Document:

Merus Labs International Inc.: Exhibit 4.7 - Filed by newsfilecorp.com

FORM OF UNSECURED CONVERTIBLE DEBENTURE 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF
THIS SECURITY AND THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE SHALL
NOT TRADE SUCH SECURITIES BEFORE JANUARY 21, 2014. 

THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE ARE
LISTED ON THE TORONTO STOCK EXCHANGE (“TSX”); HOWEVER, THE SAID SECURITIES
CANNOT BE TRADED THROUGH THE FACILITIES OF TSX SINCE THEY ARE NOT FREELY
TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS
NOT “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON TSX. 

Issue Date: September 20, 2013 

Conversion Price: $1.50 per Conversion Share (subject to
adjustment as contemplated herein) 

UNSECURED CONVERTIBLE DEBENTURE 

FOR VALUE RECEIVED, MERUS LABS INTERNATIONAL INC. (the
“Company”) promises to pay to [NAME OF HOLDER] or its registered
assigns (the “Holder”), the principal sum of $[PRINCIPAL AMOUNT]
in lawful currency of Canada (the “Principal Amount”) on or before
September 20, 2018 (the “Maturity Date”), subject to the terms and
conditions hereof. This Debenture shall bear interest calculated per quarter at
the Interest Rate (as defined herein). 

This Debenture is subject to the following additional terms and
conditions: 

	1. 	
      Definitions

	 	 
	1.1 	
      For the purposes hereof, in addition to the terms defined
      elsewhere in this Debenture: (i) capitalized terms not otherwise defined
      herein have the meanings given to such terms in the Subscription Agreement
      (as defined herein), and (ii) the following terms shall have the following
      meanings:

	 	(a) 	
      “Business Day” means any day except Saturday,
      Sunday and any day which shall be a statutory holiday in the province of
      Ontario or a day on which banking institutions in the province of Ontario
      are authorized or required by law or other government action to
    close;

	 	 	 
	 	(b) 	
      “Common Shares” means the common shares in the
      capital of the Company and shares of any other class into which such
      Common Shares may hereafter have been reclassified or changed;

	 	 	 
	 	(c) 	
      “Conversion Date” has the meaning set forth in
      Section 4.2 hereof;

	 	 	 
	 	(d) 	
      “Conversion Price” means (i) $1.50 per Conversion
      Share with respect to the Principal Amount and (ii) the greater of (A)
      $1.50 per Conversion Share and (B) the Market Price on the date of any
      Notice of Conversion per Conversion Share for any accrued but unpaid
      interest on the Principal Amount;

	 	 	 
	 	(e) 	
      “Conversion Share” means a Common Share issuable
      upon conversion of the Principal Amount and any accrued but unpaid
      interest thereon;

	 	 	 
	 	(f) 	
      “Debenture” means this unsecured convertible
      debenture;

	 	 	 
	 	(g) 	
      “Interest Rate” means 8% per
  annum;

	 	(h) 	
      “Issue Date” means September 20, 2013;

	 	 	 
	 	(i) 	
      “Market Price” has the meaning ascribed to it in
      the TSX Company Manual;

	 	 	 
	 	(j) 	
      “Person” means a corporation, association,
      partnership, organization, business, individual, government or political
      subdivision thereof;

	 	 	 
	 	(k) 	
      “Principal Amount” means the principal amount as
      may be due and owing by the Company to the Holder from time to time under
      this Debenture;

	 	 	 
	 	(l) 	
      “Subscription Agreement” means the Subscription
      Agreement, dated as of September 20, 2013, to which the Company and the
      Holder are parties and pursuant to which the Holder agreed to purchase
      this Debenture;

	 	 	 
	 	(m) 	
      “Trading Day” means a day on which the Common
      Shares are traded on the TSX or other trading market on which the Common
      Shares are then listed or quoted, provided that, in the event that the
      Common Shares are not listed or quoted, then Trading Day shall mean a
      Business Day; and

	 	 	 
	 	(n) 	
      “TSX” means the Toronto Stock
  Exchange.

	1.2 	
      Unless otherwise provided, all dollar amounts referred to
      in this Debenture are in lawful money of Canada.

	 	 
	2. 	
      Subscription Agreement and Senior
  Security

	 	 
	2.1 	
      This Debenture has been issued pursuant to the
      Subscription Agreement, is subject in all respects to the terms of the
      Subscription Agreement, and incorporates the terms of the Subscription
      Agreement to the extent that they do not conflict with the terms of this
      Debenture. This Debenture may not be transferred or exchanged without the
      prior written consent of the Company and then only in compliance with
      applicable securities laws and regulations.

