CREDIT AGREEMENT September 20, 2013

Definitions

any LIBOR Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another month, in which case such LIBOR Period shall end on the immediately preceding Business Day;

any LIBOR Period that begins on the last Business Day of a month (or on a day for which there is no numerically corresponding day in the month at the end of such LIBOR Period) shall end on the last Business Day of the month at the end of such LIBOR Period; and

no LIBOR Period shall extend beyond the Facility B Maturity Date.

Statutory Liens in respect of any amount which is not at the time overdue;

Statutory Liens in respect of any amount which may be overdue but the validity of which is being contested in good faith and in respect of which reserves have been established in accordance with GAAP;

Liens or rights of distress reserved in or exercisable under any lease for rent not at the time overdue or for compliance with the terms of such lease not at the time in default; and security deposits given under leases not in excess of six (6) months' rent;

any obligations or duties affecting any Land due to any public utility or to any municipality or government, or to any statutory or public authority, with respect to any franchise, grant, licence or permit in good standing and any defects in title to structures or other facilities arising solely from the fact that such structures or facilities are constructed or installed on Land under government permits, leases or other grants in good standing; which obligations, duties and defects in the aggregate do not materially impair the use of such property, structures or facilities for the purpose for which they are held;

Liens incurred or deposits of cash made or pledged to secure obligations under workers' compensation legislation or similar legislation, or in connection with contracts, bids, tenders or expropriation proceedings, surety or appeal bonds, costs of litigation when required by law, public and statutory obligations, and warehousemen's, storers', repairers', carriers' and other similar Liens and deposits;

security given to a public utility or any municipality or government or to any statutory or public authority to secure obligations incurred to such utility, municipality, government or other authority in the ordinary course of business and not at the time overdue;

Liens and privileges arising out of a judgment or an award (not otherwise constituting an Event of Default) in respect of which an appeal or proceeding for review has been commenced and a stay of execution pending such appeal or proceedings for review has been obtained, and in respect of which reserves have been established in accordance with GAAP;

any Lien affecting any Land arising in connection with the construction or improvement of such Land or arising out of the furnishing of materials or supplies therefor, provided that such Lien secures moneys not at the time overdue (or if overdue, the validity of which is being contested in good faith and in respect of which reserves have been established as reasonably required by the Required Lenders), notice of such Lien has not been given to the Agent or any Lender and such Lien has not been registered against title to such Land;

Liens affecting any Land arising in connection with registered restrictions, covenants, land use contracts, building schemes, declarations of covenants, conditions and restrictions, servicing agreements in favour of any Governmental Authority, easements, rights-of-way, servitudes or other similar rights in or with respect to such Land (including open space and conservation easements, restrictions or similar agreements and rights of way and servitudes for railways, water, sewer, drainage, gas and oil pipelines, electricity, light, power, telephone, telegraph, internet or cable television services and utilities) granted to or reserved by other Persons or properties, which, in the aggregate, do not materially impair the use of such Land for its intended purposes or the operation of the business thereon, and provided that same have been complied with;

Liens affecting any Land arising in connection with site plan agreements, subdivision agreements, development agreements and similar instruments registered or recorded in the ordinary course of business which do not, in the aggregate, materially impair the use of such Land for its intended purposes or the operation of the business thereon, and provided that same have been complied with;

Liens affecting any Land arising in connection with any right reserved to or vested in any Governmental Authority, by the terms of any permit, licence, certificate, order, grant, classification (including any zoning Laws and ordinances and similar legal requirements), registration or other consent, approval or authorization acquired by such Person from any Governmental Authority or by any Law, to terminate any such permit, licence, certificate, order, grant, classification, registration or other consent, approval or authorization or to require annual or other payments as a condition to the continuance thereof and which, in the aggregate, do not materially impair the use of such Land for its intended purposes or the operation of the business thereon, and provided that same have been complied with;

Liens affecting any Land arising in connection with the reservations, limitations, provisos and conditions, if any, expressed in any grants of such Land from any Governmental Authority, which, in the aggregate, do not materially impair the use of such Land for its intended purposes or the operation of the business thereon, and provided that same have been complied with;

Permitted Purchase-Money Security Interests;

Liens securing Subordinated Debt;

the Specific Permitted Liens; and

the Security;

Accounting Principles

Currency References

Extended Meanings

Luxembourg Terms

Exhibits and Schedules

Establishment of Facility A

Purpose

Revolving Nature

Repayment

Availment Options

Prime Rate Loans; or

Letters of Credit in Canadian Dollars or U.S. Dollars, provided that (A) the Equivalent Amount expressed in Canadian Dollars of the aggregate face amount of all Letters of Credit outstanding under Facility A at any time may not exceed Five Hundred Thousand Dollars ($500,000); (B) each said Letter of Credit shall have a term not in excess of one (1) year (but may be renewed or extended from time to time in the sole discretion of RBC); and (C) Letters of Credit may not be issued for the purpose of guaranteeing obligations of any Person (except another Company).

Interest and Fees

interest on Prime Rate Loans at the Prime Rate plus the Applicable Margin per annum, payable monthly in arrears on the last day of each and every month;

in respect of each Letter of Credit, in respect of the period from the date of issuance of such Letter of Credit to the last day of the then current Fiscal Quarter (both inclusive), a fee equal to the Applicable Margin multiplied by the face amount of such Letter of Credit multiplied by the number of days in such period and divided by three hundred and sixty- five (365), payable on the date of issuance of such Letter of Credit; and (ii) in respect of each subsequent Fiscal Quarter, a fee equal to the Applicable Margin multiplied by the face amount of the Letter of Credit multiplied by the number of days in such Fiscal Quarter and divided by three hundred and sixty-five (365), payable on the first day of such Fiscal Quarter;

administrative fees charged by RBC in accordance with its usual practice in respect of the issuance, amendment and renewal of Letters of Credit;

a monthly administration fee in the amount of Two Hundred Fifty Dollars ($250) per month, payable on the last day of each month; and

such fees as may be agreed in writing from time to time between the Borrower and RBC relating to any cash management services which may be provided by RBC or its Affiliates for the Companies from time to time.

Facility A Limit

In this Agreement, "Facility A Limit" means, at any time, an amount equal to the lesser of: (A) the Facility A Maximum Amount; and (B) an amount determined at such time as follows:

(i) seventy-five percent (75%) of Eligible Receivables; less

(ii) the Potential Statutory Priority Amount at such time.

The Facility A Limit shall be adjusted as at the date of each receipt by the Agent of a Borrowing Base Certificate and shall remain in effect until receipt by the Agent of a subsequent Borrowing Base Certificate; provided that if the Agent does not receive a Borrowing Base Certificate on or before the date required pursuant to paragraph 8.04(a), the Facility A Limit shall be reduced to nil until such time as a Borrowing Base Certificate is thereafter received by the Agent.

RBC shall have no obligation to make any Advance under Facility A if after making such Advance the Outstanding Advances under Facility A would exceed the Facility A Limit then in effect.

If at any time the aggregate amount of the Outstanding Advances under Facility A is in excess of the Facility A Limit for any reason (specifically including as a result of a fluctuation in currency exchange rates), the Borrower agrees that immediately after receipt of a written request from the Agent it will make Repayments under Facility A in such amount as will result in the aggregate amount of the Outstanding Advances under Facility A not exceeding the Facility A Limit. The Agent shall firstly apply such Repayment against Prime Rate Loans under Facility A; and any remaining portion of such Repayment shall be held by the Agent and applied against Letters of Credit under Facility A upon the maturity thereof.

Cancellation of Unused Portion of Facility A

Establishment of Facility B

Purpose

Non-Revolving Nature

Repayment

The Obligations under Facility B shall become due and payable upon the earliest of: (i) the occurrence of an Insolvency Event (for greater certainty, without the necessity of a demand for payment by the Agent); (ii) the Facility B Maturity Date (for greater certainty, without the necessity of a demand for payment by the Agent); and (iii) delivery by the Agent to the Borrower of written notice that all Obligations under Facility B are immediately due and payable, following the occurrence and during the continuation of an Event of Default other than an Insolvency Event.

Subject to the Obligations under Facility B becoming due and payable in accordance with paragraph (a), the Borrower shall make monthly Repayments on account of the Outstanding Advances under Facility B as follows:

Seven Hundred Thousand Dollars ($700,000) (or, if less, the amount of the Outstanding Advances under Facility B) on the last day of each month commencing on October 31, 2013 and continuing thereafter to and including September 30, 2015;

One Million One Hundred Thousand Dollars ($1,100,000) (or, if less, the amount of the Outstanding Advances under Facility B) on the last day of each month commencing on October 31, 2015 and continuing thereafter to and including September 30, 2016; and

the remaining balance of the Outstanding Advances under Facility B shall be due and payable on the Facility B Maturity Date.

Commencing in respect of the Fiscal Quarter ending December 31, 2013, not later than sixty (60) days after the end of each Fiscal Quarter in each Fiscal Year, the Borrower shall make a Repayment on account of the Outstanding Advances under Facility B as follows:

in respect of the first Fiscal Quarter in such Fiscal Year, the said Repayment shall be equal to fifty percent (50%) of Excess Cash Flow determined in respect of such Fiscal Quarter;

in respect of the second Fiscal Quarter in such Fiscal Year, the said Repayment shall be equal to fifty percent (50%) of the following amount: (A) Excess Cash Flow determined in respect of the first two Fiscal Quarters in such Fiscal Year, less (B) the Repayment made pursuant to clause (i) above in respect of such Fiscal Year;

in respect of the third Fiscal Quarter in such Fiscal Year, the said Repayment shall be equal to fifty percent (50%) of the following amount: (A) Excess Cash Flow determined in respect of the first three Fiscal Quarters in such Fiscal Year, less (B) the aggregate of the Repayments made pursuant to clauses (i) and (ii) above in respect of such Fiscal Year; and

in respect of the fourth Fiscal Quarter in such Fiscal Year, the said Repayment shall be equal to fifty percent (50%) of the following amount: (A) Excess Cash Flow determined in respect of such Fiscal Year, less (B) the aggregate of the Repayments made pursuant to clauses (i), (ii) and (iii) above in respect of such Fiscal Year.

If any Company receives:

payments under a policy of insurance, except to the extent that such payments are permitted to be retained or used by such Company as provided in section 9.09; or

net proceeds from a transaction involving the sale, leasing or other disposition of any individual asset or group of related assets (other than inventory sold in the ordinary course of business) in one or a series of related transactions, less the portion of such net proceeds (if any) used to purchase replacement capital assets within one hundred eighty (180) days after such disposition;

then the Borrower agrees to make a Repayment under Facility B in an amount equal to such payments or net proceeds within five (5) Business Days after such payments or net proceeds are received by such Company in the case of clauses (i) and (ii) above, and within one hundred eighty-five (185) days after such payments or net proceeds are received by such Company in the case of clause (iii) above; provided further that the first One Million Dollars ($1,000,000) of net proceeds received by the Companies pursuant to clause (iii) above and not used to purchase replacement capital assets in each Fiscal Year shall not be required to be paid to the Agent under clause (iii) above. As used herein, "net proceeds" in respect of any such transaction means the gross amount payable to the Company in respect of such transaction less any sales commissions, reasonable costs and expenses of such transaction paid to Persons other than Related Persons, usual and reasonable adjustments in connection with the transaction, Taxes payable in connection with or as a result of the transaction, and any other amount specifically approved by the Agent, acting reasonably, in writing. Each Repayment made pursuant to this paragraph 3.04(d) shall be applied against the Outstanding Advances under Facility B on a pari passu basis, or as may be otherwise determined by the Lenders in their discretion.

Each Repayment under each paragraph (c) and (d) in this section 3.04 is in addition to and not in substitution for all other Repayments required under each other paragraph in this section 3.04. All such Repayments shall be applied in reverse chronological order.

Availment Options

Prime Rate Loans; or

Bankers' Acceptances from BA Lenders with a maturity between 30 and 90 days (inclusive), subject to availability; or

BA Equivalent Loans from Non-BA Lenders with a maturity between 30 and 90 days (inclusive), subject to availability; or

Base Rate Loans; or

LIBOR Loans with a LIBOR Period of one (1), two (2) or three (3) months, subject to availability.

Interest and Fees

interest on Prime Rate Loans at the Prime Rate plus the Applicable Margin per annum, payable monthly in arrears on the last day of each and every month;

interest on Base Rate Loans at the Base Rate plus the Applicable Margin per annum, payable monthly in arrears on the last day of each and every month;

in respect of each Bankers' Acceptance, a stamping fee equal to the Applicable Margin, multiplied by the face amount of the Bankers' Acceptance with the product thereof further multiplied by the number of days to maturity of the Bankers' Acceptance and divided by 365, payable at the time of acceptance;

in respect of each BA Equivalent Note, a stamping fee equal to the Applicable Margin multiplied by the face amount of the BA Equivalent Note with the product thereof further multiplied by the number of days to maturity of the BA Equivalent Note and divided by 365, payable at the time of acceptance; and

interest on LIBOR Loans at the LIBO Rate plus the Applicable Margin per annum calculated on the basis of a year of three hundred and sixty (360) days, payable in the manner set out in paragraph 6.10(b).

