Document:

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                                                                   EXHIBIT 10.25

                           LOAN AND SECURITY AGREEMENT

                           DATED AS OF MARCH 30, 2001

                                     BETWEEN

                      GENERAL ELECTRIC CAPITAL CORPORATION

                                    AS LENDER

                                       AND

                           SALIX PHARMACEUTICALS, INC.

                                   AS BORROWER

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                         INDEX OF EXHIBITS AND SCHEDULES
                         -------------------------------

Schedule A        -        Definitions
Schedule B        -        Lender's and Borrower's Addresses for Notices
Schedule C        -        Letters of Credit (Not Used)
Schedule D        -        Cash Management System
Schedule E        -        Fees and Expenses
Schedule F        -        Schedule of Documents
Schedule G        -        Financial Covenants

Disclosure Schedule (3.2)           -        Places of Business; Corporate Names
Disclosure Schedule (3.6)           -        Real Estate
Disclosure Schedule (3.7)           -        Stock; Affiliates
Disclosure Schedule (3.9)           -        Taxes
Disclosure Schedule (3.11)          -        ERISA
Disclosure Schedule (3.12)          -        Litigation
Disclosure Schedule (3.13)          -        Intellectual Property
Disclosure Schedule (3.15)          -        Environmental Matters
Disclosure Schedule (3.16)          -        Insurance
Disclosure Schedule (3.18)          -        Contracts (Offset Risk)
Disclosure Schedule (5(b))          -        Indebtedness
Disclosure Schedule (5(e))          -        Liens
Disclosure Schedule (6.1)           -        Actions to Perfect Liens

Exhibit A        -        Form of Notice of Revolving Credit Advance
Exhibit B        -        Other Reports and Information
Exhibit C        -        Form of Borrowing Base Certificate
Exhibit C-1      -        Inventory Rollforward and Reconciliation
Exhibit D        -        Form of Accounts Payable Analysis
Exhibit E        -        Form of Accounts Receivable Rollforward Analysis
Exhibit F        -        Form of Revolving Credit Note
Exhibit G        -        [Intentionally Left Blank]
Exhibit H        -        Form of Secretarial Certificate
Exhibit I        -        Form of Power of Attorney
Exhibit J        -        Form of Certificate of Compliance
Exhibit K        -        Form of Lockbox Agreement
Exhibit L        -        Form of Landlord's Waiver and Consent
Exhibit M        -        [Intentionally Left Blank]
Exhibit N        -        Form of Guarantee
Exhibit O        -        Form of Opinion of Counsel to Borrower
Exhibit P        -        Intercreditor and Subordination Agreement
Exhibit Q        -        [Intentionally Left Blank]
Exhibit R        -        Form of U.C.C. Schedule
Exhibit S        -        Form of Payment of Proceeds Letter
Exhibit T        -        Form of Borrower Authorized Representative Letter
Exhibit U        -        Form of Post-Closing Letter

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                                                                      GE Capital

              TRANSACTION SUMMARY AS OF THE DATE OF THIS AGREEMENT

--------------------------------------------------------------------------------
REVOLVING CREDIT LOAN
     Maximum Amount:               $7,000,000
     --------------
     Term:                                2 years plus three optional one-year
     ----                                 renewals
     Revolving Credit Rate:               Index Rate plus 4%
     ---------------------
     Letter of Credit Subfacility: n/a
     ----------------------------
  Borrowing Base:       The  sum of  (a)  85% of the  value  (as  determined  by
  --------------        Lender) of Borrower's  Eligible  Accounts arising on and
                        after  February 1, 2001 that remain unpaid for less than
                        ninety (90) days after  invoice date plus (b) the lesser
                                                             ----
                        of (i)  $6,000,000  or (ii)  70% of the  value (as
                        determined  by Lender) of Borrower's  Eligible  Accounts
                        arising in December  2000 and  January  2001 that remain
                        unpaid for less than one hundred twenty (120) days after
                        invoice  date;  provided  that,  Lender shall reduce the
                        foregoing  percentages by one percentage  point for each
                        percentage   point  that  the  dilution  of   Borrower's
                        Accounts  (calculated by Lender as the average  dilution
                        over the most recent 3 months) exceeds 5%.

FEES
     Closing Fee:                         $17,500
     -----------
     Collateral Monitoring Fee:           $12,000 per annum.
     -------------------------
     Letter of Credit Fee:                n/a
     --------------------
  Prepayment Fee:              3% in year one and 2% in year two
  --------------

The Loans described generally here are established and governed by the terms and
conditions set forth below in this Agreement and the other Loan  Documents,  and
if there is any conflict between this general  description and the express terms
and  conditions  below or elsewhere in the Loan  Documents,  such other  express
terms and conditions shall control.
--------------------------------------------------------------------------------

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This LOAN AND SECURITY AGREEMENT is dated as of March 30, 2001, and agreed to by
and between SALIX PHARMACEUTICALS,  INC., a California corporation ("Borrower"),
any other Credit Party executing this Agreement,  and GENERAL  ELECTRIC  CAPITAL
CORPORATION, a New York corporation ("Lender").

                                    RECITALS

A. Borrower desires to obtain the Loans and other financial  accommodations from
Lender and Lender is willing  to  provide  the Loans and  accommodations  all in
accordance with the terms of this Agreement.

B.  Capitalized  terms used herein shall have the  meanings  assigned to them in
Schedule A and, for purposes of this Agreement and the other Loan Documents, the
rules of  construction  set forth in  Schedule A shall  govern.  All  schedules,
attachments,  addenda and  exhibits  hereto,  or  expressly  identified  to this
Agreement,  are incorporated  herein by reference,  and taken together with this
Agreement, constitute but a single agreement.

                                    AGREEMENT

NOW,  THEREFORE,  in  consideration  of the  premises  and the mutual  covenants
hereinafter contained, the parties hereto agree as follows:

1. AMOUNT AND TERMS OF CREDIT

1.1 Loans.  (a) Subject to the terms and conditions of this Agreement,  from the
    -----
Closing Date and until the Commitment  Termination Date (i) Lender agrees (A) to
make available  advances (each, a "Revolving  Credit  Advance") and (B) to incur
Letter of Credit Obligations,  in an aggregate  outstanding amount not to exceed
the  Borrowing  Availability,  and (ii) Borrower may at its request from time to
time borrow, repay and reborrow,  and may cause Lender to incur Letter of Credit
Obligations, under this Section 1.1.

