---

MERUS LABS INTERNATIONAL INC.

2011 INCENTIVE STOCK OPTION PLAN

WHEREAS
the Company desires to terminate any and all of its previous stock option plans
and stock appreciation rights plans (collectively, the Old Plans);

AND WHEREAS the Company wishes to replace the Old Plans with a new
  incentive stock option plan that will comply with the requirements of the
  Toronto Stock Exchange;

NOW THEREFOREthe new incentive stock option plan
  of the Company (the Plan) provides as follows:

**Section
1.**        **Purpose**

|1.1 | The Plan has been established as a means of compensating
      Eligible Persons (as defined below) for their contributions to the
      performance of the Company. The Plan is intended
to:
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | provide an incentive to Eligible Persons to further the
      development, growth and profitability of the Company;                                                                                  
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                      
| | (b) | contribute in providing such Eligible Persons with a
      total compensation and rewards package;                                                                                                   
| |     |                                                                                                                                                                                                      
| | (c) | assist the Company in retaining and attracting employees
      and consultants with experience and ability; and                                                                                      
| |     |                                                                                                                                                                                                      
| | (d) | encourage share ownership and provide Eligible Persons
      with proprietary interests in, and a greater concern for, the welfare of,
      and an incentive to continued service with, the
Company.

**Section
2.**        **Definitions**

|2.1 | In this Plan, unless the context otherwise requires, the
      following terms shall have the following
meanings:
|--- | -----------------------------------------------------------------------------------------------------------------

| | (a) | Blackout Period means any period during which a
      Company policy prevents Insiders from trading in the Shares;                                                                                                                                                                                                                                                                                   
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                        
| | (b) | Board means the board of directors of the
      Company;                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                        
| | (c) | Compensation Committee means a Compensation
      Committee comprising either the Board or such members of the Board as may
      be designated by the Board;                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                        
| | (d) | Company means Merus Labs International Inc., its
      subsidiaries, whether direct or indirect, and any other entity designated
      by the Compensation Committee;                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                        
| | (e) | Directors means the members of the
  Board;                                                                                                                                                                                                                                                                                                                                                          
| |     |                                                                                                                                                                                                                                                                                                                                                                                                        
| | (f) | Eligible Persons means an employee, Director,
      Executive Officer and any other person or company engaged to provide
      ongoing management or consulting services for the Company or for any
      entity controlled by the Company who, because of his, her or its role and
      responsibilities, is designated by the Compensation Committee as a
      potential participant in the Plan;

---

- 2 -

| | (g) | Executive Officer has the meaning ascribed to
      that term in National Instrument 51-102  Continuous Disclosure
      Obligations;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (h) | Exchange means the Toronto Stock Exchange or if
      at any time the Shares are not listed for trading on such exchange but are
      listed on another exchange, such exchange as may be designated by the
      Board;                                                                                                                                                                                                                                                                                                                                                                                                
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (i) | Expiry Date means the date upon which an Option
      will cease to be exercisable;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (j) | Insider shall have such meaning as is the
      definition of Insider as so provided in the TSX Company
Manual;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (k) | Market Value means the closing price of the
      Shares on the Exchange on the trading day prior to the date of
      calculation, provided that if there is no closing price on such trading
      day, Market Value shall mean the mid-point between the bid and ask on
      the Exchange at the close of trading on the trading day prior to the date
      of grant and provided further that in the event the Shares are not listed
      and posted for trading on any stock exchange, Market Value shall mean
      the fair market value of the Shares as determined by the Board, acting
      reasonably;
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (l) | Option means an option granted by the Company to
      a Participant to purchase authorized but unissued Shares pursuant to the
      terms of the Plan;                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (m) | Participant means an Eligible Person to whom
      Options are granted under the Plan;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (n) | Plan means this new incentive stock option plan
      of the Company, as may be amended from time to time;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (o) | Shares means common shares of the
  Company;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (p) | Share Compensation Arrangement means any stock
      option, stock option plan, employee stock purchase plan or any other
      compensation or incentive mechanism involving the issuance or potential
      issuance of Shares, including a share purchase from treasury which is
      financially assisted by the Company by way of loan, guarantee or
      otherwise;                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (q) | Specified Price means the price established by
      the Compensation Committee at not less than the Market Value on the day
      prior to the date of the grant of the Option; and                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | (r) | Trust has the meaning ascribed thereto in
      Section 5.1(b).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