Arrangement Fee

On the date of execution and delivery of this Agreement (regardless of whether an Advance is made on such date), the Borrower shall pay to the Agent on behalf of the Lenders a fee in the amount of Three Hundred Twenty Thousand Dollars ($320,000), less the portion of such fee (if any) previously paid by the Borrower to the Agent.

On December 31, 2015 the Borrower shall pay to the Agent on behalf of the Lenders a fee in an amount equal to one-half of one percent (0.5%) of the Outstanding Advances under the Facilities on such date.

Voluntary Repayments

Hedge Transactions

The Agent shall act as lead arranger for all Hedge Transactions to be entered into between the Borrower and the Lenders hereunder, and shall offer each Lender an opportunity to participate in a pro-rata portion of such Hedge Transactions pursuant to such arrangements as may be agreed between the Agent and the respective Lenders. Each Hedge Transaction entered into between the Borrower and a Lender shall be upon such terms as may be offered by such Lender in its discretion, subject to the terms of this Agreement.

Hedge Transactions may not be entered into for speculative purposes.

The term of each Currency Hedge Transaction shall expire not later than the earlier of (a) twelve (12) months from the date of such Currency Hedge Transaction, and (b) the Facility B Maturity Date.

The aggregate of the Deemed Hedge Risk in respect of all Currency Hedge Transactions shall not at any time exceed Five Hundred Thousand Canadian Dollars (Cdn$500,000). If such limit is exceeded at any time, then upon receipt of a written request by the Agent the Borrower shall immediately unwind all or any of such Currency Hedge Transactions, as designated by the Agent, in order to comply with such limit.

The term of each Interest Rate Hedge Transaction shall expire not later than the earlier of (a) thirty (30) months from the date of such Interest Rate Hedge Transaction, and (b) the Facility B Maturity Date.

The aggregate of the notional amounts of all Interest Rate Hedge Transactions outstanding at any time shall not exceed fifty percent (50%) of the Outstanding Advances under Facility B at such time.

The aggregate of the Deemed Hedge Risk in respect of all Interest Rate Hedge Transactions shall not at any time exceed Five Hundred Thousand Canadian Dollars (Cdn$500,000). If such limit is exceeded at any time, then upon receipt of a written request by the Agent the Borrower shall immediately unwind all or any of such Interest Rate Hedge Transactions, as designated by the Agent, in order to comply with such limit.

In respect of each Hedge Transaction entered into between the Borrower and a Lender, the Borrower agrees to execute and deliver to such Lender all such Loan Documents as it may reasonably require (for greater certainty, specifically including an ISDA master agreement).

The Security shall secure all obligations owing under or in respect of each Hedge Transaction; and the priority of such obligations shall rank on a pari passu basis with all other Obligations as provided in section 9.01. Each Lender acknowledges that the enforcement of the Security is a matter which requires the approval of the Required Lenders.

The Borrower will not enter into or be a party to any Hedge Transactions with any Persons other than the Lenders, except as follows. The Borrower hereby represents and warrants that (i) attached hereto as Schedule 4.01(j) is a true, correct and complete list of all Hedging Transactions in existence as at the date of this Agreement between the Companies and other Persons, including the notional amounts and maturity dates thereof (collectively, the “Existing Third-Party Hedging Transactions”); and (ii) the Borrower is in compliance with all of its obligations thereunder. The Borrower hereby agrees that it will (i) continue to observe and perform all of its obligations under the Existing Third-Party Hedging Transactions, (ii) make any payments required thereunder upon the maturity thereof, and (iii) not renew or extend any Existing Third-Party Hedging Transactions.

Each Hedge Transaction made with a Lender shall include such Lender's standard early termination events. Without limiting the generality of the foregoing, each Hedge Transaction shall also stipulate that the termination of Facility B shall constitute an Early Termination Event (as defined in the applicable ISDA Master Agreement) and the Affected Party (as defined in such ISDA Agreement) shall be the counter-party to the Lender in such contract. The Lender shall have the right to choose the payment measure and the payment method (as such terms are understood in the ISDA Master Agreement) in respect of such Early Termination Event.

Commitment to Purchase Bankers' Acceptances and BA Equivalent Notes

In connection with the issuance of each Bankers' Acceptance or BA Equivalent Note, the amount payable by the purchaser thereof to the Borrower shall be determined in accordance with the following formula:

Each BA Lender which is a bank listed in Schedule I of the Bank Act (Canada) agrees to purchase those Bankers' Acceptances which it has accepted at a discount from the face amount thereof equal to the CDOR Rate for the relevant period in effect on the issuance date thereof; provided however that if RBC is the only BA Lender under a Facility, the discount rate shall be the applicable discount rate established by RBC on the issuance date thereof.

Each BA Lender which is a bank listed in Schedule II or Schedule III of the Bank Act (Canada) agrees to purchase those Bankers' Acceptances which it has accepted at a discount from the face amount thereof equal to the CDOR Rate for the relevant period in effect on the issuance date thereof plus a premium determined by such BA Lender not in excess of one-tenth of one percent (0.10%) per annum.

Each Non-BA Lender agrees to purchase BA Equivalent Notes issued by it hereunder at a discount from the face amount thereof equal to the CDOR Rate for the relevant period in effect on the issuance date thereof.

The discount applicable to each Bankers' Acceptances and BA Equivalent Note shall be determined on the basis of a year of 365 days.

Special Provisions Regarding Bankers' Acceptances

The Borrower agrees to provide for each Bankers' Acceptance by payment of the face amount thereof to the Agent on behalf of the BA Lender on the maturity of the Bankers' Acceptance or, prior to such maturity, on the Acceleration Date; and the Agent shall remit the said amount to such BA Lender and such BA Lender shall in turn remit such amount to the holder of the Bankers' Acceptance. If the Borrower fails to provide for the payment of the Bankers' Acceptance accordingly, any amount not so paid shall be immediately payable by the Borrower to the Agent on behalf of the BA Lender together with interest on such amount calculated daily and payable monthly at the rate and in the manner applicable to Prime Rate Loans under the Facility under which such Bankers' Acceptance was issued. The Borrower agrees not to claim any days of grace for the payment at maturity of any Bankers' Acceptance and agrees to indemnify and save harmless the BA Lender in connection with all payments made by the BA Lender (or by the Agent on its behalf) pursuant to Bankers' Acceptances accepted by the BA Lender, together with all reasonable costs and expenses incurred by the BA Lender in this regard. The Borrower hereby waives any defences to payment which might otherwise exist if for any reason a Bankers' Acceptance is held by the BA Lender for its own account at maturity.

If at any time and from time to time the Agent determines, acting reasonably, that there no longer exists a market for Bankers' Acceptances for the term requested by the Borrower, or at all, the Agent shall so advise the Borrower, and in such event the BA Lenders shall not be obliged to accept and the Borrower shall not be entitled to issue Bankers' Acceptances.

The Borrower hereby appoints each BA Lender as its true and lawful attorney to complete and issue Bankers' Acceptances on behalf of the Borrower in accordance with written (including facsimile) transmitted instructions provided by the Borrower to the Agent on behalf of such BA Lender, and the Borrower hereby ratifies all that its said attorney may do by virtue thereof except anything done that constitutes negligence or wilful misconduct by the BA Lender. The Borrower agrees to indemnify and hold harmless the Agent and the BA Lenders and their respective directors, officers and employees from and against any charges, complaints, costs, damages, expenses, losses or liabilities of any kind or nature which they may incur, sustain or suffer, arising from or by reason of acting, or failing to act, as the case may be, in reliance upon this power of attorney, except to the extent caused by the negligence or wilful misconduct of the Agent or the BA Lender or their respective directors, officers and employees. The Borrower hereby agrees that each Bankers' Acceptance completed and issued and accepted in accordance with this section by a BA Lender on behalf of the Borrower is a valid, binding and negotiable instrument of the Borrower as drawer and endorser. The Borrower agrees that each BA Lender's accounts and records will constitute prima facie evidence of the execution and delivery by the Borrower of Bankers' Acceptances. This power of attorney shall continue in force until the earlier of (i) delivery of written notice of revocation by the Borrower to the Agent on behalf of the BA Lender at the Agent's address provided in section 14.08, and (ii) the termination of this Agreement.

Special Provisions regarding BA Equivalent Notes

The Borrower agrees to provide for each BA Equivalent Note by payment of the face amount thereof to the Agent on behalf of the Non-BA Lender on the maturity of the BA Equivalent Note or, prior to such maturity, on the Acceleration Date; and the Agent shall remit the said amount to such Non-BA Lender and such Non-BA Lender shall in turn remit such amount to the holder of the BA Equivalent Note. If the Borrower fails to provide for the payment of the BA Equivalent Note accordingly, any amount not so paid shall be immediately payable by the Borrower to the Agent on behalf of the Non-BA Lender together with interest on such amount calculated daily and payable monthly at the rate and in the manner applicable to Prime Rate Loans under Facility B. The Borrower agrees not to claim any days of grace for the payment at maturity of any BA Equivalent Note and agrees to indemnify and save harmless the Non-BA Lender in connection with all payments made by the Non-BA Lender (or by the Agent on its behalf) pursuant to BA Equivalent Notes accepted by the Non-BA Lender, together with all reasonable costs and expenses incurred by the Non-BA Lender in this regard. The Borrower hereby waives any defences to payment which might otherwise exist if for any reason a BA Equivalent Note is held by the Non-BA Lender for its own account at maturity.

The Non-BA Lender shall have no obligation to make BA Equivalent Loans during any period in which the BA Lenders' obligation to issue Bankers' Acceptances is suspended pursuant to section 3.5 of the CBA Model Provisions.

The Borrower hereby appoints the Non-BA Lender as its true and lawful attorney to complete BA Equivalent Notes on behalf of the Borrower in accordance with written (including facsimile) transmitted instructions delivered by the Borrower to the Agent, and the Borrower hereby ratifies all that its said attorney may do by virtue thereof except anything done that constitutes negligence or wilful misconduct by the Non-BA Lender. The Borrower agrees to indemnify and hold harmless the Agent and the Non-BA Lender and their respective directors, officers and employees from and against any charges, complaints, costs, damages, expenses, losses or liabilities of any kind or nature which they may incur, sustain or suffer, arising from or by reason of acting, or failing to act, as the case may be, in reliance upon this power of attorney except to the extent caused by the negligence or wilful misconduct of the Agent or the Non-BA Lender or their respective directors, officers and employees. The Borrower hereby agrees that each BA Equivalent Note completed by the Non-BA Lender on behalf of the Borrower is a valid, binding and negotiable instrument of the Borrower as drawer and endorser. The Borrower agrees that the Non-BA Lender's accounts and records will constitute prima facie evidence of the execution and delivery by the Borrower of BA Equivalent Notes. This power of attorney shall continue in force until the earlier of (i) delivery of written notice of revocation by the Borrower to the Agent on behalf of the Non-BA Lender at the Agent's address provided in section 14.08, and (ii) the termination of this Agreement.

Special Provisions Regarding LIBOR Loans

Upon receipt by the Agent from the Borrower of a Draw Request, Conversion Notice or Rollover Notice in respect of a LIBOR Loan, the Agent will promptly advise the Borrower of the LIBO Rate, such rate to be determined as at approximately 11:00 a.m. London, England time, two (2) LIBOR Business Days before the commencement of the LIBOR Interest Period for such LIBOR Loan.

Interest in respect of any LIBOR Loan shall be calculated on the basis of a year of three hundred and sixty (360) days. Interest in respect of any LIBOR Loan with a LIBOR Period of between one (1) and three (3) months (inclusive) shall be payable at the time the principal amount of such LIBOR Loan is payable. Interest in respect of any LIBOR Loan with a LIBOR Period longer than three (3) months shall be payable in arrears every three (3) months commencing at the end of the third month following the commencement of such LIBOR Period, and also at the time the principal amount of such LIBOR Loan is payable.

The Borrower acknowledges that the ability of the Lenders to maintain or provide any LIBOR Loan and/or to charge interest on any LIBOR Loan at the LIBO Rate is and will be subject to any statute, law, regulation, rule or direction by any Governmental Authority having jurisdiction which may prohibit or restrict or limit such loans and/or such interest. The Borrower agrees that the Lenders shall have the right to comply with any such requirements and, if the Agent determines it to be necessary as a result of such requirement, the Agent may convert any LIBOR Loan to a Base Rate Loan or require immediate repayment of all LIBOR Loans, including accrued interest thereon.

No Repayment of Certain Availment Options

Matters relating to Interest

Unless otherwise indicated, interest on any outstanding principal amount and all other amounts payable hereunder (including unpaid interest) shall be calculated daily and shall be payable monthly in arrears on the last day of each and every month; and if the maturity date of a Facility is not the end of a month, all accrued and unpaid interest in respect of such Facility shall be paid on such maturity date. If the last day of a month is not a Business Day, the interest payment due on such day shall be made on the next Business Day, and interest shall continue to accrue on the said principal amount and shall also be paid on such next Business Day. Interest shall accrue from and including the day upon which an Advance is made or is deemed to have been made, and ending on but excluding the day on which such Advance is repaid or satisfied. Any change in the Prime Rate shall cause an immediate adjustment of the interest rate applicable to Prime Rate Loans, and any change in the US Base Rate shall cause an immediate adjustment of the interest rate applicable to Base Rate Loans, in each case without the necessity of any notice to the Borrower.