        (b) Borrower  shall  request each  Revolving  Credit  Advance by written
notice  to Lender  substantially  in the form of  Exhibit  A (each a "Notice  of
                                                  ----------
Revolving  Credit  Advance") given no later than 11:00 A.M. (New York City time)
on-the  Business Day of the proposed  advance.  Lender shall be fully  protected
under this  Agreement in relying upon,  and shall be entitled to rely upon,  (i)
any Notice of Revolving  Credit  Advance  believed by Lender to be genuine,  and
(ii) the assumption that the Persons making electronic requests or executing and
delivering a Notice of Revolving Credit Advance were duly authorized, unless the
responsible  individual acting thereon for Lender shall have actual knowledge to
the contrary.  As an  accommodation to Borrower,  Lender may permit  telephonic,
electronic or facsimile  requests for a Revolving  Credit Advance and electronic
or facsimile transmittal of instructions,  authorizations, agreements or reports
to Lender by Borrower.  Unless Borrower  specifically  directs Lender in writing
not to accept or act upon  telephonic,  facsimile or  electronic  communications
from Borrower, Lender shall have no liability to Borrower for any loss or damage
suffered by Borrower as a result of Lender's honoring of any requests, execution
of any  instructions,  authorizations  or  agreements or reliance on any reports
communicated to it telephonically, by facsimile or electronically and purporting
to have been sent to Lender by Borrower  and Lender shall have no duty to verify
the origin of any such  communication or the identity or authority of the Person
sending it. The Revolving Credit Loan shall be evidenced by, and be repayable in
accordance with the terms of, the Revolving Credit Note and this Agreement.

        (c) In making any Loan  hereunder  Lender shall be entitled to rely upon
the most recent Borrowing Base  Certificate  delivered to Lender by Borrower and
other  information  available to Lender.  Lender shall be under no obligation to
make any  further  Revolving  Credit  Advance or incur any other  Obligation  if
Borrower shall have failed to deliver a Borrowing Base  Certificate to Lender by
the time specified in Section 4.1(b).

        (d) Letters of Credit Notwithstanding anything to the contrary contained
in this  Agreement,  including  Schedule C, Lender shall have no  obligations to
                                ----------
incur Letter of Credit Obligations for the account of Borrower.

1.2 Term and Prepayment. (a) Upon the Commitment Termination Date the obligation
    ------------------
of Lender to make Revolving  Credit  Advances and extend other credit  hereunder
shall  immediately  terminate and Borrower shall pay to Lender in full, in cash:
(i) all  outstanding  Revolving  Credit  Advances  and all  accrued  but  unpaid
interest thereon;

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(ii) an amount  sufficient to enable Lender to hold cash collateral as specified
in Schedule C; and (iii) all other non-contingent Obligations due to or incurred
by Lender.

        (b) If the Revolving  Credit Loan shall at any time exceed the Borrowing
Availability, then Borrower shall immediately repay the Revolving Credit Loan in
the amount of such excess.

        (c)  Borrower  shall  have the  right,  at any time  upon 30 days  prior
written  notice to  Lender  to (i)  terminate  voluntarily  Borrower's  right to
receive or benefit from, and Lender's obligation to make and to incur, Revolving
Credit  Advances  and Letter of Credit  Obligations,  and (ii) prepay all of the
Obligations.  The effective  date of  termination  of the Revolving  Credit Loan
specified in such notice shall be the Commitment  Termination  Date. If Borrower
exercises its right of termination and prepayment,  or if Lender's obligation to
make Loans is terminated  for any reason prior to the Stated Expiry Date then in
effect  (including as a result of the  occurrence of a Default),  Borrower shall
pay to Lender the applicable Prepayment Fee.

1.3 Use of  Proceeds.  Borrower  shall use the proceeds of the Loans for working
    ----------------
capital and other general corporate purposes.

1.4 Single  Loan.  The Loans and all of the other  Obligations  of  Borrower  to
    ------------
Lender shall constitute one general obligation of Borrower secured by all of the
Collateral.

1.5  Interest.  (a)  Borrower  shall pay  interest  to  Lender on the  aggregate
     --------
outstanding Revolving Credit Advances at a floating rate equal to the Index Rate
plus  four  percent  (4%)  per  annum,  (the  "Revolving   Credit  Rate").   All
computations  of  interest,  and all  calculations  of the Letter of Credit Fee,
shall be made by Lender on the basis of a three hundred sixty (360) day year, in
each case for the actual  number of days  occurring in the period for which such
interest or fee is payable.  Each  determination  by Lender of an interest  rate
hereunder  shall ` be conclusive and binding for all purposes,  absent  manifest
error.  In no event will  Lender  charge  interest  at a rate that  exceeds  the
highest  rate of interest  permissible  under any law that a court of  competent
jurisdiction shall, in a final determination, deem applicable.

        (b)  Interest  shall be  payable  on the  outstanding  Revolving  Credit
Advances  (i) in arrears for the  preceding  calendar  month on the first day of
each calendar month,  (ii) on the Commitment  Termination Date, and (iii) if any
interest accrues or remains payable after the Commitment  Termination Date, upon
demand by Lender.

        (c)  Effective  upon the  occurrence  of any Event of Default and for so
long as any Event of Default shall be continuing,  the Revolving Credit Rate and
the Letter of Credit Fee shall  automatically  be  increased  by two  percentage
points (2%) per annum (such increased rate, the "Default Rate").

        (d)  If  any  interest  or  any  other  payment  (including   Collateral
Monitoring Fees) to Lender under this Agreement becomes due and payable on a day
other than a Business  Day,  such  payment  date shall be  extended  to the next
succeeding  Business  Day and  interest  thereon  shall be  payable  at the then
applicable rate during such extension.

