	Merus Labs Inc. - 470 Granville St., Ste. 503, Vancouver, British
  Columbia, Canada V6C 1V5 

Schedule 5.8 – Capitalization 

The following is a complete list of the Subsidiaries of the
Borrower: 

	Entity 	Jurisdiction 	# of Shares Outstanding 	% Owned 
	Merus Labs Inc. 	British Columbia 	12,619,001 	100% 
	ECG Holdings Inc. 	Delaware 	2,000 	100% 
	Merus Labs Luxco S.a r.l 	Luxembourg 	12,500 	100% 
	Merus Labs Netherlands B.V. 	Netherlands 	18,000 	100% 
	Orbis Pharma Inc. 	Ontario 	1,000 	51%

Schedule 5.9 (b) – Canadian Employees 

The following is a complete list of agreements between the
Company and its Canadian employees with respect to any benefits or termination:

	Employment agreement with Elie Farah dated January 12, 2012
  
	Employment agreement with Ahmad Doroudian dated January 12, 2012
  
	Employment agreement with Ali Moghaddam dated March 1, 2011
  
	Employment agreement with Andrew Patient dated January 1, 2012
  
	Incentive Stock Option Plan dated January 6, 2012 

Schedule 5.10 – Authorizations, Permits, Licenses and
Approvals 

The Company possesses all necessary authorizations, approvals
and permits necessary to conduct business as presently conducted with the
exception of the following: 

	Medicine License for Merus Labs Luxco S.a r.l,
  
	Wholesale license for Merus Labs Netherland B.V. 

Schedule 5.12 – Taxes 

All corporate tax amounts and returns are in compliance with
the exception of the following: 

Unfiled returns 

	Canadian corporate tax return for Envoy Capital Group Inc. for the fiscal
  year ended September 30, 2011
  
	Canadian corporate tax return for Envoy Capital Group Inc. for the stub
  period ended December 18, 2011 (prior to Amalgamation)
  
	US Federal tax return for ECG Holdings Inc. for the fiscal year ended
  September 30, 2011 

No amounts are expected to be owed with respect to these
returns. 

Unremitted amounts 

	Quebec employee deductions for the period January 1 – June 30, 2012

The amount withheld but not yet remitted is approximately
$22,000, due to the requirement to establish a separate account for Merus Labs
International Inc., whereas previously only Merus Labs Inc. was registered in
the province. This is expected to be completed and payment remitted within 30
days. 

Schedule 5.14 – Environmental Matters 

None. 

Schedule 5.15 – Insurance 

The Company maintains the following insurance policies and
coverage, for the company and its subsidiaries: 

	Directors and Officers Liability insurance - $10M coverage ($8M direct,
  $2M Side A coverage) via Liberty and Axis Insurance (shared coverage),
  $150,000 deductible
  
	Product and General Liability insurance – Elliot Special Risks – as
  follows: 

PERIOD: 

	From 13th May 2012
  
	To 13th May 2013
  
	Both days at 12.01AM Local Standard Time at the address of the Insured
  

INTEREST: 

	Section 1 Public Liability
  
	Section 2 Products Liability 

LIMIT OF INDEMNITY: 

	Section 1 CAD 10,000,000 any one event.
  
	Section 2 CAD 10,000,000 any one event and in all. 

POLICY TERRITORY: 

	World-wide including USA as per Policy Territory below 

	(A) 	
      The Provinces and Territories of Canada;

	(B) 	
      Anywhere in the world in respect of liability arising
      from:

		i) 	
      the Products sold, supplied or distributed by the
      Insured from any premises within (A) above;

		ii) 	
      Business travel by Persons Employed
      ordinarily resident within (A) above.

CONDITIONS: 

	Canadian Biotechnology Insurance Form as attached plus Joint Ventures
  Restriction plus amendments if any as agreed as attached.
  