Unless otherwise stated, in this Agreement if reference is made to a rate of interest, fee or other amount "per annum" or a similar expression is used, such interest, fee or other amount shall be calculated on the basis of a year of three hundred and sixty-five (365) or three hundred and sixty-six (366) days, as the case may be. If the amount of any interest, fee or other amount is determined or expressed on the basis of a period of less than one year of three hundred and sixty-five (365) or three hundred and sixty-six (366) days, as the case may be, the equivalent yearly rate is equal to the rate so determined or expressed, divided by the number of days in the said period, and multiplied by the actual number of days in that calendar year.

Notwithstanding any other provisions of this Agreement, if the amount of any interest, premium, fees or other monies or any rate of interest stipulated for, taken, reserved or extracted under this Agreement or the Security would otherwise contravene the provisions of section 347 of the Criminal Code (Canada), section 8 of the Interest Act (Canada) or any successor or similar legislation, or would exceed the amounts which any Lender is legally entitled to charge and receive under any law to which such compensation is subject, then such amount or rate of interest shall be reduced to such maximum amount as would not contravene such provision; and to the extent that any excess has been charged or received such Lender shall apply such excess against the Outstanding Advances and refund any further excess amount.

Notice Periods

The Borrower shall provide written notice to the Agent in respect of Advances, Rollovers, Conversions and Repayments as set out below:

no notice is required in respect of Advances and Repayments under Facility A;

notice is required for each voluntary Repayment under Facility B in accordance with section 3.08;

except as provided in clauses (i) and (ii) above, one (1) Business Day's notice is required before 10:00 a.m. Toronto time in respect of any Advance, Rollover or Conversion if the amount is less than Ten Million Canadian Dollars (CDN$10,000,000);

except as provided in clauses (i) and (ii) above, two (2) Business Days' notice is required before 10:00 a.m. Toronto time in respect of any Advance, Rollover or Conversion if the amount is equal to or greater than Ten Million Dollars (CDN$10,000,000) but less than Twenty-Five Million Canadian Dollars (CDN$25,000,000);

except as provided in clauses (i) and (ii) above, three (3) Business Days' notice is required before 10:00 a.m. Toronto time in respect of any Advance, Rollover or Conversion if the amount is equal to or greater than Twenty-Five Million Canadian Dollars (CDN$25,000,000);

notwithstanding the foregoing, if an Advance relates to the issuance of a Bankers' Acceptance or BA Equivalent Loan, two (2) Business Days' notice is required before 10:00 a.m. Toronto time;

notwithstanding the foregoing, if an Advance, Rollover or Conversion relates to a LIBOR Loan, three (3) Business Days' notice is required before 10:00 a.m. Toronto time; and

notwithstanding the foregoing, if an Advance relates to the issuance of a Letter of Credit, three (3) Business Days' notice is required before 10:00 a.m. Toronto time.

Notice of any Advance, Rollover or Conversion referred to in paragraph (a) above shall be given in the form of a Draw Request, Rollover Notice or Conversion Notice, as the case may be, attached hereto as Exhibits, and shall be given to the Agent at its address set out in section 14.08.

If notice is not provided as contemplated herein with respect to the maturity of any LIBOR Loan, Bankers' Acceptance or BA Equivalent Loan, the Agent may in its discretion convert such LIBOR Loan upon its maturity into a Base Rate Loan and may convert such Bankers' Acceptance or BA Equivalent Loan upon its maturity into a Prime Rate Loan.

Any conversion from one form of Availment Option to another shall be subject to satisfaction of all of terms and conditions applicable to the form of the new Availment Option.

Minimum Amounts, Multiples and Procedures re Draws, Conversions and Repayments

Each request by the Borrower for an Advance or Conversion in the form of a Prime Rate Loan under Facility A or Facility B shall be in a minimum amount of One Hundred Thousand Dollars ($100,000) and a multiple of One Hundred Thousand Dollars ($100,000).

Each request by the Borrower for an Advance or Conversion in the form of a Base Rate Loan under Facility B shall be in a minimum amount of ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Dollars (U.S.$100,000) and a multiple of ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Dollars (U.S.$100,000).

Each request by the Borrower for an Advance or Conversion in the form of a Bankers' Acceptance or BA Equivalent Loan under Facility B shall be in a minimum of Five Hundred Thousand Dollars ($500,000) and a multiple of One Hundred Thousand Dollars ($100,000).

Each request by the Borrower for an Advance or Conversion in the form of a LIBOR Loan under Facility B shall be in a minimum of Five Hundred Thousand United States Dollars (U.S.$500,000) and a multiple of ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Dollars (U.S.$1,000,000).

Upon receipt of a Draw Request under any Facility, the Agent shall promptly notify each Lender under such Facility of the contents thereof and such Lender's Proportionate Share of the Advance. Such Draw Request shall thereafter be irrevocable.

Each Advance shall be made by the applicable Lenders to the Agent at its address referred to in section 14.08 or such other address as the Agent may designate by notice in writing to the Lenders from time to time. Each Lender shall make available its Proportionate Share of each said Advance to the Agent. Unless the Agent determines that any condition of the Advance has not been satisfied or waived, the Agent shall make the funds so received from the Lenders available to the Borrower by 2:00 p.m. (Toronto time) on the requested date of the Advance. No Lender shall be responsible for any other Lender's obligation to make available its Proportionate Share of the said Advance.

The Borrower agrees to deliver in favour of each Lender such other agreements and documentation as such Lender may reasonably require (not inconsistent with this Agreement) in respect of such Lender's requirements for the acceptance of Bankers' Acceptances or the issuance of BA Equivalent Notes.

All payments of principal, interest and other amounts made by the Borrower to the Agent in respect of the Outstanding Advances under each Facility shall be paid by the Agent to the respective Lenders in accordance with each Lender's Proportionate Share thereof. For greater certainty, however, stamping fees in respect of Bankers' Acceptances and BA Equivalent Notes shall be received and retained by the respective Lenders which issued or accepted such Bankers' Acceptances and BA Equivalent Notes.

Place of Repayments

All payments of principal, interest and other amounts to be made by the Borrower to the Agent pursuant to this Agreement shall be made at its address noted in section 14.08 or to such other address as the Agent may direct in writing from time to time. All such payments received by the Agent on a Business Day before 2:00 p.m. (Toronto time) shall be treated as having been received by the Agent on that day; payments made after such time on a Business Day shall be treated as having been received by the Agent on the next Business Day.

Whenever any payment shall be due on a day which is not a Business Day, the date for payment thereof shall be extended to the next succeeding Business Day. Interest shall continue to accrue and be payable thereon as provided herein, until the date on which such payment is received by the Agent.

The Borrower hereby irrevocably authorizes the Agent to debit any account maintained by the Borrower with the Agent from time to time in order to pay any amount of principal, interest, fees, expenses or other amounts payable by the Borrower pursuant to this Agreement, if such amount is not paid in full by the Borrower within thirty (30) days after receipt of a written request from the Agent for payment of such amount.

Evidence of Obligations (Noteless Advances)

Requirements for Letters of Credit

Determination of Equivalent Amounts

Illegality

Anti-Money Laundering

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

provide each Lender with copies of all information obtained in such regard without any representation or warranty as to its accuracy or completeness.

Terrorist Lists

Representations and Warranties

Status - Each Company has been duly incorporated (or amalgamated) and organized and is validly subsisting under the laws of its jurisdiction of incorporation and is up-to-date in respect of all material corporate filings.

Corporate Information - Schedule 7.01(b) attached hereto contains a list of the Companies (indicating those which are Excluded Subsidiaries) and the following information in respect of each Company: its prior names and predecessor corporations, its governing jurisdiction and all prior governing jurisdictions, its registered office, principal place of business, all locations at which it has places of business or owns assets, the number and classes of its issued and outstanding shares, and (other than the Borrower) a list of its shareholders including the number and class of shares held by each. The office (administration centrale), the place of effective management (siège de direction effective) and the centre of main interests of Merus Luxco is located at the place of its registered office (siège statutaire) in Luxembourg and Merus Luxco has no establishment outside Luxembourg (the terms “centre of main interests” and “establishment” having the meanings ascribed thereto in Council Regulation (EC) no. 1346/2000 of 29 May 2000 on insolvency proceedings). Each Excluded Subsidiary does not carry on business, does not own any assets which are material to the business and operations of the Companies taken as a whole, and owns assets having an aggregate fair market value of less than Ten Thousand Dollars ($10,000).

Solvency – Each Company is Solvent. Without limiting the generality of the foregoing, each Luxembourg Guarantor, is in compliance with all requirements of the Luxembourg legislation and regulations on the domiciliation of companies, and in particular with the Luxembourg Act dated May 31, 1999 on the domiciliation of companies, as amended from time to time. No Luxembourg Guarantor has filed and, to the best of its knowledge, no Person has filed a request with any competent court seeking that any Luxembourg Guarantor be declared subject to any Luxembourg Insolvency Event (and which include foreign court decision as to faillite, concordat or analogous procedures according to Council Regulation (EC) n°1346/2000 of 29 May 2000 on insolvency proceedings).

No Pending Changes - No Person has any agreement or option or any right or privilege (whether by law, pre-emptive or contractual) capable of becoming an agreement, including convertible securities, warrants or convertible obligations of any nature, for the purchase of any properties or assets of any Company out of the ordinary course of business or for the purchase, subscription, allotment or issuance of any debt or equity securities of any Company.

No Conflicting Agreements - Neither the execution and delivery of the Security, nor compliance with the terms, provisions and conditions of this Agreement or the Security will conflict with, result in a breach of, or constitute a default under the charter documents or by-laws of any Company or any agreement or instrument to which it is a party or is otherwise bound, and does not require the consent or approval of any Person, other than those which have been obtained.

No Conflict with Charter Documents - There are no provisions in the charter documents, by-laws or partnership agreement of any Company or in any unanimous shareholder agreement affecting it which restrict or limit its powers to borrow money, issue debt obligations, guarantee the payment or performance of the obligations of others, or otherwise encumber all or any of its property, now owned or subsequently acquired.

Loan Documents - The Borrower has the corporate capacity, power, legal right and authority to borrow from the Lenders, perform its obligations under this Agreement and provide the Security required to be provided by it hereunder; and each other Company has the corporate capacity, power, legal right and authority to guarantee payment to the Agent and the Lenders of the Borrower's obligations and provide the Security required to be provided by it hereunder. The execution and delivery of the Loan Documents by the Companies and the performance of their respective obligations therein have been duly authorized by all necessary corporate action. This Agreement and the other Loan Documents constitute legal, valid and binding obligations of the Companies, enforceable against them in accordance with the terms and provisions thereof, subject to laws of general application affecting creditors' rights (including Insolvency Legislation) and the discretion of the court in awarding equitable remedies.

Conduct of Business; Material Permits - Each of the Companies is in compliance in all material respects with all Applicable Laws of each jurisdiction in which it carries on business and is duly licensed, registered and qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the property owned or leased by it make such qualification necessary, except to the extent that the failure to hold any such licences, registrations and permits would not constitute a Material Adverse Change; and all such licences, registrations and qualifications are valid and subsisting and in good standing. Attached hereto as Schedule 7.01(h) is a true and complete list of all Material Permits, and all such Material Permits are valid and subsisting and in good standing in all material respects.

Ownership of Assets; Specific Permitted Liens - Each Company owns, and possesses its property free and clear of any and all Liens except for Permitted Liens. No Company has any commitment or obligation (contingent or otherwise) to grant any Liens except for Permitted Liens. No event has occurred which constitutes, or which with the giving of notice, lapse of time or both would constitute, a material default under any Lien which has been granted by any of the Companies. Schedule 7.01(i) attached hereto contains a true and complete list of the Specific Permitted Liens.

Owned Properties - Schedule 7.01(j) attached hereto contains a true and complete list of the Owned Properties.

Leased Properties - Schedule 7.01(k) attached hereto contains a true and complete list of all Leased Properties including in respect of each Lease the names of the parties, the municipal address and legal description of the Leased Property, the rent payable under the Lease, the term of the Lease and all renewal options, and the existence of any purchase option or right of first refusal in respect of the purchase of the Leased Property.

Intellectual Property - Each of the Companies possesses or has the right to use all Intellectual Property material to the conduct of its business, each of which is in good standing in all material respects; and has the right to use such Intellectual Property without violation of any material rights of others with respect thereto. Attached hereto as Schedule 7.01(l) is a list of all such material Intellectual Property held by the Companies, including a description of the nature of such rights. No Person has asserted any claim in respect of the validity of such Intellectual Property or the Companies’ rights therein, and the Borrower is not aware of any basis for the assertion of any such claims. The Borrower is not aware of any material infringement of the Companies’ rights under such Intellectual Property by other Persons. The conduct and operations of the businesses of each Company do not infringe, misappropriate, dilute or violate any Intellectual Property rights held by any other Person. Notwithstanding the foregoing, all patents in respect of the drug product known as Vancomycin have expired.