        (e) If, at any time after the  conditions to the initial Loan  contained
in Section 2.1 of this  Agreement  are met or waived by Lender in  writing,  the
aggregate  outstanding  Revolving  Credit Advances at any one time are less than
$1,575,000,  Borrower shall pay interest to Lender in accordance  with the terms
of this Agreement as if such Revolving Credit Advances were $1,575,000.

1.6 Cash  Management  System.  On or prior to the  Closing  Date and  until  the
    ------------------------
Termination  Date,  Borrower  will  establish  and maintain the cash  management
system  described in Schedule D. All payments in respect of the Collateral shall
                     ----------
be made to or deposited in the blocked or lockbox accounts described in Schedule
D in accordance with the terms thereof.

1.7 Fees.  Borrower  agrees to pay to Lender the Fees set forth in  Schedule  E.
    ----

1.8 Receipt of Payments.  Borrower  shall make each payment under this Agreement
    -------------------
(not otherwise made pursuant to Section 1.9) without  set-off,  counterclaim  or
deduction and free and clear of all Taxes not later than

                                       2

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11:00  A.M.  (New  York City  time) on the day when due in  lawful  money of the
United  States of  America  in  immediately  available  funds to the  Collection
Account.  If  Borrower  shall be  required  by law to deduct  any Taxes from any
payment to Lender  under any Loan  Document,  then the amount  payable to Lender
shall be  increased  so that,  after  making  all  required  deductions,  Lender
received  an  amount  equal to that  which it would  have  received  had no such
deductions been made. For purposes of computing  interest and Fees, all payments
shall be deemed  received by Lender two (2) Business Days  following  receipt of
immediately   available  funds  in  the  Collection  Account.  For  purposes  of
determining  the Borrowing  Availability,  payments shall be deemed  received by
Lender upon receipt of immediately available funds in the Collection Account.

1.9 Application  and Allocation of Payments.  Borrower  irrevocably  agrees that
    ---------------------------------------
Lender  shall  have the  continuing  and  exclusive  right to apply  any and all
payments  against the then due and payable  Obligations  in such order as Lender
may deem  advisable.  Lender is  authorized  to, and at its option may  (without
prior  notice  or  precondition  and at any time or  times),  but  shall  not be
obligated to, make or cause to be made  Revolving  Credit  Advances on behalf of
Borrower for: (a) payment of all Fees, expenses,  indemnities,  charges,  costs,
principal, interest, or other Obligations owing by Borrower under this Agreement
or any of the other Loan Documents, (b) the payment, performance or satisfaction
of any of Borrower's obligations with respect to preservation of the Collateral,
or (c) any  premium  in  whole  or in part  required  in  respect  of any of the
policies of insurance required by this Agreement, even if the making of any such
Revolving Credit Advance causes the outstanding  balance of the Revolving Credit
Loan to  exceed  the  Borrowing  Availability,  and  Borrower  agrees  to  repay
immediately,  in cash, any amount by which the Revolving Credit Loan exceeds the
Borrowing Availability.

1.10  Accounting.  Lender is  authorized  to record on its books and records the
      ----------
date and amount of each Loan and each  payment  of  principal  thereof  and such
recordation  shall  constitute  prima  facie  evidence  of the  accuracy  of the
information  so recorded.  Lender shall  provide  Borrower on a monthly  basis a
statement and accounting of such recordations but any failure on the part of the
Lender  to keep  any  such  recordation  (or any  errors  therein)  or to send a
statement  thereof to Borrower  shall not in any manner affect the obligation of
Borrower to repay any of the  Obligations.  Except to the extent  that  Borrower
shall, within 30 days after such statement and accounting is sent, notify Lender
in  writing  of  any   objection   Borrower  may  have  thereto   (stating  with
particularity the basis for such objection), such statement and accounting shall
be deemed final, binding and conclusive upon Borrower, absent manifest error.

1.11  Indemnity.  Borrower and each other Credit Party  executing this Agreement
      ---------
jointly and severally agree to indemnify and hold Lender and its Affiliates, and
their  respective  employees,   attorneys  and  agents  (each,  an  "Indemnified
Person"),  harmless  from and against any and all suits,  actions,  proceedings,
claims,  damages,  losses,  liabilities  and  expenses  of any  kind  or  nature
whatsoever  (including  attorneys'  fees and  disbursements  and other  costs of
investigation or defense, including those incurred upon any appeal) which may be
instituted or asserted against or incurred by any such Indemnified Person as the
result of credit  having  been  extended,  suspended  or  terminated  under this
Agreement  and the  other  Loan  Documents  or with  respect  to the  execution,
delivery,  enforcement,  performance and  administration of, or in any other way
arising out of or relating to, this  Agreement  and the other Loan  Documents or
any other  documents or  transactions  contemplated  by or referred to herein or
therein and any actions or failures to act with respect to any of the foregoing,
including any and all product liabilities,  Environmental Liabilities, Taxes and
legal costs and expenses  arising out of or incurred in connection with disputes
between  or  among  any  parties  to any of the  Loan  Documents  (collectively,
"Indemnified  Liabilities"),  except  to the  extent  that any such  Indemnified
Liability is finally  determined  by a court of competent  jurisdiction  to have
resulted  solely from such  Indemnified  Person's  gross  negligence  or willful
misconduct.  NO INDEMNIFIED  PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY CREDIT
PARTY,  ANY SUCCESSOR,  ASSIGNEE OR THIRD PARTY  BENEFICIARY OR ANY OTHER PERSON
ASSERTING CLAIMS DERIVATIVELY  THROUGH SUCH PARTY, FOR ANY ACT OR FAILURE TO ACT
UNDER  ANY  POWER  OF  ATTORNEY  OR  FOR   INDIRECT,   PUNITIVE,   EXEMPLARY  OR
CONSEQUENTIAL  DAMAGES  WHICH MAY BE ALLEGED AS A RESULT OF CREDIT  HAVING  BEEN
EXTENDED,  SUSPENDED  OR  TERMINATED  UNDER  THIS  AGREEMENT  OR ANY OTHER  LOAN
DOCUMENT  OR AS A RESULT  OF ANY OTHER  TRANSACTION  CONTEMPLATED  HEREUNDER  OR
THEREUNDER.