	 	 
	2.2 	
      The Holder acknowledges and agrees that, notwithstanding
      the provisions of this Debenture, this Debenture is subject to the
      Subordination and Postponement Agreement executed by the Holder, the Royal
      Bank of Canada, and the Company on September 20, 2013.

	 	 
	3. 	
      Interest

	 	 
	3.1 	
      The Principal Amount shall bear simple interest both
      before and after maturity, default and judgment from and including the
      Issue Date to the date of repayment in full at the Interest Rate. Such
      interest will be calculated quarterly, not in advance, on the basis of a
      year of 365 days and payable on the first day of each fiscal quarter of
      the Company.

	 	 
	4. 	
      Conversion

	 	 
	4.1 	
      At any time after the Issue Date until the Maturity Date,
      and provided that this Debenture is then outstanding, the Principal Amount
      then outstanding and any accrued but unpaid interest thereon may be
      converted into Conversion Shares at the option of the Holder, in whole or
      in part, at any time and from time to time. The Holder shall convert a
      minimum of $50,000 of the Principal Amount for any conversion, unless
      there is less than $50,000 of the Principal Amount then
  outstanding.

	 	 
	4.2 	
      The Holder shall effect conversions by delivering to the
      Company a duly completed and executed Notice of Conversion in the form
      attached hereto as Appendix A (a “Notice of Conversion”),
      specifying the amount of the Principal Amount and any accrued but unpaid
      interest thereon to be converted and the date on which such conversion is
      to be effected (a “Conversion Date”), which date shall not be more
      than ten (10) days following the date of delivery of the Notice of
      Conversion. If no Conversion Date is specified in a Notice of Conversion,
      the Conversion Date shall be the date that is five (5) days following the
      date of delivery of the Notice of Conversion. To effect conversions
      hereunder, the Holder shall not be required to physically surrender the
      Debenture to the Company unless the entire Principal Amount has been
  converted.

	4.3 	
      If the trading price of the Shares closes at $2.30 or
      greater on the TSX or NASDAQ for 20 consecutive Trading Days, the Company
      may provide, at its sole option, notice to the Holder that the Principal
      Amount and any accrued but unpaid interest thereon, or any portion
      thereof, must be converted pursuant to the terms of the
  Debenture.

	 	 
	4.4 	
      Any conversions of the Principal Amount hereunder shall
      have the effect of lowering the outstanding Principal Amount in an amount
      equal to the applicable amount of the Principal Amount being converted.
      The Holder and the Company shall maintain records showing all Principal
      Amounts and/or any accrued but unpaid interest converted and the date of
      such conversions. The Company shall deliver any objection to any Notice of
      Conversion within five (5) Business Days of receipt of such notice. The
      Holder, by acceptance of this Debenture, acknowledges and agrees that,
      following conversion of a portion of the Principle Amount of this
      Debenture, the unpaid and unconverted Principal Amount may be less than
      the amount stated on the face hereof.

	 	 
	4.5 	
      The number of Conversion Shares issuable upon any
      conversion shall be determined by the sum of:

	 	(a) 	
      the quotient obtained by dividing (x) by (y)
      where (x) is equal to the amount of the Principal Amount and
      (y) is the Conversion Price for the Principal Amount; and

	 	 	 
	 	(b) 	
      the quotient obtained by dividing (w) by (z)
      where (w) is equal to the amount of accrued but unpaid interest
      and (z) is the Conversion Price for the accrued but unpaid
      interest.

	4.6 	
      Any Conversion Shares issuable upon the conversion of
      accrued but unpaid interest is subject to the approval of the
  TSX.

	 	 
	4.7 	
      Not later than ten (10) Trading Days after any Conversion
      Date, the Company will deliver to the Holder a certificate representing
      the number of Conversion Shares being issued, which certificate shall bear
      such restrictive legends and trading restrictions as are required by
      applicable laws and by the TSX.

	 	 
	4.8 	
      If the Company shall at any time or from time to time,
      while any Principal Amount is still outstanding, effect a subdivision or
      consolidation of the outstanding Common Shares, the Conversion Price in
      effect immediately before a subdivision shall be proportionately
      decreased, and, conversely, the Conversion Price in effect immediately
      before a consolidation shall be proportionately increased. Any adjustment
      under this Section 4.8 shall become effective at the close of business on
      the date the subdivision or consolidation becomes effective.