Insurance - The Companies have placed insurance, including property, boiler and machinery, business interruption and liability insurance, in appropriate amounts and for appropriate risks as would be considered prudent for similar businesses. Attached hereto as Schedule 7.01(m) is a true and complete list of all insurance policies held by the Companies, including the following information in respect of each policy: name of insurer, type and amount of coverage, deductible limit (if applicable) and policy expiry date.

Material Agreements - Each Material Agreement to which any Company is a party (for greater certainy, specifically including each of the Novartis Agreements) is in good standing and in full force and effect; and none of the Companies, or, to the best of the Borrower's knowledge, any of the other parties thereto, is in material breach of any of the terms or conditions contained therein. Attached hereto as Schedule 7.01(n) is a true and complete list of all Material Agreements to which the Companies are a party, including a brief description of the nature of each said Material Agreement.

Labour Agreements - Schedule 7.01(o) attached hereto contains a true and complete list of all contracts with labour unions and employee associations to which the Companies are a party, and the Borrower is not aware of any attempts to organize or establish any other labour union or employee association.

Environmental Laws - Except to the extent disclosed in Schedule 7.01(p) attached hereto:

each Company and its business, operations, assets, equipment, property, leaseholds and other facilities is in compliance in all material respects with all Requirements of Environmental Law, specifically including all Requirements of Environmental Law concerning the storage and handling of Hazardous Materials;

each Company holds all material permits, licenses, certificates and approvals from Governmental Authorities which are required in connection with air emissions, discharges to surface or groundwater, noise emissions, solid or liquid waste disposal, the use, generation, storage, transportation or disposal of Hazardous Materials and all other Requirements of Environmental Law;

there has been no material emission, spill, release, or discharge into or upon the air, soils (or any improvements located thereon), surface water or groundwater or the sewer, septic system or waste treatment, storage or disposal system servicing the premises, of any Hazardous Materials at or from any of the Properties;

no written complaint, order, directive, claim, citation, or notice from any Governmental Authority or any other Person has been received by any Company with respect to any of the Properties in respect of air emissions, spills, releases, or discharges to soils or improvements located thereon, surface water, groundwater or the sewer, septic system or waste treatment, storage or disposal systems servicing any of the Properties, noise emissions, solid or liquid waste disposal, the use, generation, storage, transportation, or disposal of Hazardous Materials or other Requirements of Environmental Law affecting the Properties;

there are no legal or administrative proceedings, investigations or claims now pending, or to the Borrower's knowledge, threatened in writing, with respect to the presence on or under, or the discharge, emission, spill, radiation or disposal into or upon any of the Properties, the atmosphere, or any watercourse or body of water, of any Hazardous Material; nor are there any material matters under discussion between any Company and any Governmental Authority relating thereto; and there is no factual basis for any such proceedings, investigations or claims; and

the Companies have no material indebtedness, obligation or liability, absolute or contingent, matured or not matured, with respect to the storage, treatment, cleanup or disposal of any Hazardous Materials, including without limitation any such indebtedness, obligation, or liability under any Requirements of Environmental Law regarding such storage, treatment, cleanup or disposal.

No Litigation - There are no actions, suits or proceedings pending or, to the Borrower's knowledge, threatened in writing against any Company in any court or before or by any Governmental Authority, except as disclosed in Schedule 7.01(q) attached hereto.

Pension Plans - Schedule 7.01(r) attached hereto contains a true and complete list of all Pension Plans established by the Companies. No Pension Plan is a Defined Benefit Pension Plan. No steps have been taken to terminate any such Pension Plan (in whole or in part), no contribution failure has occurred with respect to any such Pension Plan sufficient to give rise to a Lien under any applicable laws of any jurisdiction, and no condition exists and no event or transaction has occurred with respect to any such Pension Plan which might result in the incurrence by any Company of any material liability, fine or penalty. Each such Pension Plan is in compliance in all material respects with all applicable pension benefits and tax Laws, (i) all contributions (including employee contributions made by authorized payroll deductions or other withholdings) required to be made to the appropriate funding agency in accordance with all applicable laws and the terms of such Pension Plan have been made in accordance with all Applicable Laws and the terms of such Pension Plan, (ii) to the extent applicable, all liabilities under such Pension Plan are funded, on a going concern and solvency basis, in accordance with the terms of the respective Pension Plans, the requirements of applicable pension benefits laws and of applicable regulatory authorities and the most recent actuarial report filed with respect to the Pension Plan, and (iii) no event has occurred and no conditions exist with respect to any such Pension Plan that has resulted or could reasonably be expected to result in such Pension Plan having its registration revoked or refused for the purposes of any applicable pension benefits or tax Laws or being placed under the administration of any relevant pension benefits regulatory authority or being required to pay any Taxes or penalties under any applicable pension benefits or tax Laws.

Financial Statements - The most recent Year-end Financial Statements and Interim Financial Statements delivered to the Agent and the Lenders have been prepared in accordance with GAAP (except in the case of the Interim Financial Statements, subject to normal adjustments and the absence of footnotes) on a basis which is consistent with the previous fiscal period, and present fairly:

the assets and liabilities (whether accrued, absolute, contingent or otherwise) and financial condition of the Borrower on a consolidated basis as at the dates therein specified;

the sales, earnings and results of operations of the Borrower on a consolidated basis during the periods covered thereby; and

in the case of the Year-end Financial Statements, the changes in financial position of the Borrower on a consolidated basis;

and the Companies have no material liabilities (whether accrued, absolute, contingent or otherwise) except as disclosed therein and liabilities incurred in the ordinary course of business which do not directly or indirectly pertain to financing activities; and since the dates of the said Year-end Financial Statements and Interim Financial Statements, as the case may be, no material liabilities have been incurred by the Companies except in the ordinary course of business and no Material Adverse Change has occurred.

Financial and Other Information - All financial and other information provided by or in respect of the Companies to the Agent and the Lenders was true, correct and complete in all material respects when provided. No information, exhibit, or report furnished by the Companies to the Agent or the Lenders contains any material misstatement of fact or omits to state a material fact or any fact necessary to make the statement contained therein not materially misleading in the circumstances in which it was made.

No Guarantees – No Guarantees have been granted by any Company except for (i) Guarantees which comprise part of the Security; (ii) Guarantees in respect of Permitted Funded Debt incurred by any other Company; and (iii) Guarantees granted in respect of the PDL Credit Facilities which will be released concurrently with the first Advance hereunder.

Tax Returns - Each Company has duly and timely filed all tax returns required to be filed by it, and has paid all Taxes which are due and payable by it except for Taxes being contested in good faith and in respect of which reserves have been established as required by the Required Lenders acting reasonably. Each Company has also paid all other Taxes, charges, penalties and interest due and payable under or in respect of all assessments and re-assessments of which it has received written notice except for Taxes being contested in good faith and in respect of which reserves have been established as required by the Required Lenders acting reasonably. There are no actions, suits, proceedings, investigations or claims pending, or to the knowledge of the Borrower threatened in writing, against any Company in respect of Taxes, governmental charges or assessments except for any such actions, suits, proceedings, investigations or claims which are being contested in good faith and in respect of which reserves have been established as required by the Required Lenders acting reasonably.

No filing or stamp taxes - Regarding Luxembourg, no payment of any stamp, registration or other documentary tax in relation to the Loan Documents will be required except that in the case any Loan Documents are to be presented, directly or by way of reference, in court proceedings in a Luxembourg court or another official authority (autorité constituée) in Luxembourg, registration may be required by such court or authority and registration duties at a fixed rate of EUR 12 or an ad valorem rate (up to 0.24% of the amount referred to in the relevant document), depending on the nature of the registered document, will in such event become due and payable.

Statutory Liens - Each Company has remitted on a timely basis all amounts required to have been withheld and remitted (including withholdings from employee wages and salaries relating to income tax, employment insurance and Canada Pension Plan contributions), goods and services tax and all other amounts which if not paid when due could result in the creation of a Statutory Lien against any of its property, except for Permitted Liens.

No Default, etc. - No Default, Event of Default or Material Adverse Change has occurred and is continuing.

Transactions with Related Persons - The Companies are not party to any contract, commitment or transaction (including by way of loan) with any Related Person thereto which contains any terms which are not commercially reasonable.

Full Disclosure - There are no facts known to the Borrower which could reasonably be expected to materially adversely affect the Companies' ability to observe and perform their respective obligations under the Loan Documents.

Survival of Representations and Warranties

Positive Covenants

Prompt Payment - in the case of the Borrower, pay all principal, interest and other amounts due hereunder at the times and in the manner specified herein;

Preservation of Corporate Existence - maintain its corporate existence in good standing, continue to carry on its business, preserve its rights, powers, licences, privileges, franchises and goodwill, exercise any rights of renewal or extensions of any leases, licences, concessions, franchises or any other rights whatsoever which are material to the conduct of its business, maintain all qualifications to carry on business in each jurisdiction in which such qualifications are required, carry on and conduct its business in a proper and efficient manner so as to protect its property and income, and not materially change the nature of its business;

Compliance with Laws - comply in all material respects with all Applicable Laws (specifically including, for greater certainty, all applicable Requirements of Environmental Law), use the proceeds of all Advances hereunder for legal and proper purposes, and obtain and maintain in good standing all material leases, licences, permits and approvals from any and all Governmental Authorities required in respect of its business and operations;

Payment of Taxes, etc. - pay when due all rents, Taxes, rates, levies, assessments and governmental charges, fees and dues lawfully levied, assessed or imposed in respect of its property which are material to the conduct of its business, and deliver to the Agent upon request receipts evidencing such payments; except for rents, Taxes, rates, levies, assessments and governmental charges, fees or dues in respect of which an appeal or review proceeding has been commenced, a stay of execution pending such appeal or review proceeding has been obtained, reserves reasonably required by the Required Lenders have been established; and the amounts in question do not in the aggregate materially detract from the ability of the Companies to carry on their businesses and to perform and satisfy all of their respective obligations hereunder;

Maintain Records - maintain adequate books, accounts and records in accordance with GAAP;

Maintenance of Assets - keep its property and assets (except obsolete assets) in good repair and working condition;

Inspection - permit the Agent and its employees and agents, upon not less than five (5) Business Days' written notice to the Borrower, to enter upon and inspect its properties, assets, books and records from time to time during normal business hours and in a manner which does not materially interfere with its business, and make copies of and abstracts from such books and records and discuss its affairs, finances and accounts with any of its officers, directors, accountants and auditors; and it agrees to execute and deliver all consents and further assurances as may be necessary or desirable in order for the Agent and its agents to obtain information from Governmental Authorities and other third parties with respect to environmental matters;

Insurance - obtain from financially responsible insurance companies and maintain liability insurance, all-risks property insurance on a replacement cost basis (less a reasonable deductible not to exceed amounts customary in the industry for similar businesses and properties), business interruption insurance and insurance in respect of such other risks as are customary in the industry for similar businesses and properties; all of which policies of insurance shall be in such amounts as are customary in the industry for similar businesses and properties; and the interest of the Agent shall be noted on such policies (except liability insurance policies) as first loss payee; and the Agent shall be named as an additional insured under such liability insurance policies; and the Borrower agrees to provide the Agent with certificates of insurance and certified copies of such policies from time to time upon request;

Perform Obligations - fulfil all covenants and obligations required to be performed by it under those Loan Documents to which it is a party and any other agreement or undertaking now or hereafter made between it and the Lenders or the Agent;

Notice of Certain Events - provide prompt notice to the Agent of: (i) the occurrence of any Default; (ii) the incorrectness of any representation or warranty contained herein in any material respect; (iii) any material contravention of or non-compliance by any Company with any terms and conditions of any Loan Document; (iv) any Material Adverse Change; (v) any litigation which is material in relation to the Companies taken as a whole or in which the amount claimed under such specific litigation is in excess of Five Hundred Thousand Dollars ($500,000); (vi) any material labour dispute affecting any Company; (vii) any notice of (A) a payment default or (B) any other material default (unless such other material default is cured within any applicable grace or cure period relating thereto) in respect of any Funded Debt of any Company; (viii) any notice in respect of the termination or suspension of, or a material default under, any Material Agreement (for greater certainty, specifcially including any of the Novartis Agreements) or Material Permit; or (ix) the issuance of any management letter to the Borrower by its auditor;

Bank Accounts and Service Agreements - maintain all of its bank accounts and Service Agreements with RBC and its Affiliates, subject to the following exceptions: (i) Merus Luxco may maintain a bank account in Luxembourg provided that the Agent shall have received a pledge of all monies on deposit in such account as required pursuant to section 9.01(b) herein; and (ii) the Companies may maintain bank accounts with other banks and financial institutions in jursidictions where RBC and its Affiliates do not provide banking services provided that the aggregate amount of deposits in such accounts does not exceed Five Hundred Thousand Dollars ($500,000) at any time;

Use of Advances - utilize the proceeds of all Advances for the Borrower's own business purposes; and not permit such proceeds to be used, directly or indirectly, by any other Person or for any other purpose;

Environmental Information - if requested by the Agent from time to time upon the instructions of the Required Lenders: (i) provide the Agent with an environmental questionnaire in the Agent's standard form completed by a knowledgeable officer of the Borrower in respect of any Property; and (ii) if the information contained therein is inconsistent in any material respect with the representations in paragraph 7.01(p) herein, provide the Agent with a phase I environmental report in respect of such Property, and promptly take all such action as may be required to comply with all reasonable recommendations contained therein; and

Further Assurances - provide the Agent and the Lenders with such further information, financial data, documentation and other assurances as they may reasonably require from time to time.