	Retroactive Date Section 2: 13th May 2011 but 3rd April 2012 in respect of
  CAD 5,000,000 in excess of CAD 5,000,000
  
	Deductible Section 1 CAD 10,000 each and every claim.
  
	Deductible Section 2 CAD 10,000 each and every claim.
  
	Deductible: USD 10,000 each and every claim including costs and expenses.
  
	Employee Benefits Liability – Limit CAD 1,000,000 any one occurrence and
  including costs and expenses.
  
	Deductible CAD 1,000 any one claim
  
	Non-Owned Automobile Coverage – Limit CAD 1,000,000 any one occurrence
  
	Deductible CAD 1,000 any one claim
  
	S.E.F No.94 Legal Liability for Damages to Hired Automobiles
  
	Limit CAD 50,000 any one occurrence including costs and expenses.
  
	Deductible CAD 500 any one claim
  
	Tenants’ Legal Liability Insurance – Limit CAD 1,000,000 any one premises
  
	Deductible CAD 1,000 any one claim
  
	Advertising Liability - Limit CAD 1,000,000 any one occurrence
  
	Deductible CAD 1,000 any one claim 

	Incidental Medical Malpractice Liability
  
	Additional Insured – Broadform Vendors
  
	Voluntary Medical Payments
  
	Limit CAD 50,000 any one occurrence and in all
  
	Deductible CAD 1,000 any one claim
  
	Employers Liability Coverage
  
	Limit CAD 1,000,000 any one occurrence and in all
  
	Deductible CAD 1,000 any one claim
  
	Biocontamination Coverage
  
	Limit CAD 25,000 any one occurrence and in the aggregate
  
	Deductible CAD 1,000 any one claim
  
	Extended Pollution Coverage
  
	Limit CAD 25,000 any one occurrence and in the aggregate
  
	Deductible CAD 1,000 any one claim
  
	Barcode Coverage
  
	Limit CAD 25,000 any one occurrence and in the aggregate
  
	Deductible CAD 1,000 any one claim
  
	Product Tampering Extension
  
	Limit CAD 25,000 any one occurrence and in the aggregate
  
	Deductible CAD 1,000 any one claim 

Schedule 5.18 – Labour Matters 

None. 

Schedule 5.19 – Canadian Labour Matters 

None. 

Schedule 5.25 – Certificated Inactive Subsidiaries 

None. 

Schedule 7.1 – Existing Debt 

The Company currently has the following existing debt: 

The Company is party to a support services agreement with a
distribution services provider. Under the terms of the agreement, the
distribution services provider provided the Company with loan of $500,000 to be
used for working capital purposes in consideration for being the Company’s
exclusive provider of certain distribution services of the Company’s products in
Canada. Payments are made based on net sales of Vancocin. The agreement is for a
five year term with automatic renewal terms of two years until terminated. As at
June 30, 2012, the carrying value of the loan is $392,076. 

Schedule 7.2 – Permitted Liens 

None. 

Schedule 7.5 – Mergers, Consolidations, Asset Sales 

None. 

Schedule 7.9 – Existing Agreements 

None. 

Schedule 7.11 – Existing Investments 

The Company currently has the following existing investments:

	Account Holder 
	Account Name and
      
Identification Number 	Securities Intermediary
      and 
Address 
	Merus Labs International Inc. 

	Canadian dollar margin account
      

      * * *	Haywood Securities 

      * * *

Note: This account is a legacy account
from the former Envoy Capital Group entity. It was used for trading positions in
the former merchant bank business. It now consists of cash of approximately
$* * *, plus * * *, a private UK entity, valued at
approximately $* * *.

There are no restrictions on the account with respect to
pledging. 