	 	 
	4.9 	
      If the Company at any time or from time to time while
      this Debenture is outstanding, issues, or fixes a record date for the
      determination of holders of Common Shares entitled to receive, a dividend
      or other distribution payable solely in Common Shares, the Conversion
      Price that is then in effect shall be decreased as of the time of such
      issuance or, in the event such record date is fixed, as of the close of
      business on such record date, by multiplying the Conversion Price by a
      fraction (i) the numerator of which is the total number of Common Shares
      issued and outstanding immediately prior to the time of such issuance or
      the close of business on such record date, and (ii) the denominator of
      which is the sum of the total number of Common Shares issued and
      outstanding immediately prior to the time of such issuance or the close of
      business on such record date plus the number of Common Shares issuable in
      payment of such dividend or distribution; provided, however, that if such
      record date is fixed and such dividend is not fully paid or if such
      distribution is not fully made on the date fixed therefore, the Conversion
      Price shall be recomputed accordingly as of the close of business on such
      record date and thereafter the Conversion Price shall be adjusted pursuant
      to this Section 4.9 to reflect the actual payment of such dividend or
      distribution.

	 	 
	4.10 	
      If at any time while this Debenture is outstanding, (i)
      the Company effects any merger, consolidation, amalgamation, arrangement
      or combination of the Company with or into another entity, (ii) the
      Company effects any sale of all or
substantially all of its assets in one or more transactions, (iii) any tender
offer or exchange offer (whether by the Company or another entity) is completed
pursuant to which holders of Common Shares are permitted to tender or exchange
their Common Shares for other securities, cash or property, or (iv) the Company
effects any reclassification or recapitalization of the Common Shares or any
compulsory share exchange pursuant to which the Common Shares are effectively
converted into or exchanged for other securities, cash or property (other than a
subdivision, consolidation or dividend provided for elsewhere in this Section 4)
(in any such case, a “Fundamental Change”), then, upon any subsequent
conversion of this Debenture, the Holder shall have the right to receive, for
each Conversion Share that would have been issuable upon such conversion absent
such Fundamental Change, the same kind and amount of securities, cash or
property as it would have been entitled to receive upon the occurrence of such
Fundamental Change if it had been, immediately prior to such Fundamental Change,
the holder of one Common Share (the “Alternate Consideration”). If
holders of Common Shares are given any choice as to the securities, cash or
property to be received in a Fundamental Change, then the Holder shall be given
the same choice as to the Alternate Consideration it receives upon any
conversion of this Debenture following such Fundamental Change. In the event of
a Fundamental Change, the Company or the successor or purchasing entity, as the
case may be, shall execute with the Holder a written agreement providing that: 

	 	(a) 	
      this Debenture shall thereafter entitle the Holder to
      purchase the Alternate Consideration; and

	 	 	 
	 	(b) 	
      in the case of any such successor or purchasing entity,
      upon such consolidation, merger, amalgamation, arrangement, statutory
      exchange, combination, sale or conveyance, such successor or purchasing
      entity shall be jointly and severally liable with the Company for the
      performance of all of the Company’s obligations under this Debenture and
      the Subscription Agreement entered into in connection with the issuance of
      this Debenture.

	4.11 	
      If, in the case of any Fundamental Change, the Alternate
      Consideration includes shares, other securities, other property or assets
      of an entity other than the Company or any such successor or purchasing
      entity, as the case may be, then such written agreement shall also be
      executed by such other entity and shall contain such additional provisions
      to protect the interests of the Holder as the board of directors of the
      Company shall reasonably consider necessary by reason of the foregoing. At
      the Holder’s request, any successor to the Company or surviving entity in
      such Fundamental Change shall issue to the Holder a new Debenture
      consistent with the foregoing provisions and evidencing the Holder’s right
      to convert such Debenture into Alternate Consideration. The terms of any
      agreement pursuant to which a Fundamental Change is effected shall include
      terms requiring any such successor or surviving entity to comply with the
      provisions of this Section 4 and insuring that this Debenture (or any such
      replacement security) will be similarly adjusted upon any subsequent
      transaction analogous to a Fundamental Change.