Negative Covenants

Funded Debt - create, incur or assume any Funded Debt, except Permitted Funded Debt;

Liens - grant or suffer to exist any Lien in respect of any of its property, except Permitted Liens;

Disposition of Assets - directly or indirectly sell, transfer, assign, lease or otherwise dispose of any of its assets (including, without limitation, intellectual and industrial property), except that:

each Company may sell inventory in the ordinary course of business; and

if no Default has occurred and is continuing, each Company may sell or dispose of any other assets from time to time in the ordinary course of business (but for greater certainty a sale and leaseback transaction shall not be considered to be in the ordinary course of business), provided that in each Fiscal Year the aggregate amount received by the Companies from such dispositions less the aggregate amount incurred by the Companies in such Fiscal Year to purchase replacement capital assets shall not exceed One Million Dollars ($1,000,000); and for greater certainty the provisions of paragraph 3.04(d) shall apply to all such dispositions;

Guarantees - become obligated under Guarantees, except: (i) Guarantees which comprise part of the Security; and (ii) Guarantees in respect of Permitted Funded Debt incurred by any other Company;

Luxembourg Financial Assistance Prohibitions - with respect to any Luxembourg Guarantor, create, grant or permit to subsist any Permitted Lien to the extent that doing so would constitute a breach of the financial assistance prohibitions contained at Article ▇▇-▇ (▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇) ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇ on commercial companies of 10 August 1915, as amended (the "Companies Act") or constitute a misuse of corporate assets (abus de biens sociaux) as defined at Article 171-1 of the Companies Act;

Investments - make or acquire any Investments, except that the following Investments may be made or acquired if both immediately before and immediately after each such Investment no Default or Event of Default has occurred and is continuing:

Investments may be made by any Company in any other Company which was in existence as at the date of this Agreement, provided that such other Company has provided all Security required to be provided by it hereunder;

Investments may be made in direct obligations of Canada or the United States of America, including Canadian or United States of America federal, provincial or state obligations, with maturities of one (1) year or less from the date of acquisition of the investment, provided that if required by the Required Lenders, the Company making such Investment shall provide such additional items of Security as the Required Lenders may require in order that such investments shall be specifically pledged to the Agent;

Investments may be made in certificates of deposit having maturities of less than one (1) year, issued by RBC; and

a Company may acquire Intellectual Property rights (including the IP Ancillary Rights) in respect of any drug product, provided that (A) the purchase price thereof is financed entirely from the proceeds of equity or Subordinated Debt (and for greater certainty, no portion of such purchase price shall be financed, directly or indirectly, by indebtedness incurred hereunder); and (B) the Required Lenders have provided their prior written consent to such acquisition, which consent shall not be unreasonably withheld or delayed;

Capital Expenditures - incur Capital Expenditures, except that the following Capital Expenditures may be incurred if both immediately before and immediately after each such Capital Expenditure no Default has occurred and is continuing:

in each Fiscal Year the Companies may incur Capital Expenditures in the maximum aggregate amount of (i) Five Hundred Thousand Dollars ($500,000) plus (ii) an amount (if positive) equal to Five Hundred Thousand Dollars ($500,000) less the Capital Expenditures incurred by the Companies in the aggregate in the immediately preceding Fiscal Year;

Distributions - make any Distributions, other than Distributions to any other Company, unless both immediately before and immediately after each such Distribution no Default has occurred and is continuing;

Certain Payments - (i) make any payment in respect of principal, interest, fees or any other amounts in respect of Subordinated Debt, except for payments on account of interest when no Event of Default has occurred and is continuing and to the extent otherwise permitted under the subordination and postponement agreement relating thereto; (ii) make any payment in respect of principal, interest, fees or any other amounts in respect of Subordinated Debt, except to the extent permitted under the subordination, postponement and assignment agreement relating thereto; and for greater certainty any payment contemplated pursuant to this paragraph 8.02(i) shall not be considered a "Distribution" for the purposes of paragraph 8.02(h);

Corporate Changes - materially change its capital structure or the nature of its business, maintain a place of business or any material assets in any jurisdiction other than Canada or Luxembourg or any other such jurisdiction as may be approved in writing by the Agent upon the instructions of the Required Lenders, such approval not to be unreasonably withheld (provided that it shall be reasonable for such approval to be withheld if the Agent is unable to obtain a First-Ranking Security Interest in Collateral in such jursidiction), or enter into any transaction whereby all or a substantial portion of its property, assets and undertaking would become the property of any other Person, whether by way of reconstruction, reorganization, recapitalization, consolidation, amalgamation, merger, transfer, sale or otherwise;

Defined Benefit Pension Plans – establish, assume or otherwise become a party to or liable under any Defined Benefit Pension Plan;

Excluded Subsidiaries – permit any Excluded Subsidiary to carry on business, own any assets which are material to the business and operations of the Companies taken as a whole, or owns asset having an aggregate fair market value of less than Ten Thousand Dollars ($10,000);

New Subsidiaries - create or acquire any Subsidiary unless (i) all of the issued and outstanding shares in the capital of such Subsidiary are owned directly or indirectly by the Borrower; (ii) such new Subsidiary provides a Guarantee in respect of the Obligations and all Security required to be provided by it hereunder; and (iii) all of the issued and outstanding shares of such new Subsidiary are pledged to the Agent, and in each case accompanied by legal opinions as contemplated herein;

Fiscal Year - change its Fiscal Year (which for greater certainty presently ends on September 30 in each year);

Auditors - change its auditors to a firm that is not a nationally recognized auditing firm, except with the prior written consent of the Required Lenders which shall not be unreasonably withheld;

Dealing with Related Persons - enter into any contract with any Related Person (other than a contract relating to Subordinated Debt held by such Related Person) unless all terms and conditions thereof (specifically including the price) are commercially reasonable, or make a loan to any Related Person; but for greater certainty this paragraph (m) shall not apply to restrict the payment of any Distributions made in compliance with the restrictions contained in paragraph 8.02(h); or

Use of Advances - use the proceeds of any Advance for any purposes other than those expressly contemplated in this Agreement.

Financial Covenants

The ratio of Senior Funded Debt to EBITDA in the immediately preceding twelve (12) month period shall not be greater than 2.25 to 1.

The ratio of Total Funded Debt to EBITDA in the immediately preceding twelve (12) month period shall not be greater than 3.00 to 1.

The Fixed Charge Coverage Ratio shall not be less than 1.15 to 1. For the purpose of determining the Fixed Charge Coverage Ratio in respect of any fiscal period ending prior to September 30, 2014, Funded Debt Service for such fiscal period shall be determined as if (i) the Facilities and the MezzLender Subordinated Debt had been outstanding during the said fiscal period and (ii) the PDL Credit Facilities had not been outstanding during the said fiscal period.

Reporting Requirements

a Borrowing Base Certificate as at the end of each month in the form of Exhibit "F" attached hereto, certified by the President, Chief Financial Officer or other senior officer of the Borrower acceptable to the Agent by no later than the twentieth (20th) day after the end of such month, which shall include:

an aged summary of accounts receivable of the Companies including the following information: country of domicile; intercompany accounts; doubtful accounts; accounts in dispute; contra accounts; holdbacks, and any deposits received from each account debtor which remain outstanding at the report date;

an aged summary of accounts payable of the Companies; and

a summary of all amounts which comprise the Potential Statutory Priority Amount;

quarterly, within forty-five (45) days after the end of each Fiscal Quarter (specifically including the last Fiscal Quarter in each Fiscal Year):

the Interim Financial Statements in respect of such Fiscal Quarter accompanied by management discussion and analysis;

a Compliance Certificate in respect of such Fiscal Quarter certified by the President, Chief Financial Officer or other senior officer of the Borrower acceptable to the Agent in the form of Exhibit "G" attached hereto;

a variance analysis providing explanations for variances between actual results for such Fiscal Quarter and the projections contained in the most recent Annual Business Plan presented to the Agent and Lenders; and

a calculation of Excess Cash Flow in respect of the fiscal period from the commencement of such Fiscal Year to the end of such Fiscal Quarter;

annually, within ninety (90) days after the end of each Fiscal Year:

the Year-End Financial Statements in respect of such Fiscal Year, accompanied by management discussion and analysis and a copy of the Borrower's auditor's letter to management;

a Compliance Certificate in respect of such Fiscal Year certified by the President, Chief Financial Officer or other senior officer of the Borrower acceptable to the Agent in the form of Exhibit "G" attached hereto;

a variance analysis providing explanations for variances between actual results for such Fiscal Year and the projections contained in the most recent Annual Business Plan presented to the Agent and Lenders; and

a calculation of Excess Cash Flow in respect of such Fiscal Year;

annually, not later than ninety (90) days after the commencement of each Fiscal Year, the consolidated annual business plan of the Borrower for such Fiscal Year, including projections in respect of profit and loss, balance sheet, cash flow, Capital Expenditures and financial covenant calculations set out in this Agreement, including disclosure of all material assumptions utilized (the "Annual Business Plan"); and

such additional information and documents as the Lenders or the Agent may reasonably require from time to time to ensure the ongoing compliance by the Companies with the terms and conditions of this Agreement, in form reasonably acceptable to the Lenders and the Agent.

Security to be Provided by the Companies

Guarantees from all present and future Subsidiaries of the Borrower in respect of all present and future, direct and indirect, indebtedness and obligations of the Borrower to the Agent and the Lenders, each such Guarantee to be in an unlimited amount except for the Guarantee provided by Merus Luxco which will be limited to the principal amount of Fifty Million Dollars ($50,000,000);

a general security agreement from each Company creating a First-Ranking Security Interest in respect of all of its present and future property, assets and undertaking; provided that in the case of Merus Luxco it shall instead provide (i) a pledge of all monies on deposit in its bank accounts; and (ii) a pledge over receivables owed to Merus Luxco;

to the extent required by the Required Lenders in their discretion from time to time, collateral mortgages or debentures or other forms of security from the Companies creating a First-Ranking Security Interest in respect of all Owned Properties;

to the extent required by the Required Lenders in their discretion from time to time, debentures, collateral mortgages or other forms of security from the Companies creating a First-Ranking Security Interest in respect of any or all Leased Properties which the Required Lenders acting reasonably consider to be material;

a security agreement from each Company creating a First-Ranking Security Interest in respect of its equity investment held in each Subsidiary directly owned by such Company, and including for greater certainty a pledge by the Borrower of its equity interest in Merus Luxco;

if required by the Required Lenders in their discretion from time to time, a security agreement creating an assignment and First-Ranking Security Interest in respect of its rights to and interest in any Intellectual Property which the Required Lenders acting reasonably consider to be material, together with any necessary consents from other Persons which may be required in connection with the granting of said assignment and security interest; and without limiting the generality of the foregoing such security shall be required in respect of all Intellectual Property in respect of the Key Products;

if required by the Required Lenders in their discretion from time to time, specific assignments by the Companies of all rights and benefits arising under each Material Agreement, accompanied by an agreement from the other contracting party thereto, in form and substance satisfactory to the Agent and the Lenders; provided however that specific assignments shall not be required in respect of any of the Novartis Agreements;

assignments of the interest of all Companies in all policies of insurance (which requirement shall be satisfied if the Agent's interest as first mortgagee and loss payee is recorded on such policies); and

such other security and further assurances as the Agent may reasonably require from time to time, not inconsistent with the provisions of this Agreement.

Security to be Provided by Others

a subordination, postponement and standstill agreement from MezzLender;

a subordination, postponement and standstill agreement from any other holder of any indebtedness which is intended to constitute Subordinated Debt; and

if requested by the Agent upon the instructions of the Required Lenders, a Landlord Agreement in respect of any one or more of the Leased Properties.

General Provisions re Security; Registration

Opinions re Security

After-Acquired Property, Further Assurances

Security for Hedge Transactions

Luxembourg Guarantee Limitation Language

Notwithstanding anything to the contrary contained in this Agreement or in any other Loan Documents, the aggregate obligations and exposure of a Luxembourg Guarantor in respect of the obligations of an affiliated entity which is not a direct or indirect subsidiary of such Luxembourg Guarantor shall be limited at any time to an aggregate amount not exceeding 90% of the greater of:

an amount equal to the sum of the Luxembourg Guarantor's Net Assets and its subordinated debt (dettes subordonnées), as referred to in the Luxembourg Act of 19 December 2002 on the Register of Commerce and Companies, on accounting and on annual accounts of the companies, as amended (the 2002 Law) and as reflected in the financial information of the Luxembourg Guarantor available to the Agent as at the date of this Agreement (or its accession as a Guarantor), including, without limitation, its most recently and duly approved financial statements (comptes annuels) and any (unaudited) interim financial statements signed by its board of managers (gérants) or directors (administrateurs); and

an amount equal to the sum of the Luxembourg Guarantor's Net Assets and its subordinated debt (dettes subordonnées), as referred to in the 2002 Law and as reflected in the financial information of the Luxembourg Guarantor available to the Agent as at the date the guarantee is called, including, without limitation, its most recently and duly approved financial statements (comptes annuels) and any (unaudited) interim financial statements signed by its board of managers (gérants) or directors (administrateurs).