**Section
3.**        **Administration
of the Plan**

The
Plan is under the direction of the Compensation Committee that, in addition to
the specific powers conferred upon it hereunder, has full and complete authority
to interpret the Plan and to prescribe such rules and regulations and make such
other determinations as it deems necessary or desirable to meet the objectives
of, and to administer, the Plan subject to the requirements of the TSX or other
requirements of law. Without limiting the generality of the foregoing, for
greater certainty, the Compensation Committee shall have the power and authority
to:

| | (a) | adopt rules and regulations for implementing the
    Plan;                                                                                                                                                                                                           
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                      
| | (b) | determine the eligibility of persons to participate in
      the Plan, when Options to Eligible Persons shall be granted, the number of
      Shares subject to each Option, the Specified Price of the Shares and the
      vesting period, if any, for each Option;

---

- 3 -

| | (c) | interpret and construe the provisions of the
  Plan;                                                                                                                                                                                                   
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                        
| | (d) | delegate any or all of their power and authority under
      paragraphs (a), (b) and (c) above to such persons or groups of persons on
      such terms and on such conditions as the Compensation Committee may in its
      discretion determine; and
| |     |                                                                                                                                                                                                                                                        
| | (e) | take such other steps as the Compensation Committee
      determines to be necessary or desirable to give effect to the
  Plan.                                                                                                                        

Any
decision, approval or determination made by a person or group of persons
delegated the ability to make such decision, approval or determination pursuant
to Section 3(d) above shall be deemed to be a decision, approval or
determination, as the case may be, of the Compensation Committee.

**Section
4.**        **Number
of Shares to be Issued Under the Plan**

|4.1 | The number of Shares that may be issued as a result of
      the grant of Options under the Plan shall be equal to 10% of the issued
      and outstanding Shares from time to time. Any increase in the issued and
      outstanding Shares will result in an increase in the available number of
      Shares issuable under the Plan, and any exercises of options will make new
      grants available under the Plan effectively resulting in a re-loading of
      the number of options available to grant under the Plan. To the extent
      that any Option has terminated or expired without being fully exercised or
      has been repurchased for cancellation under Section 5.5(b), the unissued
      Shares subject to such Option shall be available for any subsequent Option
      granted under the Plan.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|4.2 | Under the Plan:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

| | (a) | no single Participant and his, her or its associates
      shall be granted Options which could result in the issuance of Shares
      exceeding 5% of the issued and outstanding Shares, within a one year
      period, to such Participant and his, her or its associates, in the
      aggregate;
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                      
| | (b) | the number of Shares issuable to any single Participant
      pursuant to Options, shall not exceed 5% of the issued and outstanding
      Shares;                                                                                                                                                   
| |     |                                                                                                                                                                                                                                                                                                      
| | (c) | the number of Shares issuable to Insiders, at any time,
      under all Share Compensation Arrangements, shall not exceed 10% of the
      issued and outstanding Shares; and                                                                                                                        
| |     |                                                                                                                                                                                                                                                                                                      
| | (d) | the number of Shares issued to Insiders, within any one
      year period, under all Share Compensation Arrangements, shall not exceed
      10% of the issued and outstanding Shares.                                                                                                               

|4.3 | For the purposes of this Section 4, Options held by
      Trusts established for the benefit of a Participant shall be considered to
      be held by that Participant.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

**Section
5.**        **Options**

|5.1 | Grant of Options
|--- | ----------------
|    |                 
|    | (a)             

---

- 4 -

| | (b) | A Participant may, in his, her or its sole discretion,
      elect to have some or all of any Options granted to him, her or it,
      granted to a trust or trusts (Trusts) governed by a registered
      retirement savings plan established by and for the benefit of such
      Participant. Such election must be made prior to the execution of the
      option agreement representing the Options and shall be evidenced in such
      option agreement.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

5.2       Payment of
Specified Price

The
Specified Price for the Shares covered by an Option granted under the Plan shall
be paid in full at the time of exercise of such Option.