	 	 
	4.12 	
      If at any time after the issuance of the Convertible
      Debenture and prior to the Maturity Date, the Company issues or
      distributes to the holders of all or substantially all of the outstanding
      Common Shares, securities of the Company, including rights, options or
      warrants to acquire Common Shares or securities convertible into or
      exchangeable for Common Shares or property or assets, including evidences
      of indebtedness, other than dividends or distributions paid in the
      ordinary course and other than as provided herein, or a record date for
      any of the foregoing events occurs, there will be an appropriate
      adjustment in the number of Conversion Shares to be issued in accordance
      with this Section or, at the option of the Company and subject to the
      approval of the TSX, such securities, property or assets may be issued to
      the Holder and, for the same aggregate consideration payable, if any, in
      addition to the number of Conversion Shares to which such Holder was
      theretofore entitled, the Holder will be entitled to receive such
      securities, property or assets as if, on the record date at which holders
      of Common Shares are determined for the purpose thereof, such Holder had
      been the registered holder of the number of Conversion Shares to which the
      Holder was then entitled.

	 	 
	4.13 	
      The Company covenants that it will at all times reserve
      and keep available out of its authorized and unissued Common Shares,
      Conversion Shares for the purpose of issuance upon conversion of the
      Debenture, free from pre-emptive rights or any other actual contingent
      purchase rights of Persons other than the Holder, not less than such
      number of Conversion Shares as shall be issuable upon the
  conversion of the Principal Amount and accrued but unpaid interest
      thereon. The Company covenants that all Conversion Shares that shall be so
      issuable shall, upon issue, be duly and validly authorized, issued and
  fully paid and non-assessable.

	4.14 	
      Upon a conversion hereunder, the Company shall not be
      required to issue share certificates representing fractions of Conversion
      Shares and the Company shall be entitled to round the number of Conversion
      Shares down to the nearest whole number. The Company shall issue cash to
      the Holder in lieu of any fractional Conversion Share. The Holder agrees
      to waive any rights or entitlements to fractional Conversion Shares that
      the Holder may have in connection with a conversion hereunder.

	 	 
	4.15 	
      In each case of an adjustment or readjustment provided
      under this Section 4, the Company, at its own expense, shall cause its
      Secretary or other officer as directed by the board of directors of the
      Company to compute such adjustment or readjustment in accordance with the
      provisions hereof and prepare a certificate showing such adjustment or
      readjustment, and shall deliver such certificate to the Holder in
      accordance with Section 8.1. The certificate shall set forth such
      adjustment or readjustment, showing in detail the facts upon which such
      adjustment or readjustment is based. No adjustment in the Conversion Price
      shall be required to be made unless it would result in an increase or
      decrease of at least one cent, but any adjustments not made because of
      this sentence shall be carried forward and taken into account in any
      subsequent adjustment otherwise required hereunder.

	 	 
	5. 	
      Prepayment

	 	 
	5.1 	
      Subject to conversion as set forth in Section 4.4 hereof,
      the Principal Amount of the Convertible Debenture may only be prepaid with
      the prior written approval of the Holder.

	 	 
	6. 	
      Limitations on Conversion

	 	 
	6.1 	
      The Holder shall not have the right to convert any
      portion of the Principal Amount plus any accrued but unpaid interest
      thereon pursuant to the terms and conditions of this Debenture to the
      extent that, after giving effect to such conversion, the Holder (together
      with the Holder’s affiliates and Persons acting jointly or in concert with
      such Persons (together, the “Joint Actors”)) would beneficially own
      in excess of 19.9% (the “Maximum Percentage”) of the number of
      Common Shares outstanding immediately after giving effect to such
      conversion on a diluted basis, assuming the conversion of all securities
      of the Joint Actors which are convertible into Common Shares within sixty
      (60) days from the proposed Conversion Date, including without limitation,
      the Conversion Shares issuable upon conversion of this
Debenture.

	 	 
	7. 	
      Events of Default

	 	 
	7.1 	
      The occurrence of any of the following shall constitute
      an “Event of Default” under this
Debenture:

	 	(a) 	
      the Company failing to pay any Principal Amount or
      interest payment thereon on the due date hereunder and such failure
      continuing for ten (10) days after written notice thereof is delivered to
      the Company by the Holder advising of such failure to pay;

	 	 	 
	 	(b) 	
      the Company failing to observe or perform any other
      material covenant contained in this Debenture or the Subscription
      Agreement which failure is not cured, if possible to cure, within thirty
      (30) calendar days after notice of such default is sent by the Holder to
      the Company;