1.12 Borrowing Base; Reserves.  The Borrowing Base shall be determined by Lender
     ------------------------
(including the  eligibility of Accounts and Inventory)  based on the most recent
Borrowing Base Certificate delivered to Lender in accordance with Section 4.1(b)
and such other information  available to Lender. The Revolving Credit Loan shall
be subject to

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Lender's continuing right to withhold from Borrowing  Availability reserves, and
to increase and decrease  such  reserves from time to time, if and to the extent
that in  Lender's  good faith  credit  judgment  such  reserves  are  necessary,
including to protect  Lender's  interest in the  Collateral or to protect Lender
against  possible  non-payment of Accounts for any reason by Account  Debtors or
possible  diminution of the value of any  Collateral or possible  non-payment of
any of the  Obligations  or for any  Taxes or in  respect  of any state of facts
which could constitute a Default. Lender may, at its option,  implement reserves
by  designating  as  ineligible  a  sufficient  amount of  Accounts  which would
otherwise be Eligible  Accounts so as to reduce the Borrowing Base by the amount
of the  intended  reserves.  Without  in any way  limiting  Lender's  rights  to
establish  reserves as described in this Section 1. 12, Lender shall  withhold a
reserve of $2,000,000 from Borrowing Availability until such time as Salix Ltd.,
Borrower and the other  Subsidiaries of Salix Ltd. have achieved a net profit on
a consolidated basis in five (5) consecutive  months, as evidenced by Borrower's
financial statements delivered to Lender in accordance with Section 4.1(d).

2. CONDITIONS PRECEDENT

2.1 Conditions to the Initial  Loans.  Lender shall not be obligated to make any
    --------------------------------
of the Loans or to  perform  any other  action  hereunder,  until the  following
conditions  have been satisfied in a manner  satisfactory  to Lender in its sole
discretion, or waived in writing by Lender:

        (a) the Loan  Documents  to be  delivered  on or before the Closing Date
shall have been duly executed and delivered by the appropriate  parties,  all as
set forth in the Schedule of Documents (Schedule F);
                                       ------------
        (b) the  insurance  policies  provided  for in Section  3.16 are in full
force and effect,  together with  appropriate  evidence  showing loss payable or
additional  insured clauses or endorsements in favor of Lender as required under
such Section;
        (c) as of the Closing Date Net Borrowing  Availability shall be not less
than $5,000,000 after giving effect to the initial  Revolving Credit Advance and
Letter of Credit  Obligations  (on a pro forma basis,  with trade payables being
paid currently,  and expenses and liabilities  being paid in the ordinary course
of business and without acceleration of sales);
        (d) Lender  shall have  received  an opinion of counsel to the  Borrower
with respect to the Loan Documents in form and substance satisfactory to Lender;
        (e) no  event  or  circumstance  has  occurred  since  the  date  of the
Agreement  which has had or  reasonably  could be  expected  to have a  Material
Adverse Effect; and
        (f)  Lender  shall  have  received   satisfactory  results  of  Lender's
pre-funding field examination of Borrower and the Collateral.

2.2 Further  Conditions to the Loans.  Lender shall not be obligated to fund any
    --------------------------------
Loan (including the initial Loans), if, as of the date thereof:

        (a) any  representation or warranty by any Credit Party contained herein
or in any of the other Loan  Documents  shall be untrue or  incorrect as of such
date, except to the extent that any such representation or warranty is expressly
stated to relate to a specific earlier date, in which case, such  representation
and warranty shall be true and correct as of such earlier date; or
        (b) any  event or  circumstance  which  has had or  reasonably  could be
expected to have a Material Adverse Effect shall have occurred since the Closing
Date; or
        (c) any Default  shall have  occurred and be  continuing or would result
after giving effect to such Loan;  or
        (d) after giving effect to such Loan, the Revolving Credit Loan would
exceed the Borrowing Availability.

The request  and  acceptance  by  Borrower of the  proceeds of any Loan shall be
deemed  to  constitute,  as of the  date of such  request  and the  date of such
acceptance, (i) a representation and warranty by Borrower that the conditions in
this Section 2.2 have been  satisfied and (ii) a restatement by Borrower of each
of the  representations  and  warranties  made by it in any Loan  Document and a
reaffirmation  by Borrower of the granting  and  continuance  of Lender's  Liens
pursuant to the Loan Documents.

3. REPRESENTATIONS, WARRANTIES AND AFFIRMATIVE COVENANTS

To induce Lender to enter into this  Agreement  and to make the Loans,  Borrower
and each other Credit Party  executing this  Agreement  represent and warrant to
Lender (each of which representations and warranties shall

                                       4

<PAGE>

survive the execution and delivery of this Agreement),  and promise to and agree
with Lender until the Termination Date as follows:

3.1 Corporate  Existence;  Compliance with Law. Each Corporate Credit Party: (a)
    ------------------------------------------
is, as of the  Closing  Date,  and will  continue to be (i) a  corporation  duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
jurisdiction  of its  incorporation  or  formation,  (ii) duly  qualified  to do
business and in good standing in each other  jurisdiction where its ownership or
lease of property or the conduct of its business  requires  such  qualification,
except where the failure to be so qualified  could not reasonably be expected to
have a Material Adverse Effect, and (iii) in compliance with all Requirements of
Law  and  Contractual  Obligations,  except  to the  extent  failure  to  comply
therewith could not, individually or in the aggregate, reasonably be expected to
have a Material  Adverse  Effect;  and (b) has and will continue to have (i) the
requisite corporate power and authority and the legal fight to execute,  deliver
and  perform  its  obligations  under the Loan  Documents,  and to own,  pledge,
mortgage or otherwise encumber and operate its properties, to lease the property
it operates  under  lease,  and to conduct its  business as now,  heretofore  or
proposed to be conducted, and (ii) all licenses,  permits,  franchises,  rights,
powers, consents or approvals from or by all Persons or Governmental Authorities
having  jurisdiction  over such  Corporate  Credit Party which are  necessary or
appropriate for the conduct of its business.