5.3       Option Period

Subject
to the provisions of Sections 5.6, 10.4 and 10.5, each Option shall be
exercisable during a period established by the Compensation Committee provided
that such period shall expire no later than tenyears after the date of
grant.

5.4       Shares
Available for Purchase

Vesting
of Options shall be at the discretion of the Directors. 5.5 Exercise of
Options

| | (a) | An Option may be exercised at any time, or from time to
      time, during its term as to any number of whole Shares which have vested
      and are then available for purchase. A Participant electing to exercise an
      Option on his, her on its own behalf or on behalf of a Trust established
      for his, her or its benefit shall give written notice of the election to
      the Company, together with the aggregate amount to be paid for the Shares
      to be acquired pursuant to the exercise of an Option, by certified cheque.
      Upon actual receipt by the Company of written notice and a cheque for the
      aggregate Specified Price, the Participant (including a trustee, in the
      case of the exercise of Options by a Trust) exercising the Option shall be
      registered as the holder of the appropriate number of Shares. No person
      shall enjoy any part of the rights or privileges of a holder of Shares
      subject to Options until that person becomes the holder of record of those
      Shares.                                                                                     
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | (b) | Subject to any restrictions or limitations under
      applicable securities laws, rules and regulations, or the rules of the
      TSX, and subject to the complete discretion of the Compensation Committee
      to elect to honour such a notice, a Participant may by written notice to
      the Compensation Committee request that the Company repurchase for
      cancellation any Options then held by the Participant (to the extent only
      of the Shares then available for purchase under the Option) for an amount
      per Share equal to the amount by which the Market Value of each Share on
      the date prior to the date the notice is given exceeds the Specified
      Price. To the extent accepted by the Compensation Committee, such Options
      shall be cancelled against payment of the price so determined. If required
      by the Company, any such Options to be repurchased shall first be
      exercised and the Shares acquired on exercise immediately repurchased for
      cancellation at the Market Value of the Shares on the day prior to the day
      of such repurchase for cancellation.

|5.6 | Termination of Employment or
Directorship                                                    
|--- | ---------------------------------------------------------------------------------------------
|    |                                                                                              
|    | Unless otherwise decided by the Compensation Committee
      the following rules shall apply:

| | (a) | In the event of:
| | --- | ----------------

---

- 5 -

| | (i)  | the termination of the Participants employment by or
      engagement with the Company (as a Director, Executive Officer employee or
      otherwise) by the Company for cause; or
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |      |                                                                                                                                                                                    
| | (ii) | the Participants voluntary resignation prior to normal
      retirement;                                                                                                          

| |     | the Options held by such Participant, or any Trust on the
      Participants behalf, which have vested as at the effective date of
      resignation or termination of employment are exercisable by such
      Participant or the trustee, as the case may be, within three months after
      such effective date and, to the extent not exercised within that period,
      shall terminate on the expiration of such three month period;
and
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (b) | in the event of:                                                                                                                                                                                                                                                                                                                                                                                                                                 

| | (i)   | the retirement (at age 65 or other prescribed retirement
      age for the Company);                                                                                                                         
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                                                                                              
| | (ii)  | the death;                                                                                                                                                                                                   
| |       |                                                                                                                                                                                                              
| | (iii) | the physical or mental disability; or                                                                                                                                                                        
| |       |                                                                                                                                                                                                              
| | (iv)  | the termination (other than for cause) by the Company of
      the employment or engagement of the Participant (before resignation,
      disability or termination of employment or engagement for
  cause);

the
Options held by the Participant, or any Trust on the Participants behalf, which
have vested as at the date of the Participants death, disability, retirement or
termination of employment are exercisable by such Participant, such
Participants legal representative(s) or the trustee, as the case may be, within
12 months after such date and, to the extent not exercised within that period,
shall terminate on the expiration of such 12 month period, provided, however,
that the provisions of this Section 5.6 shall not be construed as extending the
exercise period of any Option past the term of such Options and provided further
that all unvested Options shall expire on the date on which any of the events
specified in Section 5.6(a) and (b) occur.