Schedule 7.14 – Bank Accounts 

The Company currently has the following bank accounts: 

  	Account Holder 
	Account Name and Identification 

        Number 	Securities Intermediary and Address
        

	Merus Labs International Inc. (old Envoy account) 	Canadian dollar operating account
      

      * * *	Royal Bank of Canada 

      * * *
	Merus Labs International Inc. (old Envoy account) 	US dollar operating account
      

      * * *	Royal Bank of Canada 

      * * *
	Merus Labs International Inc. 	Canadian dollar operating account
      

      * * *	Royal Bank of Canada 

      * * *
	Merus Labs International Inc. 	US dollar operating account
      

      * * *	Royal Bank of Canada 

      * * *
	Merus Labs Inc. 	Canadian dollar operating account
      

      * * *	Royal Bank of Canada 

      * * *
	Merus Labs Inc. 	US dollar operating account 

      * * *	Royal Bank of Canada 

      * * *
	Merus Labs Inc. 	Canadian dollar operating account 

      * * *	Royal Bank of Canada 

      * * *
	Merus Labs Inc. 	Canadian dollar operating account 

      * * *	National Bank of Canada, 

      * * *

  	Account Holder 
	Account Name and Identification 

        Number 
	Securities Intermediary and Address
        

	Merus Labs Inc. 

	US dollar operating account 

      * * *	National Bank of Canada, * * *

	ECG Holdings Inc. 

	US dollar operating account 

      * * *

      

      * * *	Wells Fargo N.A.

Exhibit A 

Form of Compliance Certificate 

          Please
refer to the Credit Agreement dated as of July __, 2012 (as amended,
supplemented, restated or otherwise modified from time to time, the “Credit
Agreement”) among the undersigned (“Borrower”), the other Loan
Parties named therein, PDL BIOPHARMA INC., as the Lender, and PDL BIOPHARMA
INC., as Agent. This certificate (this “Certificate”), together with
supporting calculations attached hereto, is delivered to Agent and the Lender
pursuant to the terms of the Credit Agreement. Terms used but not otherwise
defined herein are used herein as defined in the Credit Agreement. [Enclosed
herewith is a copy of the [annual audited/quarterly] report of Borrower as at
________________ (the “Computation Date”), which report
fairly presents in all material respects the financial condition and results of
operations [(subject to the absence of footnotes and to normal year-end
adjustments)] of Borrower as of the Computation Date and has been prepared in
accordance with IFRS consistently applied.] 

          Borrower
hereby certifies and warrants that the computations set forth on the schedule
attached hereto correspond to the ratios and/or financial restrictions contained
in the Credit Agreement and such computations are true and correct as at the
[Computation Date]. 

          Borrower
further certifies that no Event of Default or Default has occurred and is
continuing. 

          Borrower
has caused this Certificate to be executed and delivered by its officer
thereunto duly authorized on _____________. 

MERUS LABS INTERNATIONAL INC. 

By: 
Title:
___________________________________

A-1 

Schedule to Compliance Certificate1 
Dated as of
_________________

	A. 	Section 7.13.1 - Minimum EBITDA
    	  
	 	 	 
	1. 	Consolidated Net Income 	$________ 
	 	 	 
	2. 	Plus: 	  
	 	 	 
	  	a. Interest Expense 	$________ 
	 	 	 
	  	b. income tax expense 	$________ 
	 	 	 
	  	c. depreciation and amortization
    	$________ 
	 	 	 
		d. transaction expenses incurred
      in connection with the Asset Sale and the financing 	$________ 
	 	 	 
	  	e. non-cash stock compensation
      expense 	$________ 
	 	 	 
	  	f. any non-cash non-recurring
      charges or expenses 	$________ 
	 	 	 
		g. any extraordinary or
      non-recurring charges or expenses approved in writing by the Agent 	$________ 
	 	 	 