3.2 Executive Offices;  Corporate or Other Names. The location of each Corporate
    --------------------------------------------
Credit Party's chief executive  office,  corporate  offices,  warehouses,  other
locations of Collateral  and locations  where records with respect to Collateral
are kept  (including in each case the county of such locations) are as set forth
in  Disclosure  Schedule  (3.2)  and,  except  as set  forth in such  Disclosure
    ---------------------------
Schedule, such locations have not changed during the preceding twelve months. As
of the  Closing  Date,  during  the  prior  Five  years,  except as set forth in
Disclosure  Schedule  (3.2),  no  Corporate  Credit  Party has been  known as or
---------------------------
conducted business in any other name (including trade names).

3.3 Corporate  Power;  Authorization  Enforceable  Obligations.  The  execution,
    ----------------------------------------------------------
delivery and  performance by each Credit Party of the Loan Documents to which it
is a party,  and the creation of all Liens provided for herein and therein:  (a)
are and will continue to be within such Credit Party's power and authority;  (b)
have been and will  continue to be duly  authorized  by all  necessary or proper
action;  (c) are not and will not be in violation of any  Requirement  of Law or
Contractual  Obligation of such Credit Party except to the extent the failure to
comply  therewith  could not,  individually  or in the aggregate,  reasonably be
expected to have a Material  Adverse  Effect;  (d) do not and will not result in
the creation or imposition of any Lien (other than Permitted  Encumbrances) upon
any of the  Collateral;  and (e) do not and  will not  require  the  consent  or
approval of any Governmental  Authority or any other Person except to the extent
the failure to comply  therewith  could not,  individually  or in the aggregate,
reasonably  be expected  to have a Material  Adverse  Effect.  As of the Closing
Date,  each Loan Document  shall have been duly executed and delivered on behalf
of each  Credit  Party  party  thereto,  and each such Loan  Document  upon such
execution  and  delivery  shall be and will  continue  to be a legal,  valid and
binding  obligation of such Credit Party,  enforceable  against it in accordance
with its  terms,  except  as such  enforcement  may be  limited  by  bankruptcy,
insolvency and other similar laws affecting creditors' rights generally.

3.4 Financial  Statements and Projections,  Books and Records. (a) The Financial
    ---------------------------------------------------------
Statements  delivered by Borrower to Lender for its most  recently  ended Fiscal
Year and Fiscal  Month,  are true,  correct and complete and reflect  fairly and
accurately the financial condition of Salix, Ltd., Borrower and Glycyx as of the
date of each such Financial  Statement in accordance  with GAAP. The Projections
most recently  delivered by Borrower to Lender have been prepared in good faith,
with  care and  diligence  and use  assumptions  that are  reasonable  under the
circumstances  at the time such  Projections  were  prepared  and as of the date
delivered to Lender and all such assumptions are disclosed in the Projections.

        (b) Borrower and each other  Corporate  Credit Party shall keep adequate
Books and Records with respect to the Collateral and its business  activities in
which proper entries,  reflecting all consolidated and  consolidating  financial
transactions, and payments and credits received on, and all other dealings with,
the Collateral, will be made in accordance with GAAP and all Requirements of Law
and on a basis consistent with the Financial Statements except to the extent the
failure  to  comply  therewith  could  not,  individually  or in the  aggregate,
reasonably be expected to have a Material Adverse Effect.

                                       5

<PAGE>

3.5  Material  Adverse  Change.  Between the date of the most  recently  audited
     -------------------------
Financial  Statements  delivered by Borrower to Lender and the Closing Date: (a)
no  Corporate  Credit  Party  has  incurred  any   obligations,   contingent  or
non-contingent  liabilities,  or liabilities  for Charges,  long-term  leases or
unusual  forward  or  long-term  commitments  which  are  not  reflected  in the
Projections  delivered  on the  Closing  Date and which  could,  alone or in the
aggregate,  reasonably be expected to have a Material Adverse Effect;  (b) there
has been no material  deviation  from such  Projections;  and (c) no events have
occurred which alone or in the aggregate has had or could reasonably be expected
to  have a  Material  Adverse  Effect.  No  Requirement  of  Law or  Contractual
Obligation  of any Credit Party has or have had or could  reasonably be expected
to have a Material  Adverse Effect.  No Credit Party is in default,  and to such
Credit Party's knowledge no third party is in default,  under or with respect to
any of its Contractual  Obligations,  which alone or in the aggregate has had or
could reasonably be expected to have a Material Adverse Effect.

3.6 Real Estate;  Property.  The real estate listed in Disclosure Schedule (3.6)
    ----------------------                             -------------------------
constitutes  all of the real property owned,  leased,  or used by each Corporate
Credit  Party in its  business,  and such  Credit  Party  will not  execute  any
material  agreement or contract in respect of such real estate after the date of
this  Agreement  without  giving  Lender prompt  written  notice  thereof.  Each
Corporate  Credit Party holds and will continue to hold good and  marketable fee
simple title to all of its owned real estate,  and good and marketable  title to
all of its other  properties  and  assets,  and valid  and  insurable  leasehold
interests  in all of its  leases  (both  as  lessor  and  lessee,  sublessee  or
assignee),  and none of the properties and assets of any Corporate  Credit Party
are or will be subject to any Liens, except Permitted Encumbrances. With respect
to each of the premises  identified in Disclosure  Schedule  (3.2)on or prior to
                                       ---------------------------
the Closing Date a bailee,  landlord or mortgagee agreement acceptable to Lender
has been obtained.