The
Compensation Committee shall also be entitled to extend the time during which a
Participant may exercise their Options provided for either in this Plan or in
the Participants option agreement at its discretion provided that (i) such
extension does not extend past the maximum ten year term, and (ii) the
Participant is not an Insider as the Compensation Committee is not entitled to
extend the time during which an Insider may exercise Options held by the
Insider.

5.7        Options
Non-Assignable

Subject
to Section 9, no Options or any interest therein shall be transferable or
assignable by the Participant or a Trust otherwise than by will or pursuant to
the laws of succession and no Option may be exercised by anyone other than the
Participant, his, her or its legal representative(s) or a Trust established by
and for the benefit of such Participant.

**Section
6.**        **Participant
Not a Shareholder**

Neither
a Participant nor a Trust shall have any rights as a shareholder of the Company
with respect to any Shares covered by any Option until such time as and to the
extent only that such Option has been exercised.

---

- 6 -

**Section
7.**        **Effects of
Alteration of Capital Stock**

If
the number of outstanding Shares shall be increased or decreased as a result of
a stock split, consolidation or reclassification or if other changes with
respect to the Shares shall occur, other than as a result of the issuance of
Shares for Market Value, or if additional Shares are issued pursuant to a stock
dividend, then the number of and/or price payable for Shares subject to any
unexercised Options shall be adjusted in accordance with applicable law and in
such manner as the Board shall deem proper to preserve such rights of the
Participants under the Plan substantially proportionate to those existing prior
to such change or event. In addition, upon the occurrence of any such change or
event, the maximum number of Shares that may be issued as a result of the grant
of Options under the Plan shall be adjusted by the Board so that it is
substantially proportionate to the maximum number existing prior to such change
or event.

**Section
8.**        **Acceleration
of Expiry Dates**

Upon
the announcement or contemplation of any event, including a reorganization,
acquisition, amalgamation or merger (or a plan of arrangement in connection with
any of the foregoing), other than solely involving the Company and one or more
of its affiliates (as such term is defined in the Securities Act
(Ontario)), with respect to which all or substantially all of the persons who
were the beneficial owners of the Shares immediately prior to such
reorganization, amalgamation, merger or plan of arrangement do not, following
such reorganization, amalgamation, merger or plan of arrangement, beneficially
own, directly or indirectly more than 50% of the resulting voting shares on a
fully-diluted basis (for greater certainty, this shall not include a public
offering or private placement out of treasury) or the sale to a person other
than an affiliate of the Company of all or substantially all of the Companys
assets (collectively, a Change of Control), the Company shall have the
discretion, without the need for the agreement of any Participant, to accelerate
the Expiry Dates and/or any applicable vesting provisions of all Options, as it
shall see fit. The Company may accelerate one or more Participants Expiry Dates
and/or vesting requirements without accelerating the Expiry Dates and/or vesting
requirements of all Options and may accelerate the Expiry Date and/or vesting
requirements of only a portion of a Participants Options.

In
the event that the Company is a consenting party to a Change of Control,
outstanding Options shall be subject to the agreement effecting such Change of
Control and Participants shall be bound by such Change of Control agreement.
Such agreement, without the Participants consent, may provide for:

| | (a) | the acceleration of the Options as provided
  above;                                                                                                                      
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                           
| | (b) | the continuation of such outstanding Options by the
      Company (if the Company is the surviving or acquiring Company);                                                 
| |     |                                                                                                                                                                           
| | (c) | the assumption of the Plan and such outstanding Options
      by the surviving entity; or                                                                                 
| |     |                                                                                                                                                                           
| | (d) | the substitution or replacement by the surviving or
      acquiring Company or its parent of options with substantially the same
      terms for such outstanding Options.

The
Company may provide in any agreement with respect to any such Change of Control
that the surviving, new or acquiring Company shall grant options to the
Participants to acquire shares in such Company or its parent with respect to
which the excess of the Market Value of the shares of such Company immediately
after the consummation of such Change of Control over the exercise price
therefore shall not be less than the excess of the value of the Shares over the
Specified Price of the Options immediately prior to the consummation of such
Change of Control.