	 	 	 
	 	(c) 	
      the Company (i) applying for or consenting to the
      appointment of a receiver, trustee, liquidator or custodian of itself or
      of all or a substantial part of its property, (ii) being unable, or
      admitting in writing its inability, to pay its debts generally as they
      mature, (iii) making a general assignment for the benefit of its or any of
      its creditors, (iv) being dissolved or liquidated in full or in part (v)
      commencing a voluntary case or other proceeding seeking liquidation,
      reorganization or other relief with respect to itself or its debts under
      any bankruptcy, insolvency or other similar law now or hereafter in effect
      or consenting to any such relief or to the appointment of or taking
      possession of its property by any official in an involuntary case or
      other proceeding commenced against it, or (vi) taking any action for the
  purpose of effecting any of the foregoing; and

	 	(d) 	
      proceedings for the appointment of a receiver, trustee,
      liquidator or custodian of the Company or of all or a substantial part of
      the property thereof, or an involuntary case or other proceedings seeking
      liquidation, reorganization or other relief with respect to the Company or
      the debts thereof under any bankruptcy, insolvency or other similar law
      now or hereafter in effect being commenced and an order for relief entered
      or such proceeding is not dismissed or discharged within thirty (30) days
      of commencement.

	7.2 	
      Upon the occurrence or existence of any Event of Default
      and following the expiry of any applicable grace periods and at any time
      thereafter during the continuance of such Event of Default, the Holder
      may, by written notice to the Company, declare all outstanding amounts
      payable by the Company hereunder to be immediately due and payable without
      presentment, demand, protest or any other notice of any kind, all of which
      are hereby expressly waived, anything contained herein to the contrary
      notwithstanding. Upon the occurrence or existence of any Event of Default
      described in subsections 6.1(c) hereof, immediately and without notice,
      all outstanding amounts payable by the Company hereunder shall
      automatically become immediately due and payable, without presentment,
      demand, protest or any other notice of any kind, all of which are hereby
      expressly waived, anything contained herein to the contrary
      notwithstanding. In addition to the foregoing remedies, upon the
      occurrence or existence of any Event of Default, the Holder may exercise
      any other right, power or remedy permitted to it by law, either by suit in
      equity or by action at law, or both.

	 	 
	8. 	
      Notices

	 	 
	8.1 	
      Any notice required or permitted to be given to the
      Company or the Holder will be in writing and may be given by prepaid
      registered post, electronic facsimile transmission or other means of
      electronic communication capable of producing a printed copy to the
      address of the party set forth below or such other address as such party
      may specify by notice in writing to the other party, and any such notice
      will be deemed to have been given and received by the party to whom it was
      addressed if mailed, on the third day following the mailing thereof, if by
      facsimile or other electronic communication, on the date sent, or, if
      delivered, on delivery; but if at the time of mailing or between the time
      of mailing and the third Business Day thereafter there is a strike,
      lockout, or other labour disturbance affecting postal service, then the
      notice will not be effectively given until actually
  delivered:

To the Company:

100 Wellington St. West 
Suite
2110, P.O. Box 151 
Toronto, ON M5K 1H1 Canada 

Attention: Chief Financial Officer

Facsimile: 416.593.4434 
Email: apatient@meruslabs.com 

with a copy, which shall not
constitute notice, to: 

Clark Wilson LLP 
Barristers and
Solicitors 
900 – 885 West Georgia Street 
Vancouver, British Columbia V6C
3H1 

Attention: Stewart Muglich

Facsimile: 604.891.7701 
Email: slm@cwilson.com 

To the Holder: 

[ADDRESS] 

Fax: 

Attention: 

With a copy to: 

	9. 	
      Exchange or Replacement of Debenture

	 	 
	9.1 	
      The Holder may, at its option, in person or by duly
      authorized attorney, surrender this Debenture for exchange at the
      principal business office of the Company and receive in exchange therefor
      a new Debenture in the same principal amount as the unpaid Principal
      Amount of this Debenture and bearing interest at the same annual rate as
      this Debenture, each such new Debenture to be dated as of the date of this
      Debenture and to be in such Principal Amount as remains unpaid and payable
      to such Holder.

	 	 
	9.2 	
      Upon receipt by the Company of evidence satisfactory to
      it of the loss, theft, destruction, or mutilation of this Debenture and
      (in the case of loss, theft or destruction) of an indemnity reasonably
      satisfactory to it, and upon surrender and cancellation of this Debenture,
      if mutilated, the Company will deliver a new Debenture of like tenor in
      lieu of this Debenture. Any Debenture delivered in accordance with the
      provisions of this Section 9.2 shall be dated as of the date of this
      Debenture.