	3. 	Minus, to the extent included in
      determining Consolidated Net Income, all non-cash gains 	$________ 
	 	 	 
	4. 	Total (EBITDA) 	$________ 
	 	 	 
	5. 	Minimum required 	$________ 
	  	  	  
	B. 	Section 7.13.2 – Maximum Total
      Leverage Ratio 	  
	 	 	 
	1. 	Total Debt outstanding 	$________ 
	 	 	 
	2. 	Less the amount of Unrestricted
      Cash that is Excess Cash 	$________ 
	 	 	 
	3. 	(1) minus (2) 	$________ 
	 	 	 
	4. 	EBITDA (from Item A(3) above) 	$________ 
	 	 	 
	5. 	Ratio of (3) to (4) 	_____ to 1 
	 	 	 
	6. 	Maximum allowed 	_____ to 1

____________________________

	1 	
      All calculations are subject to the provisions of Section
      7.13.4 and 7.13.5 of the Credit Agreement.

A-2 

	C. 	Section 7.13.3 – Minimum Net Sales 	  
	  	  	  
	1. 	Gross Sales 	$________ 
	  	  	  
	2. 	Minus: 	  
	  	  	  
	  	a. freight, insurance and other transportation
      and shipping charges 	$________ 
	  	b. sales, use, value-added, excise taxes and
      duties 	$________ 
		c. billbacks, chargebacks, customer adjustments
      (including payment discounts and customer pricing), performance
      allowances, promotional monies, trade, quantity, cash discounts, volume
      incentives, off invoice discounts, government and other third- party
      rebates, and product service fees 	$________ 
	  	d. allowances or credits2 	$________ 
	  	e. bad debt 	$________ 
	  	f. such other discounts and other deductions
      customary in the trade 	$________ 
	  	g. Total Net Sales Deductions (sum of (a)
      through (f)) 	$________ 
	  	  	  
	3. 	Net Sales ((1) minus (2)(g)) 	$________ 
	  	  	  
	4. 	Minimum Required 	$________ 
	  	  	  
	  	  	  
	  	  	  
	D. 	Section 1.1 – Minimum Fixed Charges Coverage
      Ratio 	  
	  	  	  
	1. 	Fixed Charges 	  
	  	  	  
		a. Interest Expense accrued (other than
      interest paid-in-kind, amortization of financing fees, and other non-cash
      Interest Expense) 	$________ 
	  	b. principal payments in respect of Debt that
      are required to be paid 	$________ 
	  	c. all federal, state, and local income taxes
      paid in cash 	$________ 
		d. all Restricted Payments paid (whether in
      cash or other property, other than common Stock) 	$________ 
	  	e. Total Fixed Charges (sum of (a) through (d))
    	$________ 
	  	  	  
	2. 	EBITDA (from Item A(3) above) 	$________ 
	  	  	  
	3. 	Ratio of (2) to (1)(e) 	_____ to 1 
	  	  	  
	4. 	Minimum allowed 	_____ to 1

_____________________________________

	2 	
      Including those in respect of rejection, defects, damaged
      item credits, sales returns, retroactive price reduction, shipping
      charges, shipment shortages, shelf-stock adjustments, invoice errors, and
      replacement costs.

A-3 

Exhibit B 

Form of Note 

	$__________________ 	New York, New York 
	  	_______, 20__ 

          The
undersigned (“Borrower”), for value received, promises to pay to the
order of _____________(“Lender”) at the office of PDL BIOPHARMA, INC.
(the “Agent”) the aggregate unpaid amount of the Loans (herein, the
“Loans”) made to Borrower by Lender pursuant to the Credit Agreement
referred to below, such principal amount to be payable on the dates set forth in
the Credit Agreement. 

          Borrower
further promises to pay interest on the unpaid principal amount of the Loans
from the date of such Loans until such Loans are Paid in Full, payable at the
rate(s) and at the time(s) set forth in the Credit Agreement. Payments of both
principal and interest are to be made in lawful money of the United States of
America to the deposit account of the Agent identified in the Credit Agreement.