For this purpose, "Net Assets" (actifs) will be determined in accordance with Article 34 of the 2002 Law.

The limitation set forth at paragraph (a) above shall not apply to any amounts borrowed under this Agreement and made available, in any form whatsoever, to such Luxembourg Guarantor or any of its direct or indirect subsidiaries.

Insurance by Agent

Insurance Proceeds

if an Event of Default has occurred and is continuing at such time, the Required Lenders shall apply such proceeds against the Obligations (unless otherwise agreed by the Required Lenders in their sole discretion);

if no Event of Default has occurred and is continuing at such time, and such proceeds are less than Five Hundred Thousand Dollars ($500,000) the Required Lenders agree to consent to the payment of such proceeds to such Company if:

such property has been repaired or replaced and the proceeds will reimburse the Company for payments it has made for such purpose; or

the Company confirms in writing to the Agent that it will forthwith use such proceeds to repair or replace such property; and

if no Event of Default has occurred and is continuing at such time, and such proceeds are equal to or greater than Five Hundred Thousand Dollars ($500,000), the Required Lenders shall apply such proceeds against the Obligations (unless otherwise agreed by the Required Lenders in their sole discretion).

Successors and Assigns

Conditions Precedent to First Advance

all conditions precedent in section 10.02 shall have been satisfied;

the Lenders shall have completed and shall be satisfied with their due diligence in respect of the Companies, specifically including due diligence with respect to:

the Year-end Financial Statements in respect of the Fiscal Years ended September 30, 2011 and September 30, 2012, and the Interim Financial Statements in respect of the Fiscal Quarter ended June 30, 2013;

financial projections for the Fiscal Years ending September 30, 2013, September 30, 2014 and September 30, 2015, taking into account the establishment of the Facilities herein and the establishment of the MezzLender Subordinated Debt;

the most current aged accounts receivable, accounts payable and inventory listings for the Companies;

insurance policies;

the terms and conditions of the Novartis Agreements and all other Material Agreements;

the terms and conditions of all Material Permits;

the status of any litigation which may affect the Companies;

the corporate and capital structure of the Companies;

key management of the Companies; and

business, environmental, regulatory, tax and legal matters;

the Security shall have been executed and delivered and all registrations necessary or desirable in connection therewith shall have been made (except to the extent described in section 9.03), and any other documentation required by the Agent and the Lenders shall have been executed and delivered, all in form and substance satisfactory to the Agent and the Lenders in their sole discretion;

the Agent and the Lenders shall have received satisfactory evidence that there are no Liens affecting any of the Companies except for Permitted Liens; PDL shall have provided a written undertaking to release and discharge all security and guarantees held by it in connection therewith upon receipt of a specified amount, and arrangements satisfactory to the Agent and the Lenders shall have been made for the payment to PDL of such amount using the proceeds of the first Advance, proceeds from the MezzLender Subordinated Debt and the Borrower’s own resources; and the Borrower shall have repaid all of its indebtedness to Methapharm Inc. (which the Borrower hereby advises is unsecured);

the Agent and the Lenders shall have received particulars of all Permitted Liens, specifically including the assets encumbered thereby, the amounts due thereunder, and confirmation from the holders thereof that the terms thereof are being complied with

the Agent and the Lenders shall have received, in respect of each Owned Property and each Leased Property considered by the Required Lenders to be material, an environmental report from a qualified consultant in form and substance satisfactory to them, accompanied by a transmittal letter from such consultant authorizing the Agent and the Lenders to rely thereon (or in the discretion of the Agent and the Lenders, an environmental questionnaire in respect of such Owned Property or Leased Property);

the property and assets of the Companies shall be insured in accordance with the requirements herein;

the Agent and the Lenders shall have received satisfactory evidence that the MezzLender Subordinated Debt has been advanced in an amount of not less than Eight Million Dollars ($8,000,000);

immediately after the first Advance the Funded Debt of the Borrower and its Subsidiaries on a consolidated basis (for greater certainty, specifically including the Outstanding Advances), but excluding the MezzLender Subordinated Debt, shall not exceed Thirty Million Five Hundred Thousand Dollars ($30,500,000);

immediately after the first Advance the Borrower shall have cash in its bank account of not less than One Million Dollars ($1,000,0000);

immediately after the first Advance there shall be no Outstanding Advances under Facility A;

the Agent and the Lenders shall have received a pro forma Compliance Certificate which evidences the Borrower's projected compliance with the financial covenants in section 8.03 immediately after the first Advance hereunder, on the following basis: (i) EBITDA shall be determined in respect of the fiscal period commencing on October 1, 2012 and ending on the date of the first Advance hereunder and then annualized; and (ii) Funded Debt Service shall be determined for such fiscal period as if the Facilities and the MezzLender Subordinated Debt had been outstanding during the said fiscal period and the PDL Credit Facilities had not been outstanding during the said fiscal period, and then annualized;

not less than three (3) days prior to the date of such Advance (or such shorter period as the Agent and the Lenders in their discretion may otherwise agree), the Agent and the Lenders shall have received information contemplated pursuant to paragraph 8.03(a) regarding the accounts receivable of the Companies, including a current Borrowing Base Certificate, which shall establish that the Facility A Limit is greater than any Advances which may be requested by the Borrower under Facility A contemplated as at the date of this Agreement;

any necessary governmental, regulatory and third party approvals necessary in connection with this Agreement and the transactions contemplated therein shall have been given unconditionally (other than usual and customary conditions imposed by the Toronto Stock Exchange relating to the conditional listing of common shares of the Borrower in connection with the MezzLender Subordinated Debt) and without containing any onerous terms;

the Agent shall have received a certificate of status, certificate of compliance or similar certificate for each Company (other than a Luxembourg Guarantor) issued by its governing jurisdiction and each other jurisdiction in which it carries on business or holds any material assets;

the Agent shall have received an officer's certificate and certified copies of resolutions of the board of directors of each Company concerning the due authorization, execution and delivery of the Loan Documents to which it is a party, and such related matters as the Agent and the Lenders may reasonably require;

for each Luxembourg Guarantor, the Agent shall have received (i) an electronic certified excerpt of the Luxembourg Companies Register dated no more than one Business Days prior to the date of this Agreement (ii) a solvency certificate dated as of the date of this Agreement (signed by a director or an authorized signatory) that it is not subject to nor, as applicable, does it meet or threaten to meet the criteria of bankruptcy (faillite), insolvency, voluntary or judicial liquidation (liquidation volontaire ou judiciaire), composition with creditors (concordat préventif de faillite), controlled management (gestion contrôlée), reprieve from payment (sursis de paiement), general settlement with creditors, reorganization or similar laws affecting the rights of creditors generally and no application has been made or is to be made by its director or, as far as it is aware, by any other Person for the appointment of a commissaire, juge-commissaire, liquidateur, curateur or similar officer pursuant to any voluntary or judicial insolvency, winding-up, liquidation or similar proceedings and (iii) an electronic certified copy of a certificate of non-registration of judgments (certificat de non-inscription d’une décision judiciaire), issued by the Luxembourg Companies Register on the date of this Agreement and reflecting the situation no more than one Business Day prior to the date of this Agreement, certifying that, as of the date of the day immediately preceding such certificate, the Luxembourg Guarantor has not been declared bankrupt (en faillite), and that it has not applied for general settlement or composition with creditors (concordat préventif de faillite), controlled management (gestion controlee), or reprieve from payment (sursis de paiement), judicial or voluntary liquidation (liquidation judiciaire ou volontaire), such other proceedings listed at Article 13, items 2 to 11, 13 and Article 14 of the Luxembourg Act dated 19 December 2002 on the Register of Commerce and Companies, on Accounting and on Annual Accounts of the Companies (as amended from time to time), (and which include foreign court decisions as to faillite, concordat or analogous procedures according to Council Regulation (EC) n°1346/2000 of 29 May 2000 on insolvency proceedings);

the Agent and the Lenders shall have received an opinion from the solicitors for each Company regarding its corporate status, the due authorization, execution, delivery and enforceability of the Loan Documents provided by it, and such other matters as the Agent and the Lenders may reasonably require, in form and substance satisfactory to the Agent and the Lenders in their sole discretion;

the Borrower shall have paid to the Agent all fees and expenses (including the Agent's legal expenses) relating to the establishment of the Facilities;

the Borrower shall have satisfied all requirements of the Agent and each Lender under AML Legislation; and

the Agent and the Lenders shall have received such additional evidence, documents or undertakings as it may reasonably require to complete the transactions contemplated hereby in accordance with the terms and conditions contained herein.

Conditions Precedent to all Advances

the representations and warranties in section 7.01 shall be true and correct in all material respects as if made on the date of such Advance;

any additional Security required to be provided at the time of such Advance shall have been executed and delivered and all registrations necessary or desirable in connection therewith shall have been made, and any other documentation required by the Agent shall have been executed and delivered, all in form and substance satisfactory to the Agent;

no Default shall have occurred, nor shall the making of the Advance result in the occurrence of any Default;

the Borrower shall have given a Draw Request to the Agent in accordance with the notice requirements provided herein;

in respect of an Advance under Facility A the Borrower shall have provided a Borrowing Base Certificate in accordance with the requirements set out in paragraph 8.03(a);

no Material Adverse Change shall have occurred and be continuing; and

no third party demand or garnishment order for payment to any Government Authority shall have been received by the Agent or any Lender with respect to any Company.

Events of Default

any Company fails to pay any principal, Interest or other amount under this Agreement or any other Loan Document when due (for greater certainty, specifically including the failure of the Borrower to satisfy any demand by the Agent for payment of all or any portion of the Obligations under Facility A);

any representation or warranty provided by a Company to the Agent or the Lenders herein or in any other Loan Document was incorrect in any material respects on the date on which such representation or warranty was made;

the Borrower fails to perform or comply with any of the covenants set out in section 8.03;

any Company fails to perform or comply with any of its covenants or obligations contained in this Agreement, the Security or any other agreement made between it and any Lenders (other than those set out in paragraphs (a), (b), and (c) above) after receipt of notice of such non-compliance from the Agent; provided that if such non-compliance is capable of remedy within ten (10) days and such Company diligently attempts to remedy such non-compliance and informs the Agent of its efforts in this regard, and such non- compliance is remedied within such period, then such non-compliance shall be deemed not to constitute an Event of Default;

any Company is in default in the payment or performance of any of its indebtedness or obligations under any agreement relating to Funded Debt (other than the Outstanding Advances) in excess of One Hundred Thousand Dollars ($100,000) after the expiry of any grace or cure periods relating thereto;

an Insolvency Event occurs in respect of any Company;

any document constituting part of the Security shall for any reason (other than the fault of the Agent or any Lender) cease to be in full force and effect or shall be declared in a final judgment of a court of competent jurisdiction to be null and void; or any Company contests the validity or enforceability thereof or denies it has any further liability or obligation thereunder; or any document (other than a Guarantee) constituting part of the Security shall for any reason fail to create a valid and perfected First-Ranking Security Interest in and to the property purported to be subject thereto, except that if such failure is capable of remedy within thirty (30) days, the Borrower or such Company diligently attempts to remedy such failure and diligently informs the Agent of its efforts in this regard, and the failure is remedied within such thirty (30) day period, then the failure shall not constitute an Event of Default;

any Person which has provided a Guarantee in respect of the Obligations terminates or purports to terminate its liability under such Guarantee or its liability thereunder in respect of any future Advances, or disputes the validity or enforceability of such Guarantee or any Security provided by it;

any Person having the right to do so takes possession of any property of a Company with a value in excess of One Hundred Thousand Dollars ($100,000) by way of or in contemplation of enforcement of security, or a distress or execution or similar process is levied or enforced against any such property;

one or more final judgments or decrees for the payment of money shall have been obtained or entered against any one or more of the Companies in excess of One Hundred Thousand Dollars ($100,000) in the aggregate and shall remain unpaid for a period in excess of thirty (30) days; unless such judgement is fully covered by insurance (subject to a reasonable deductible amount) and the insurer thereof has confirmed such coverage in writing;

any Governmental Authority shall take any action to condemn, seize or appropriate any property of any Company with a value in excess of One Hundred Thousand Dollars ($100,000) unless such Governmental Authority has paid a fair and reasonable expropriation amount;

any Person (or group of Persons acting in concert) (i) has Control of the Borrower at any time; or (ii) collectively holds, directly or indirectly, shares in the capital of the Borrower at any time to which are attached votes representing more than fifty-one percent (51%) of all votes attached to all issued and outstanding shares in the capital of the Borrower;

the Borrower's auditors include any adverse qualification in their audit letter relating to the Year-end Financial Statements, unless the Required Lenders acting reasonably are satisfied that such qualification is not material; or

a Material Adverse Change occurs and is continuing.

Acceleration, etc.