---

- 7 -

**Section
9.**        **Transferability**

|9.1 | Options may be exercised by the Participant, by his, her
      or its trustee in the case of a Trust, and, upon the Participants death,
      the legal representative(s) of his or her estate or any other person who
      acquires his or her rights in respect of an Option by bequest or
      inheritance. A person exercising an Option, may subscribe for Shares only
      in his, her or its own name, on behalf of a Trust established for his, her
      or its benefit or in his, her or its capacity as legal
    representative.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|9.2 | Options may be transferred between a Participant and one
      or more Trusts established for the sole benefit of such Participant. If
      the beneficiary of a Trust changes, the Options granted to the Trust will
      be immediately cancelled by the Company.                                                                                                                                                                                                                                                                           

Section 10.Amendment and Termination

|10.1 | Subject in all cases to the approval of all regulatory
      authorities and the TSX, the Board may from time to time amend or revise
      the terms of the Plan or may discontinue the Plan at any time provided
      however that no such right may, without the consent of the Participant, in
      any manner adversely affect his of her rights under any Option theretofore
      granted under the Plan. The following amendments to the Plan may be made
      by the Board without the approval of shareholders: (i) any amendments
      necessary to ensure that the Plan is in compliance with the rules of the
      Exchange and any other applicable regulatory authority; (ii) amendments
      that are of an administrative or general housekeeping nature; (iii)
      amendments to the definitions of Eligible Persons under the Plan; (iv)
      amendments to the manner in which the Plan is administered; (v) amendments
      to the maximum term of Options granted pursuant to the Plan provided that
      (A) such extension does not extend past the maximum ten year term, and (B)
      the Participant is not an Insider as the Compensation Committee is not
      entitled to extend the time during which an Insider may exercise Options
      held by the Insider; (vi) amendments to the vesting provisions and the
      termination provisions found in Section 5.6 of the Plan; and (vii)
      amendments to the anti-dilution provisions set out in Section 7 of the
      Plan.
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.2 | The following amendments to the Plan will require
      shareholder approval: (i) amendments to the maximum number of Shares that
      may be issued as a result of the grant of Options pursuant to the Plan;
      (ii) amendments to the maximum number of securities or Options that may be
      granted to Insiders; (iii) amendments to the manner in which the exercise
      price of Options is determined; (iv) any amendment to the term of options
      granted to Insiders; and (v) amendments to the amending provisions of the
      Plan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.3 | The Specified Price of outstanding Options issued to
      Insiders may only be reduced if the Company obtains shareholder approval
      to such reduction. For the purposes of this Section, the Specified Price
      will be deemed to have been reduced and shareholder approval will be
      required if outstanding Options are cancelled and then reissued to the
      same Eligible Person at a lower Specified Price. Eligible Persons
      benefiting from the reduction in the Specified Price of their Options will
      not be eligible to vote their Shares on the resolution approving the
      reduction in the Specified Price.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.4 | Other than as provided for in Sections 5.6 and 10.5, the
      Expiry Date of an outstanding Option may only be extended if the Company
      obtains shareholder approval to such an extension. Eligible Persons
      benefiting from the extension of the Expiry Date of their Options will not
      be eligible to vote their Shares on the resolution approving the extension
      of the Expiry Date.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|10.5 | The Expiry Date of an Option can be extended by the
      Compensation Committee without shareholder approval where such Expiry Date
      occurs within a Blackout Period or within ten days of the end of a
      Blackout Period and the new Expiry Date shall be the tenth day following
      the end of the relevant Blackout Period.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

---

- 8 -

**Section
11.**     **Laws**

|11.1 | The Plan and all matters to which reference is made
      herein shall be governed by and interpreted in accordance with the laws of
      the Province of Ontario and those of Canada insofar as the latter may be
      applicable.                            
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                  
|11.2 | No Option may be exercised nor will the Company have any
      obligation to issue Shares pursuant thereto if such exercise or issue
      would be contrary to or violate any applicable law or any applicable
      regulation of a duly constituted authority.