	 	 
	10. 	
      Governing Law

	 	 
	10.1 	
      All questions concerning the construction, validity,
      enforcement and interpretation of this Debenture shall be governed by and
      construed and enforced in accordance with the laws of the Province of
      British Columbia and the federal laws of Canada applicable therein,
      without regard to the principles of conflicts of law thereof.

	 	 
	11. 	
      Waivers

	 	 
	11.1 	
      The Company hereby waives presentment, demand for
      payment, notice of dishonour, notice of protest and all other notices or
      demands in connection with the delivery, acceptance, performance or
      default of this Debenture. No delay by the Holder in exercising any power
      or right hereunder shall operate as a waiver of any power or right, nor
      shall any single or partial exercise of any power or right preclude other
      or further exercise thereof, or the exercise thereof, or the exercise of
      any other power or right hereunder or otherwise; and no waiver whatsoever
      or modification of the terms hereof shall be valid unless set forth in
      writing by the Holder and then only to the extent set forth
  therein.

	 	 
	12. 	
      Amendments

	 	 
	12.1 	
      Subject to the provisions of the Subscription Agreement,
      this Debenture may not be amended without the express written consent of
      both the Company and the Holder.

	 	 
	13. 	
      Severability

	 	 
	13.1 	
      If any provision of this Debenture is invalid, illegal or
      unenforceable, the balance of this Debenture shall remain in effect, and
      if any provision is inapplicable to any Person or circumstance, it shall
      nevertheless remain applicable to all other Persons and
    circumstances.

	14. 	
      Next Business Day

	 	 
	14.1 	
      Whenever any payment or other obligation hereunder shall
      be due on a day other than a Business Day, such payment shall be made on
      the next succeeding Business Day.

	 	 
	15. 	
      Time of the Essence

	 	 
	15.1 	
      Time will be of the essence of this
  Debenture.

IN WITNESS WHEREOF, the Company has caused this Debenture to be
duly executed by a duly authorized officer as of the date first above indicated.

MERUS LABS INTERNATIONAL INC. 

 

	Per: 		 
	 	Authorized Signatory 	 

APPENDIX A 

NOTICE OF CONVERSION 

The undersigned hereby irrevocably elects to convert principal
and, if applicable, any accrued but unpaid interest due under the Debenture of
MERUS LABS INTERNATIONAL INC., a company incorporated pursuant to the
laws of the province of British Columbia (the “Company”), into Conversion
Shares according to the terms and conditions of the Debenture, as of the date
written below. If Conversion Shares are to be issued in the name of a Person
other than the undersigned, the undersigned will pay all transfer taxes payable
with respect thereto and is delivering herewith such certificates and opinions
as reasonably requested by the Company in accordance therewith. No fee will be
charged to the Holder for any conversion, except for such transfer taxes, if
any. Capitalized terms used herein and not otherwise defined shall have the
meanings set out in the Debenture. 

The undersigned agrees to comply with applicable securities
laws in connection with any transfer of the aforesaid Conversion Shares. 

	Conversion Date: 	 
    
	  	  
	Applicable Conversion Price: 	$1.50
    
	 	 
	Principal Amount to be converted: 	$
  
	 	 
	Accrued but unpaid interest to be converted: 	$
  
	 	 
	Principal Amount of Debenture unconverted: 	$
  
	 	 
	Register the Conversion Shares in the following 
name
      and address: 	
	 	 
	 	 
	  	  
	  	  
	 	 
	Signature of the Holder: 	 
    
	  	  
	Name: 	 
    
	  	  
	Address: 	 
    
	 	 
	  	  
	 	 
	  	  
	 	 
	Phone Number: 	 
    
	  	  
	Email Address:Merus Labs International Inc.: Exhibit 4.8 - Filed by newsfilecorp.com

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 THEREFORE the 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) 	
      Subject to Section 4, the Compensation Committee shall,
      in its absolute discretion, designate from among the Eligible Persons
      those to whom Options shall be granted, the number of Shares to be covered
      by each Option, the Specified Price for each Option, the period during
      which the same may be exercised and the other terms and conditions
      attaching thereto. Any Participant, at the time of the grant of an Option,
      may hold more than one Option.

- 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 ten years 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.

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