The Agent shall, upon the instructions of RBC, issue a written notice to the Borrower declaring the Obligations under Facility A to be immediately due and payable. For greater certainty, as Facility A is a demand facility RBC may instruct the Agent to issue a demand for payment under Facility A regardless of whether an Event of Default has occurred and is continuing. Notwithstanding the issuance of any such demand for payment under Facility A, any enforcement of the Security shall require the approval of the Required Lenders as hereinafter provided.

Upon the occurrence of an Event of Default which is continuing the Agent shall, upon the instructions of the Required Lenders, issue a written notice to the Borrower (a "Acceleration Notice") declaring all of the Obligations to be immediately due and payable.

Upon receipt of an Acceleration Notice the Borrower shall immediately pay and satisfy the Obligations, including payment to the Agent of the following amounts (without duplication): (i) the Outstanding Advances and all accrued and unpaid interest, fees and other amounts relating thereto; (ii) the greater of the Aggregate Actual Hedge Liability and the aggregate Deemed Hedge Risk in respect of all Hedge Transactions then outstanding; (iii) an amount equal to the face amount of all Bankers' Acceptances and BA Equivalent Loans then outstanding; and (iv) the maximum amount payable under all outstanding Letters of Credit. The Agent shall hold all such amounts paid by the Borrower in respect of such Hedge Transactions, Bankers' Acceptances, BA Equivalent Loans and Letters of Credit as security for the Borrower's obligations thereunder.

At any time on or after the Acceleration Date the Agent may exercise any and all rights and remedies hereunder and under any other Loan Documents, including the enforcement of all or any portion of the Security.

From and after the date of the occurrence of an Event of Default and for so long as such Event of Default continues, both before and after the issuance of an Acceleration Notice, all Outstanding Advances shall bear interest or fees at the rates otherwise applicable plus two percent (2%) per annum in order to compensate the Lenders for the additional risk.

Acceleration of Certain Contingent Obligations

Combining Accounts, Set-Off

combine, consolidate or merge any or all of the deposits or other accounts maintained with such Lender by such Company (whether term, notice, demand or otherwise and whether matured or unmatured) and such Company's obligations to such Lender hereunder; and

set off, apply or transfer any or all sums standing to the credit of any such deposits or accounts in or towards the satisfaction of such obligations.

Appropriation of Monies

No Further Advances

Judgment Currency

Remedies Cumulative

Performance of Covenants by Agent

Decision-Making

Any amendment to this Agreement relating to the following matters, and the granting of any waiver or consent by the Lenders in respect of such matters, shall require the unanimous agreement of the Lenders:

changes to the interest rates and fees payable in respect of any Facility;

increases in the maximum amount of credit available under any Facility;

extensions of the maturity date of any Facility;

changes to the scheduled dates or the scheduled amounts for Repayments hereunder;

releases of all or any portion of the Security, except to the extent provided in paragraph (c) below;

the definitions of “Required Lenders” and “Proportionate Share” in section 1.01;

any provision of this Agreement which expressly states that the unanimous consent of the Lenders is required in connection with any action to be taken or consent to be provided by the Lenders; and

this section 12.01.

Except for the matters described in paragraph (a) above, any amendment to this Agreement shall be effective if made among the Borrower, the Agent and the Required Lenders, and for greater certainty any such amendment which is agreed to by the Required Lenders shall be final and binding upon all Lenders.

The Agent may from time to time without notice to or the consent of the Lenders execute and deliver partial releases of the Security in respect of any item of Collateral (whether or not the proceeds of sale thereof are received by the Agent) which the Companies are permitted to dispose of pursuant to this Agreement without obtaining the prior written consent of the Lenders; and in releasing any such security the Agent may rely upon and assume the correctness of all information contained in any certificate or document provided by the Borrower, without further enquiry. Otherwise, any release or discharge in respect of the Security or any portion thereof shall require the written consent of the Lenders acting unanimously.

Except for the matters which require the unanimous consent of the Lenders as set out in the foregoing paragraphs of this section 12.01, and except as otherwise specifically provided in this Agreement, any action to be taken or decision to be made by the Lenders pursuant to this Agreement (specifically including for greater certainty the issuance of written notice to the Borrower of the occurrence of a Default or Event of Default, the issuance of a demand for payment of the Obligations, a decision to make an Advance despite any condition precedent relating thereto not being satisfied, the provision of any waiver in respect of a breach of any covenant or the granting of any consent) shall be effective if approved by the Required Lenders; and any such decision or action shall be final and binding upon all the Lenders.

Any action to be taken or decision to be made by the Lenders pursuant to this Agreement which is required to be unanimous shall be made at a meeting of the Lenders called by the Agent pursuant to paragraph 12.06(k) or by a written instrument executed by all of the Lenders. Any action to be taken or decision to be made by the Lenders pursuant to this Agreement which is required to be made by the Required Lenders shall be made at a meeting of the Lenders called by the Agent pursuant to paragraph 12.06(k) or by a written instrument executed by the Required Lenders. Any such instrument may be executed by fax or pdf and in counterparts.

Security

Except to the extent provided in paragraph (b), the Security shall be granted in favour of and held by the Agent for and on behalf of the Lenders in accordance with the provisions of this Agreement. The Agent shall, in accordance with its usual practices in effect from time to time, take all steps required to perfect and maintain the Security, including: taking possession of the certificates representing the securities required to be pledged hereunder; filing renewals and change notices in respect of such Security; and ensuring that the name of the Agent is noted as loss payee or mortgagee on all property insurance policies covering the Collateral. If the Agent becomes aware of any matter concerning the Security which it considers to be material, it shall promptly inform the Lenders. The Agent shall comply with all instructions provided by the Lenders in connection with the enforcement or release of the Security which it holds. The Agent agrees to permit each Lender to review and make photocopies of the original documents comprising the Security from time to time upon reasonable notice.

If any Company has provided security in favour of any Lender directly such as but not limited to security provided in favour of RBC prior to the date hereof and security under the Bank Act (Canada), such Lender agrees to pay to the Agent all amounts received by it in connection with the enforcement of such security, and all such amounts shall be deemed to constitute Proceeds of Realization and shall be dealt with as provided in section 12.03. Each Lender which holds any such Security agrees that it shall not enforce such security unless and until the Required Lenders have made a determination to enforce the Security pursuant to paragraph 12.01(d).

Application of Proceeds of Realization

first, in payment of all costs and expenses incurred by the Agent and the Lenders in connection with such realization, including legal, accounting and receivers' fees and disbursements;

second, against the remaining Obligations (except those referred to in paragraph (c) below), on a pari passu basis among the Lenders to whom such Obligations are payable;

third, to pay any Obligations owed to Non-Funding Lenders, on a pari passu basis among the Non-Funding Lenders to whom such Obligations are payable; and

fourth, if all obligations of the Borrower listed above have been paid and satisfied in full, any surplus Proceeds of Realization shall be paid in accordance with Applicable Law.

Payments by Agent

The following provisions shall apply to all payments made by the Agent to the Lenders hereunder:

the Agent shall be under no obligation to make any payment (whether in respect of principal, interest, fees or otherwise) to any Lender until an amount in respect of such payment has been received by the Agent from the Borrower;

if the Agent receives a payment of principal, interest, fees or other amount owing by a Borrower under any Facility which is less than the full amount of any such payment due, the Agent shall distribute such amount received among the Lenders under such Facility in each Lender’s Proportionate Share of such Facility;

if any Lender has advanced more or less than its Proportionate Share of its Commitment under any Facility, such Lender’s entitlement to such payment shall be increased or reduced, as the case may be, in proportion to the amount actually advanced by such Lender;

if a Lender’s Proportionate Share of an Advance under any Facility thereof has been advanced for less than the full period to which any payment by the Borrower relates, such Lender’s entitlement to receive a portion of any payment of interest or fees shall be reduced in proportion to the length of time such Lender’s Proportionate Share has actually been outstanding (unless such Lender has paid all interest required to have been paid by it to the Agent pursuant to the CBA Model Provisions);

the Agent acting reasonably and in good faith shall, after consultation with the Lenders in the case of any dispute, determine in all cases the amount of all payments to which each Lender is entitled and such determination shall be deemed to be prima facie correct;

upon request, the Agent shall deliver a statement detailing any of the payments to the Lenders referred to herein;

all payments by the Agent to a Lender hereunder shall be made to such Lender at its address set out herein unless notice to the contrary is received by the Agent from such Lender; and

if the Agent has received a payment from a Borrower on a Business Day (not later than the time required for the receipt of such payment as set out in this Agreement) and fails to remit such payment to any Lender entitled to receive its Proportionate Share of such payment on such Business Day, the Agent agrees to pay interest on such late payment at a rate determined by the Agent in accordance with prevailing banking industry practice on interbank compensation.

The Borrower hereby irrevocably authorizes the Agent to debit any account maintained by it with the Agent in order to make payments to the Lenders as contemplated herein, if the Borrower has not paid such amount within one (1) Business Day after receipt from the Agent of a written request for such payment.

The Agent may in its sole discretion from time to time make adjustments in respect of any Lender’s share of a Drawdown, Conversion, Rollover or Repayment under any Facility in order that the Outstanding Advances due to such Lender under such Facility shall be approximately in accordance with such Lender’s Proportionate Share of such Facility.

Protection of Agent

Unless the Agent has actual knowledge or actual notice to the contrary, it may assume that each Lender's address set out in Exhibit A attached hereto is correct, unless and until it has received from such Lender a notice designating a different address.

The Agent may engage and pay for the advice or services of any lawyers, accountants or other experts whose advice or services may to it seem necessary, expedient or desirable and rely upon any advice so obtained (and to the extent that such costs are not recovered from the Borrower pursuant to this Agreement, each Lender agrees to reimburse the Agent in such Lender's Proportionate Share of such costs).

Unless the Agent has actual knowledge or actual notice to the contrary, it may rely as to matters of fact which might reasonably be expected to be within the knowledge of any Company upon a statement contained in any Loan Document.

Unless the Agent has actual knowledge or actual notice to the contrary, it may rely upon any communication or document believed by it to be genuine.

The Agent may refrain from exercising any right, power or discretion vested in it under this Agreement unless and until instructed by the Required Lenders as to whether or not such right, power or discretion is to be exercised and, if it is to be exercised, as to the manner in which it should be exercised (provided that such instructions shall be required to be provided by all of the Lenders in respect of any matter for which the unanimous consent of the Lenders is required as set out herein).

The Agent may refrain from exercising any right, power or discretion vested in it which would or might in its sole and unfettered opinion be contrary to any law of any jurisdiction or any directive or otherwise render it liable to any Person, and may do anything which is in its opinion in its sole discretion necessary to comply with any such law or directive.

The Agent may refrain from acting in accordance with any instructions of the Required Lenders to begin any legal action or proceeding arising out of or in connection with this Agreement or take any steps to enforce or realize upon any Security, until it shall have received such security as it may reasonably require (whether by way of payment in advance or otherwise) against all costs, claims, expenses (including legal fees) and liabilities which it will or may expend or incur in complying with such instructions.

The Agent shall not be bound to disclose to any Person any information relating to the Companies or any Related Person if such disclosure would or might in its opinion in its sole discretion constitute a breach of any law or regulation or be otherwise actionable at the suit of any Person.

The Agent shall not accept any responsibility for the accuracy and/or completeness of any information supplied in connection herewith or for the legality, validity, effectiveness, adequacy or enforceability of any Loan Document and shall not be under any liability to any Lender as a result of taking or omitting to take any action in relation to any Loan Document except in the case of the Agent's gross negligence or wilful misconduct.

Duties of Agent

as a non-fiduciary agent for the Borrower, maintain a record of the Outstanding Advances owing to each Lender (including the interest of each Lender in all outstanding Syndicated Letters of Credit), which record shall conclusively be presumed to be correct and accurate, absent manifest error;

hold and maintain the Security to the extent provided in section 12.02;

provide to each Lender copies of all financial information received from the Borrower promptly after receipt thereof, and copies of any Draw Requests, Conversion Notices, Rollover Notices, Repayment Notices and other notices received by the Agent from the Borrower upon request by any Lender;

promptly advise each Lender of Advances required to be made by it hereunder and disburse all Repayments to the Lenders hereunder in accordance with the terms of this Agreement;

promptly notify each Lender of the occurrence of any Default of which the Agent has actual knowledge or actual notice;

at the time of engaging any agent, receiver, receiver-manager, consultant, monitor or other party in connection with the Security or the enforcement thereof, obtain the agreement of such party to comply with the applicable terms of this Agreement in carrying out any such enforcement activities and dealing with any Proceeds of Realization;

account for any monies received by it in connection with this Agreement, the Security and any other agreement delivered in connection herewith or therewith;

each time the Borrower requests the written consent of the Lenders in connection with any matter, use its best efforts to obtain and communicate to the Borrower the response of the Lenders in a reasonably prompt and timely manner having due regard to the nature and circumstances of the request;

give written notice to the Borrower in respect of any other matter in respect of which notice is required in accordance with or pursuant to this Agreement, promptly or promptly after receiving the consent of the Lenders, if required under the terms of this Agreement;

except as otherwise provided in this Agreement, act in accordance with any instructions given to it by the Required Lenders;

refrain from exercising any right, power or discretion vested in it under this Agreement or any document incidental thereto if so instructed by the Required Lenders (in respect of any matter which requires the consent of the Required Lenders), or by all of the Lenders (in respect of any matter which requires the unanimous consent of the Lenders); and

call a meeting of the Lenders at any time not earlier than five (5) days and not later than thirty (30) days after receipt of a written request for a meeting provided by any Lender.