**Section
12.**     **Compliance with Statues
and Regulations**

The granting of Options and the sale and delivery of
Shares under this Plan shall be carried out in compliance with applicable laws,
rules and regulations and with the rules and regulations of governmental
authorities and the TSX. Without limiting the forgoing, this Plan will be
subject to the approval of shareholders of the Company within three years from
its effective date and then every three years thereafter. If the Compensation
Committee determines that in order to comply with any such laws, rules or
regulations, certain action is necessary or desirable as a condition of or in
connection with the granting of an Option or the issue or purchase of Shares
under an Option, that Option may not be exercised in whole or in part unless
that action shall have been completed in a manner satisfactory to the
Compensation Committee.

Section 13.Participation Voluntary

|13.1 | The participation of an Eligible Person in the Plan is
      entirely voluntary and not obligatory and shall not be interpreted as
      conferring upon such Eligible Person any rights or privileges other than
      those rights and privileges expressly provided in the Plan. In particular,
      participation in the Plan does not constitute a condition of employment
      nor a commitment on the part of the Company to ensure the continued
      employment of such Eligible Person.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|13.2 | The Plan does not provide any guarantee against any loss
      of profit which may result from fluctuations in the market price of the
      Shares.                                                                                                                                                                                                                                                                                                                                                
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|13.3 | The Company does not assume responsibility for the income
      or other tax consequences for the Eligible Persons participating in the
      Plan and Eligible Persons are advised to consult with their own tax
      advisors.                                                                                                                                                                                                                                                                   

**Section
14.**     **Taxes**

The Company shall have the power and the right to deduct or
withhold, or require an optionee to remit to the Company, the required amount to
satisfy federal, provincial, and local taxes, domestic or foreign, required by
law or regulation to be withheld with respect to any taxable event arising as a
result of the Plan, including the grant or exercise of any Option granted under
the Plan. With respect to any required withholding, the Company shall have the
irrevocable right to, and the Participant consents to, the Company setting off
any amounts required to be withheld, in whole or in part, against amounts
otherwise owing by the Company to the Participant (whether arising pursuant to
the Participant's relationship as an Eligible Person or otherwise), or may make
such other arrangements that are satisfactory to the Participant and the
Company. In addition, the Company may elect, in its sole discretion, to satisfy
the withholding requirement, in whole or in part, by withholding such number of
Shares issuable upon exercise of the Options as it determines are required to be
sold by the Company, as trustee, to satisfy any withholding obligations net of
selling costs. The Participant consents to such sale and grants to the Company
an irrevocable power of attorney to effect the sale of such Shares issuable upon
exercise of the Options and acknowledges and agrees that the Company does not
accept responsibility for the price obtained on the sale of such Common Shares
issuable upon exercise of the Options.

---

- 9 -

**Section
15.**        **Notice**

|15.1 | Any notice required or permitted to be given to the
      Company hereunder shall be either personally delivered sent by same day or
      next day courier or sent by facsimile or similar method of electronic
      communication, charges prepaid. Any notice so given shall be sent to the
      Company at the address set out below or such other address at the Company
      notifies of Options in writing:
|---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |                                                                                                                                                                                                                                                                                                                                                                                                                      
|     | Merus Labs International Inc. 100 Wellington St. West
      Suite 2110 P.O. Box 151 Toronto, ON M5K 1H1                                                                                                                                                                                                                                                                                                              
|     |                                                                                                                                                                                                                                                                                                                                                                                                                      
|     | Attention: Corporate Secretary                                                                                                                                                                                                                                                                                                                                                                                       

Any notice sent by courier shall be deemed to have been
received on the next business day after which it was so sent. Any notice given
by personal delivery shall be deemed to be received on the date of delivery and
any notice sent by telecopy or other similar method of electronic communication
shall be deemed to be received on the date of the sending of the telecopy or
other similar method of electronic communication, as the case may be.

**Section
16.**        **Coming Into
Effect and Duration of Plan**

This Plan shall come into effect on the approval by the
shareholders of the Company. Upon coming into effect, this Plan shall replace
the Old Plans.

---