3.7 Ventures,  Subsidiaries and Affiliates;  Outstanding Stock and Indebtedness.
    ----------------------------------------------------------------------------
Except as set forth in  Disclosure  Schedule  (3.7),  as of the Closing  Date no
                        ---------------------------
Corporate Credit Party has any Subsidiaries,  is engaged in any joint venture or
partnership with any other Person,  or is an Affiliate of any other Person.  All
of the issued and outstanding  Stock of each Corporate  Credit Party  (including
all  fights to  purchase,  options,  warrants  or similar  rights or  agreements
pursuant to which any  Corporate  Credit  Party may be required to issue,  sell,
repurchase  or redeem any of its Stock) as of the Closing  Date is owned by each
of the Stockholders (and in the amounts) set forth on Disclosure Schedule (3.7).
                                                      --------------------------
All outstanding  Indebtedness  of each Corporate  Credit Party as of the Closing
Date is described in Disclosure Schedule (5(b)).
                     ---------------------------
3.8 Government  Regulation;  Margin  Regulations.  No Corporate  Credit Party is
    ---------------------------------------------
subject to or regulated  under any Federal or state statute,  rule or regulation
that restricts or limits such Person's ability to incur Indebtedness, pledge its
assets,  or to perform its obligations  under the Loan Documents.  The making of
the Loans,  the  application  of the proceeds  and  repayment  thereof,  and the
consummation of the  transactions  contemplated by the Loan Documents do not and
will not violate any  Requirement of Law. No Corporate  Credit Party is engaged,
nor will it engage,  in the  business  of  extending  credit for the  purpose of
"purchasing"  or "carrying"  any "margin  security" as such terms are defined in
Regulation U of the Federal  Reserve  Board as now and hereafter in effect (such
securities  being  referred to herein as "Margin  Stock").  No Corporate  Credit
Party  owns any Margin  Stock,  and none of the  proceeds  of the Loans or other
extensions of credit under this Agreement will be used,  directly or indirectly,
for the  purpose of  purchasing  or  carrying  any Margin  Stock or  reducing or
retiring any Indebtedness which was originally incurred to purchase or carry any
Margin  Stock.  No  Corporate  Credit  Party will take or permit to be taken any
action  which might cause any Loan  Document  to violate any  regulation  of the
Federal Reserve Board.

3.9 Taxes;  Charges.  Except as disclosed on Disclosure  Schedule  (3.9) all tax
    ---------------                          ---------------------------
returns,  reports and statements  required by any  Governmental  Authority to be
filed by Borrower or any other Credit Party have, as of the Closing  Date,  been
filed and will,  until  the  Termination  Date,  be filed  with the  appropriate
Governmental  Authority  and no tax Lien has been filed against any Credit Party
or any Credit Party's  property.  Proper and accurate amounts have been and will
be  withheld  by  Borrower  and each other  Credit  Party from their  respective
employees for all periods in complete  compliance with all  Requirements of. Law
and  such  withholdings  have  and  will  be  timely  paid  to  the  appropriate
Governmental Authorities. Disclosure Schedule (3.9) sets forth as of the Closing
                          -------------------------
Date those taxable years for which any Credit  Party's tax returns are currently
being audited by the IRS or any other applicable  Governmental Authority and any
assessments  or  threatened  assessments  in  connection  with  such  audit,  or
otherwise  currently  outstanding.  Except as described on  Disclosure  Schedule
(3.9),  none of the Credit Parties and their respective  predecessors are liable
for any Charges:  (a) under any agreement  (including any tax sharing agreements
or agreement  extending  the period of assessment of any Charges) or (b) to each
Credit Party's knowledge, as a

                                       6

<PAGE>

transferee. As of the Closing Date, no Credit Party has agreed or been requested
to make any  adjustment  under  IRC  Section  481 (a),  by reason of a change in
accounting  method or  otherwise,  which could  reasonably be expected to have a
Material Adverse Effect.

3.10 Payment of Obligations.  Each Credit Party will pay, discharge or otherwise
     ----------------------
satisfy at or before maturity or before they become delinquent,  as the case may
be, all of its Charges and other  obligations of whatever  nature,  except where
the amount or validity  thereof is  currently  being  contested in good faith by
appropriate  proceedings  and  reserves  in  conformity  with GAAP with  respect
thereto  have been  provided on the books of such  Credit  Party and none of the
Collateral is or could  reasonably be expected to become  subject to any Lien or
forfeiture or loss as a result of such contest.

3.11 ERISA. No ERISA Event has occurred or is reasonably expected to occur that,
     -----
when taken together with all other existing  ERISA Events,  could  reasonably be
expected to result in a liability  of any Credit  Party of more than the Minimum
Actionable Amount. The present value of all accumulated  benefit  obligations of
the Credit Parties under each Plan (based on the  assumptions  used for purposes
of Statement of Financial  Accounting  Standards No. 87) did not, as of the date
of the most recent Financial Statements reflecting such amounts, exceed the fair
market  value of the  assets of such Plan by more  than the  Minimum  Actionable
Amount,  and the present value of all  accumulated  benefit  obligations  of all
underfunded  Plans (based on the  assumptions  used for purposes of Statement of
Financial  Account  Standards No. 87) did not, as of the date of the most recent
Financial  Statements  reflecting such amounts,  exceed the fair market value of
the assets of such underfunded Plans by more than the Minimum Actionable Amount.
No Credit Party or ERISA  Affiliate has incurred or reasonably  expects to incur
any Withdrawal Liability in excess of the Minimum Actionable Amount.

3.12  Litigation.  No  Litigation  is pending or, to the knowledge of any Credit
      ----------
Party,  threatened by or against any Credit Party or against any Credit  Party's
properties  or revenues (a) with respect to any of the Loan  Documents or any of
the transactions  contemplated  hereby or thereby, or (b) which could reasonably
be expected to have a Material Adverse Effect. Except as set forth on Disclosure
                                                                      ----------
Schedule  (3.12),  as of the  Closing  Date  there is no  Litigation  pending or
---------------
threatened  against any Credit Party which seeks damages in excess of $50,000 or
injunctive  relief or alleges  criminal  misconduct  of any Credit  Party.  Each
Credit  Party  shall  notify  Lender  promptly in writing  upon  learning of the
existence,  threat or commencement  of any Litigation  against any Credit Party,
any ERISA Affiliate or any Plan or any allegation of criminal misconduct against
any Credit Party.