          This
Note evidences indebtedness incurred under, and is subject to the terms and
provisions of, the Credit Agreement, dated as of July __, 2012 (as amended,
supplemented, restated or otherwise modified from time to time, the “Credit
Agreement”; terms not otherwise defined herein are used herein as defined in
the Credit Agreement), among Borrower, the other Loan Parties named therein, and
PDL BIOPHARMA INC., as Agent and Lender, to which Credit Agreement reference is
hereby made for a statement of the terms and provisions under which this Note
may or must be paid prior to its due date or its due date accelerated. 

          This
Note is made under and governed by the laws of the State of New York applicable
to contracts made and to be performed entirely within such State. 

MERUS LABS INTERNATIONAL INC. 

By:
_________________________________________________
Title:
________________________________________________

B-1Exhibit 4.3 Lock Up Letter Agreement

Exhibit 4.3

LOCK-UP LETTER AGREEMENT

Laidlaw & Company (UK) Ltd.

90 Park Avenue – 31st Floor

New York, NY 10016

The investors set forth on the signature 

pages of the Unit Purchase Agreement, 

by and among Actinium Pharmaceuticals, Inc.

and each of the purchasers identified on Exhibit A 

attached thereto

Dear Sirs:

The undersigned understands that Actinium Pharmaceuticals, Inc. (“API”) intends to enter into a Unit Purchase Agreement, by and among API and each of the purchasers identified on Exhibit A attached thereto (the “Agreement”) pursuant to which API intends to issue in units of API’s securities (the “Units”), with each Unit having a purchase price of $100,000 and consisting of one hundred eighty-one thousand eight hundred eighteen (181,818) shares of common stock of API (“API Common Stock”) and two Investor Warrants as follows: (i) an "A" Warrant to purchase one hundred eighty-one thousand eight hundred eighteen (181,818) shares of API Common Stock, exercisable at a price of $0.55 per share for a period of one hundred and twenty (120) days from the date of the final closing of the offering, and (ii) a "B" Warrant to purchase ninety thousand nine hundred nine (90,909) shares of API Common Stock, exercisable at a price of $0.825 per share for a period of five (5) years from the date of the final closing.

The undersigned also understands that API intends to enter into a Share Exchange Agreement with Cactus Ventures, Inc., a Nevada corporation (“Cactus”), pursuant to which Cactus will acquire 100% of the issued and outstanding equity securities of API, in exchange for the issuance of shares of common stock, par value $0.01 per share, of Cactus (the “ Cactus Common Stock”), which are to be issued to the shareholders of API, constituting approximately 99% of the issued and outstanding Cactus Common Stock after such issuance (the “Share Exchange”).  As a result of the Share Exchange, API will become the wholly owned subsidiary of Cactus and the former shareholders of API will became the controlling shareholders of Cactus.

In consideration of the execution of the Agreement by the purchasers and consummation of the Share Exchange, and for other good and valuable consideration, the undersigned hereby irrevocably agrees that the undersigned will not, directly or indirectly, that following the consummation of the Share exchange, sell or otherwise transfer any shares of Cactus Common Stock or other securities of Cactus owned by such person until (i) the date that is the earlier of twelve (12) months from the closing date of the Share Exchange; or (ii) six (6) months following the effective date of the Registration Statement.

In furtherance of the foregoing, Cactus and its transfer agent are hereby authorized to decline to make any transfer of securities if such transfer would constitute a violation or breach of this Lock-Up Letter Agreement.

It is understood that, if API notifies the undersigned that it does not intend to proceed with the Share Exchange or if the Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to the closing of the Share Exchange, then the undersigned will be released from the undersigned’s obligations under this Lock-Up Letter Agreement.

Laidlaw & Company

Page 2

The undersigned understands that API and the investors will proceed with the Agreement and Share Exchange in reliance on this Lock-Up Letter Agreement.

The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Lock-Up Letter Agreement and that, upon request, the undersigned will execute any additional documents necessary in connection with the enforcement hereof.  Any obligations of the undersigned shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned.

Very truly yours,

By:_________________________________

Name:

Title:

Dated:__________________________

-2-

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