Lenders' Obligations Several; No Partnership

Sharing of Information

Acknowledgement by Borrower

Amendments to Article XII

Deliveries, etc.

all statements, certificates, consents and other documents which the Agent purports to deliver to a Company on behalf of the Lenders shall be binding on each of the Lenders, and none of the Companies shall be required to ascertain or confirm the authority of the Agent in delivering such documents;

all certificates, statements, notices and other documents which are delivered by a Company to the Agent in accordance with this Agreement shall be deemed to have been duly delivered to each of the Lenders; and

all payments which are delivered by the Borrower to the Agent in accordance with this Agreement shall be deemed to have been duly delivered to each of the Lenders.

Agency Fees

Assignment Fee

Non-Funding Lender

Each Non-Funding Lender shall be required to provide to the Agent, immediately upon receipt of a written request from the Agent, (A) cash in an amount equal to 105% of such Non-Funding Lender's Proportionate Share of the face amount of outstanding Letters of Credit, and (B) cash in an amount, as shall be determined from time to time by the Agent in its discretion, equal to all other obligations of such Non-Funding Lender to the Agent that are owing or may become owing pursuant to this Agreement, including, without limitation, such Non-Funding Lender's obligation to pay its Proportionate Share of any indemnification or expense reimbursement amounts not paid by the Borrower. Such cash shall be held by the Agent in one or more accounts in the name of the Agent and shall not be required to be interest-bearing. The Agent shall be entitled to apply such cash from time to time in satisfaction of all or any portion of such obligations of such Non- Funding Lender, as determined by the Agent in its discretion.

The Agent shall be entitled to set off any Non-Funding Lender's Proportionate Share of all payments received from the Borrower against such Non-Funding Lender's obligations to fund payments and Advances required to be made by it and to purchase participations required to be purchased by it in each case under this Agreement and the other Loan Documents. The Agent shall be entitled to withhold and deposit in one or more non- interest bearing accounts in the name of the Agent all amounts (whether principal, interest, fees or otherwise) received by the Agent from the Borrower and due to such Non-Funding Lender pursuant to this Agreement, which amounts shall be used by the Agent (A) first, to reimburse the Agent for any amounts owing to it by such Non-Funding Lender pursuant to this Agreement or any other Loan Document, (B) second, to reimburse the other Lenders in respect of any Advances which may have been made by them in their discretion in order to fund, in whole or in part, any shortfall in Advances which were required to have been made by such Non-Funding Lender (and to the extent that any said Advance made by a Lender is so reimbursed, such Advance shall be deemed to have been assigned by such Lender to the Non-Funding Lender), (C) third, to be held in such account and applied by the Agent from time to time against all other obligations of such Non-Funding Lender to the Agent owing pursuant to this Agreement in such amount as shall be determined from time to time by the Agent in its discretion including, without limitation, such Non-Funding Lender's obligation to pay its Proportionate Share of any indemnification or expense reimbursement amounts not paid by the Borrower, and (D) fourth, at the Agent's discretion, to fund from time to time such Non-Funding Lender's Proportionate Share of Advances under any Facility.

A Non-Funding Lender shall have no voting or consent rights with respect to matters under this Agreement or the other Loan Documents, unless and until it is no longer a Non-Funding Lender. Accordingly, the Commitments and the aggregate unpaid principal amount of the Advances owing to any Non-Funding Lender shall be disregarded in the determination of the Required Lenders.

Neither the Agent nor any of its Affiliates nor any of their respective officers, directors, employees, agents or representatives shall be liable to any Lender (including, without limitation, a Non-Funding Lender) for any action taken or omitted to be taken by them in connection with amounts payable by the Borrower to a Non-Funding Lender and received by the Agent and applied in accordance with the provisions of this Agreement, save and except for the negligence or wilful misconduct of the Agent as determined by a final non- appealable judgment of a court of competent jurisdiction.

CBA Model Provisions Incorporated by Reference

Each term set out below which is used as a defined term in the CBA Model Provisions shall be deemed to have been replaced as set out below; and for greater certainty the said replacement term shall have the meaning ascribed thereto in section 1.01 of this Agreement:

"Administrative Agent" shall be replaced by "Agent";

"Applicable Percentage" shall be replaced by "Proportionate Share";

"LIBO Rate Loan" shall be replaced by "LIBOR Loan";

"Loans" shall be replaced by "Advances";

“Obligors” shall be replaced by “Borrower” (and all necessary changes required by the context shall be deemed to have been made); and

"Provisions" shall be replaced by "CBA Model Provisions".

"Pro rata share", "rateably" and similar terms in the CBA Model Provisions shall have the meaning ascribed to the term "Proportionate Share" as defined in section 1.01 of this Agreement, if the context requires.

The terms "Related Parties" and "Related Party" in the CBA Model Provisions shall be deemed to have the meanings ascribed to the defined terms "Related Persons" and "Related Person" in this Agreement, respectively.

In the third line of subsection 7.7(1) of the CBA Model Provisions, the phrase "…in consultation with the Borrower…" is hereby amended to read "…upon notice to the Borrower…".

The parties hereby acknowledge and agree that the indemnity contained in clause 9(b)(iii) of the CBA Model Provisions is in addition to and not in substitution for the indemnity contained in section 15.05 of this Agreement.

In addition to the restrictions contained in paragraph 10(b) of the CBA Model Provisions relating to the ability of Lenders to assign their Commitments in whole or in part, if a Lender proposes to assign less than its entire Commitment under any Facility, it may do so only if it retains a Commitment under such Facility in a principal amount of at least Five Million Dollars ($5,000,000).

Inconsistencies with CBA Model Provisions

Waiver

Expenses of Agent and Lenders

Debit Authorization

General Indemnity

any failure by the Borrower to pay and satisfy its obligations hereunder including, without limitation, any costs or expenses incurred by reason of the liquidation or re-employment in whole or in part of deposits or other funds required by the Lenders to fund or maintain the Facilities or as a result of the Borrower's failure to take any action on the date required hereunder or specified by it in any notice given hereunder;

any investigation by Governmental Authorities or any litigation or other similar proceeding related to any use made or proposed to be made by the Borrower of the proceeds of any Advance; and

any instructions given to any Lender to stop payment on any cheque issued by the Borrower or to reverse any wire transfer or other transaction initiated by such Lender at the request of the Borrower.

Environmental Indemnity

any losses suffered by the Indemnitees for, in connection with, or as a direct or indirect result of, the failure of any Company to comply with all Requirements of Environmental Law;

any losses suffered by the Indemnitees for, in connection with, or as a direct or indirect result of, the presence of any Hazardous Material situated in, on or under any property owned by any of the Companies or upon which any of them carries on business; and

any and all liabilities, losses, damages, penalties, expenses (including reasonable legal fees) and claims which may be paid, incurred or asserted against the Indemnitees for, in connection with, or as a direct or indirect result of, any legal or administrative proceedings with respect to the presence of any Hazardous Material on or under any property owned by any of the Companies or upon which any of them carries on business, or the discharge, emission, spill, radiation or disposal by any of them of any Hazardous Material into or upon any Land, the atmosphere, or any watercourse or body of water; including the costs of defending and/or counterclaiming or claiming over against third parties in respect of any action or matter and any cost, liability or damage arising out of a settlement entered into by the Indemnitees of any such action or matter;

Survival of Certain Obligations despite Termination of Agreement

Interest on Unpaid Costs and Expenses

Notice

Severability

Further Assurances

Time of the Essence

Promotion and Marketing

Public Filing of Agreement

Entire Agreement; Waivers and Amendments to be in Writing

This Agreement supersedes all discussion papers, term sheets and other writings which may have been issued by the Agent or the Lenders prior to the date hereof relating to the Facilities, which shall have no further force or effect. This Agreement and any other documents or instruments contemplated herein or therein shall constitute the entire agreement and understanding among the Borrower, the Lenders and the Agent relating to the subject-matter hereof.

Subject to paragraph 12.01(b) and section 12.10, no provision of this Agreement, or any other document or instrument in existence among the parties may be modified, waived or terminated except by an instrument in writing executed by the party against whom such modification, waiver or termination is sought to be enforced.

Inconsistencies with Security

Governing Law

Execution by Fax and Counterparts

Binding Effect

The Borrower hereby request an Advance as follows:

Facility:

date of Advance:

amount of Advance:

type of Availment Option:

if Availment Option is one of the following, indicate period requested:

Banker's Acceptance (or BA Equivalent Loan, if applicable):

(may have a maturity date of 30 to 90 days (inclusive))

LIBOR Loan:

(Libor Period may be for 1, 2 or 3 months)

if Letter of Credit requested, attach schedule setting out requested terms

payment instructions (if any):

The Borrower hereby certifies that as at the date hereof:

the representations and warranties in Article VII of the Credit Agreement, other than those which are expressly stated to have been made as at the date of the Credit Agreement, are true and correct in all material respects as if made on the date hereof;

no Default or Event of Default has occurred and is continuing, nor shall the Advance result in the occurrence of a Default or Event of Default; and

no Material Adverse Change has occurred and is continuing.

The Borrower hereby request a Rollover as follows:

Facility:

date of maturing Advance:

amount of maturing Advance:

type of Availment Option requested:

if Availment Option is one of the following, indicate period requested:

Banker's Acceptance (or BA Equivalent Loan, if applicable):

(may have a maturity date of 30 to 90 days (inclusive))

LIBOR Loan:

(Libor Period may be for 1, 2, or 3 months)

The Borrower hereby certifies that as at the date hereof:

the representations and warranties in Article VII of the Credit Agreement, other than those which are expressly stated to have been made as at the date of the Credit Agreement, are true and correct in all material respects as if made on the date hereof;

no Default or Event of Default has occurred and is continuing, nor shall the Rollover result in the occurrence of a Default or Event of Default; and

no Material Adverse Change has occurred and is continuing.

The Borrower hereby request a Conversion as follows:

Facility:

type of Advance to be converted:

maturity date of maturing Advance:

amount of maturing Advance to be converted:

if Availment Option is one of the following, indicate period requested:

Banker's Acceptance (or BA Equivalent Loan, if applicable):

(may have a maturity date of 30 to 90 days (inclusive))

LIBOR Loan:

(Libor Period may be for 1, 2, or 3 months)

The Borrower hereby certifies that as at the date hereof:

the representations and warranties in Article VII of the Credit Agreement, other than those which are expressly stated to have been made as at the date of the Credit Agreement, are true and correct in all material respects as if made on the date hereof;

no Default or Event of Default has occurred and is continuing, nor shall the Conversion result in the occurrence of a Default or Event of Default; and

no Material Adverse Change has occurred and is continuing.

The Borrower hereby irrevocably commit to make a Repayment as follows:

Facility:

date of Repayment:

amount of Repayment:

type of Availment Option to be repaid:.

Eligible Receivables: _______________________ x 75% = _________________ ; less

Potential Statutory Priority Amount: ; ____________________equals

Facility A Limit: ______________________ (maximum $2,000,000)

Attachments

an aged summary of accounts receivable of the Companies including the following: country of domicile; intercompany accounts; doubtful accounts; accounts in dispute; contra accounts; holdbacks, and any deposits received from each account debtor which remain outstanding at the report date;

an aged summary of accounts payable of the Companies; and

a summary of all amounts which comprise the Potential Statutory Priority Amount as at the Applicable Date; and

an aged summary of accounts payable of the Companies.

the foregoing information and all information contained in the attachments hereto is true, correct and complete as at the Applicable Date;

the representations and warranties in Article VII of the Credit Agreement, other than those which are expressly stated to have been made as at the date of the Credit Agreement, are true and correct in all material respects as if made on the date hereof;

no Default or Event of Default has occurred and is continuing; and

no Material Adverse Change has occurred and is continuing.

The following are the financial ratios and covenants in respect of Merus Labs International Inc. and its Subsidiaries on a consolidated basis, calculated in accordance with the provisions of the Credit Agreement, as at the end of the Fiscal Quarter ended ______________________ (or in respect of the financial period(s) ended on such date, as indicated below):

Senior Funded Debt to EBITDA : _______________________________________

Total Funded Debt to EBITDA Ratio: ____________________________________

Fixed Charge Coverage Ratio: __________________________________________

Attached hereto is an analysis of any material variances in the financial results in such Fiscal Quarter from the projections contained in the most recent Annual Business Plan delivered to the Lenders.

The undersigned officer of the Borrower hereby certifies on behalf of the Borrower and without personal liability that as at the date hereof:

the foregoing information and all information contained in the attachments hereto is true, correct and complete as at the end of the Fiscal Quarter;

the representations and warranties in Article VII of the Credit Agreement, other than those which are expressly stated to have been made as at the date of the Credit Agreement, are true and correct in all material respects as if made on the date hereof;

no Default or Event of Default has occurred and is continuing; and

no Material Adverse Change has occurred and is continuing.