3.13 Intellectual Property.  Each Corporate Credit Party owns, or is licensed to
     ---------------------
use, all  Intellectual  Property  necessary to conduct its business as currently
conducted except for such  Intellectual  Property the failure of which to own or
license could not reasonably be expected to have a Material Adverse Effect. Each
Corporate  Credit Party will  maintain the  patenting  and  registration  of all
Intellectual  Property with the United States Patent and Trademark  Office,  the
United States Copyright Office, or other appropriate  Governmental Authority and
each Corporate  Credit Party will promptly  patent or register,  as the case may
be, all of its new Intellectual Property.

3.14  Full  Disclosure.  No  information  contained  in any Loan  Document,  the
      ----------------
Financial  Statements or any written statement  furnished by or on behalf of any
Credit Party under any Loan  Document,  or to induce  Lender to execute the Loan
Documents, when taken together, contains any untrue statement of a material fact
or omits to state a material  fact  necessary to make the  statements  contained
herein or therein not misleading in light of the circumstances  under which they
were made.

3.15 Hazardous Materials.  Except as set forth on Disclosure Schedule (3.15), as
     -------------------                          --------------------------
of the Closing Date, (a) each real property  location owned,  leased or occupied
by each  Corporate  Credit Party (the "Real  Property")  is  maintained  free of
contamination  from any  Hazardous  Material,  (b) no Corporate  Credit Party is
subject to any  Environmental  Liabilities or, to any Credit Party's  knowledge,
potential Environmental Liabilities,  in excess of $50,000 in the aggregate, (c)
no notice has been received by any Corporate  Credit Party  identifying  it as a
"potentially  responsible  party"  or  requesting  information  under  CERCLA or
analogous state statutes, and to the knowledge of any Credit Party, there are no
facts, circumstances or conditions that may result in any Corporate Credit Party
being identified as a "potentially  responsible party" under CERCLA or analogous
state  statutes;  and (d) each  Corporate  Credit  Party has  provided to Lender
copies of all existing environmental reports, reviews and audits and all written
information pertaining to actual or potential Environmental Liabilities, in each
case relating to any Corporate  Credit Party.  Each Corporate  Credit Party: (i)
shall comply in all material respects with all applicable Environmental Laws and

                                       7

<PAGE>

environmental  permits; (ii) shall notify Lender in writing within seven days if
and when it becomes aware of any Release,  on, at, in, under, above, to, from or
about any of its Real  Property;  and (iii) shall  promptly  forward to Lender a
copy of any order, notice, permit,  application,  or any communication or report
received by it or any other Credit Party in connection with any such Release.

3.16  Insurance.  As of the Closing Date,  Disclosure  Schedule (3.16) lists all
      ---------                            ---------------------------
insurance of any nature maintained for current  occurrences by Borrower and each
other  Corporate  Credit  Party,  as  well as a  summary  of the  terms  of such
insurance.  Each Corporate Credit Party shall deliver to Lender certified copies
and  endorsements to all of its and those of its Subsidiaries (a) "All Risk" and
business  interruption  insurance  policies  naming  Lender loss payee,  and (b)
general  liability and other  liability  policies naming Lender as an additional
insured. All policies of insurance on real and personal property will contain an
endorsement, in form and substance acceptable to Lender, showing loss payable to
Lender (Form 438 BFU or equivalent) and extra expense and business  interruption
endorsements.  Such  endorsement,  or an  independent  instrument  furnished  to
Lender,  will provide that the insurance  companies will give Lender at least 30
days prior written notice before any such policy or policies of insurance  shall
be altered or  canceled  and that no act or  default  of  Borrower  or any other
Person shall affect the right of Lender to recover under such policy or policies
of insurance in case of loss or damage. Each Corporate Credit Party shall direct
all present and future  insurers  under its "All Risk"  policies of insurance to
pay all  proceeds  payable  thereunder  directly  to  Lender.  If any  insurance
proceeds  are paid by check,  draft or other  instrument  payable  to any Credit
Party and Lender  jointly,  Lender may endorse such Credit  Party's name thereon
and do such  other  things as Lender  may deem  advisable  to reduce the same to
cash.  Lender reserves the right at any time, upon review of each Credit Party's
risk  profile,  to  require  additional  forms  and  limits of  insurance.  Each
Corporate  Credit Party shall, on each  anniversary of the Closing Date and from
time to time at  Lender's  request,  deliver  to Lender a report by a  reputable
insurance  broker,  satisfactory  to  Lender,  with  respect  to  such  Person's
insurance policies.

3.17  Deposit and  Disbursement  Accounts.  Attachment I to Schedule D lists all
      -----------------------------------                   ----------
banks and other financial  institutions at which Borrower or any other Corporate
Credit  Party,   maintains   deposits  and/or  other  accounts,   including  the
Disbursement Account, and such Attachment correctly identifies the name, address
and telephone number of each such  depository,  the name in which the account is
held,  a  description  of the purpose of the account,  and the complete  account
number.

3.18 Accounts.  As of the date of each Borrowing Base  Certificate  delivered to
     --------
Lender,  each Account listed thereon as an Eligible Account shall be an Eligible
Account.  Borrower  has not made,  and will not  make,  any  agreement  with any
Account  Debtor for any  extension of time for the payment of any  Account,  any
compromise or settlement for less than the full amount  thereof,  any release of
any Account Debtor from liability therefor,  or any deduction therefrom except a
discount or  allowance  for prompt or early  payment  allowed by Borrower in the
ordinary  course of its  business  consistent  with  historical  practice and as
previously disclosed to Lender in writing. Disclosure Schedule (3.18) sets forth
each Contract of the Borrower  with any Account  Debtor which gives such Account
Debtor the right (under such Contract,  under common law or otherwise) to offset
any Accounts for Borrower's  failure to perform under such Contract and Borrower
has  obtained  an offset  waiver for each such  Contract  in form and  substance
satisfactory  to Lender.  With  respect to the  Accounts  pledged as  collateral
pursuant to any Loan Document (a) the amounts shown on all invoices,  statements
and  reports  which may be  delivered  to the Lender  with  respect  thereto are
actually and absolutely owing to the relevant Credit Party as indicated  thereon
and are not in any way  contingent;  (b) no payments  have been or shall be made
thereon  except  payments  immediately  delivered  to  the  applicable  accounts
described in paragraph 1 to Schedule D or the Lender as required hereunder;  and
(c) to Borrower's  knowledge all Account  Debtors have the capacity to contract.
Borrower  shall notify  Lender  promptly of any event or  circumstance  which to
Borrower's knowledge would cause Lender to consider any then existing Account as
no longer constituting an Eligible Account.

3.19  Conduct of Business.  Each  Corporate  Credit Party (a) shall  conduct its
      -------------------
business substantially as now conducted or as otherwise permitted hereunder, and
(b) shall at all times maintain,  preserve and protect all of the Collateral and
such  Credit  Party's  other  property,  used or  useful in the  conduct  of its
business and keep the same in good repair, working order and condition, ordinary
wear and tear  excepted,  and  make,  or cause  to be  made,  all  necessary  or
appropriate  repairs,  replacements  and  improvements  thereto  consistent with
industry practices.

3.20  CORD  Internet  Access.  At such time as access  by  Borrower  may  become
      ----------------------
available to CORD's  computer  system via the internet,  Borrower  shall use its
best efforts to cause CORD to provide Lender, at Borrower's sole cost

                                       8

<PAGE>

and expense,  access to such system for the purpose of Lender  accessing  CORD's
records regarding Borrower's Accounts and Inventory.

3.21  Further  Assurances.  At any time and from time to time,  upon the written
      -------------------
request of Lender and at the sole expense of  Borrower,  Borrower and each other
Credit  Party  shall  promptly  and duly  execute  and  deliver any and all such
further  instruments  and documents  and take such further  action as Lender may
reasonably  deem desirable (a) to obtain the full benefits of this Agreement and
the other Loan Documents, (b) to protect,  preserve and maintain Lender's rights
in any Collateral,  or (c) to enable Lender to exercise all or any of the rights
and powers herein granted.

4. FINANCIAL MATTERS; REPORTS

4.1  Reports and  Notices.  From the Closing  Date until the  Termination  Date,
     --------------------
Borrower shall deliver to Lender:

        (a) within 15 days following the end of each Fiscal Month, an aged trial
balance by Account Debtor and as soon as available but in no event later than 30
days following the end of each Fiscal Month, a reconciliation  of the aged trial
balance to the  Borrower's  general  ledger and from the  general  ledger to the
Financial  Statements for such Fiscal Month accompanied by supporting detail and
documentation as Lender may request;

        (b) as  frequently  as Lender may request and in any event no later than
15 days following the end of each Fiscal Month, a Borrowing Base  Certificate in
the form of Exhibit C as of the last day of the previous  Fiscal Month detailing
ineligible Accounts for adjustment to the Borrowing Base,  certified as true and
correct by the Chief  Financial  Officer of Borrower or such other officer as is
acceptable to Lender;

        (c) within 15 days  following the end of each Fiscal Month,  an Accounts
Payable  Analysis  in the Form of Exhibit D (together  with an accounts  payable
                                  ---------
aging) and an Accounts  Receivable Roll Forward  Analysis in the Form of Exhibit
                                                                         -------
E, each certified as true and correct by the Chief Financial Officer of Borrower
-
or such other officer as is acceptable to Lender;

        (d) within 30 days following the end of each Fiscal Month, the Financial
Statements for such Fiscal Month, which shall provide  comparisons to budget and
actual results for the  corresponding  period during the prior Fiscal Year, both
on a monthly and  year-to-date  basis, and accompanied by a certification in the
form of Exhibit J by the Chief Executive  Officer or Chief Financial  Officer of
Borrower that such Financial Statements are complete and correct, that there was
no Default (or  specifying  those  Defaults  of which he or she was aware),  and
showing in reasonable  detail the  calculations  used in determining  compliance
with the financial covenants hereunder;

        (e)  within  90 days  following  the  close  of each  Fiscal  Year,  the
Financial Statements for such Fiscal Year certified without  qualification by an
independent  certified accounting firm acceptable to Lender, which shall provide
comparisons  to the  prior  Fiscal  Year,  and  shall  be  accompanied  by (i) a
statement in reasonable  detail  showing the  calculations  used in  determining
compliance with the financial covenants hereunder, (ii) a report from Borrower's
accountants  to the  effect  that in  connection  with their  audit  examination
nothing has come to their  attention to cause them to believe that a Default has
occurred or  specifying  those  Defaults of which they are aware,  and (iii) any
management letter that may be issued;

        (f) not less than 30 days prior to the close of each  Fiscal  Year,  the
Projections,  which will be prepared  by  Borrower in good faith,  with care and
diligence, and using assumptions which are reasonable under the circumstances at
the time such  Projections  are delivered to Lender and  disclosed  therein when
delivered; and

        (g) all the reports and other  information set forth on Exhibit B in the
time frames set forth therein.

4.2  Financial  Covenants.  Borrower  shall  not  breach  any of  the  financial
     --------------------
covenants set forth in Schedule G.
                       ----------
4.3 Other Reports and  Information.  Borrower shall advise Lender  promptly,  in
    ------------------------------
reasonable  detail,  of:  (a)  any  Lien,  other  than  Permitted  Encumbrances,
attaching to or asserted against any of the Collateral or any occurrence causing
a material  loss or decline in value of any  Collateral  and the  estimated  (or
actual, if available) amount of such loss or decline; (b) any material change in
the composition of the Collateral; and (c) the occurrence of any Default or

                                       9

<PAGE>

other  event  which has had or could  reasonably  be expected to have a Material
Adverse Effect.  Borrower shall, upon request of Lender,  furnish to Lender such
other  reports  and  information  in  connection  with  the  affairs,  business,
financial  condition,  operations,  prospects or  management  of Borrower or any
other Credit Party or the  Collateral  as Lender may request,  all in reasonable
detail.

5. NEGATIVE COVENANTS

Borrower and each Credit Party  executing  this  Agreement  covenants and agrees
(for itself and each other Credit Party) that,  without  Lender's  prior written
consent,  from the Closing Date until the Termination Date, neither Borrower nor
any other Corporate Credit Party shall, directly or indirectly,  by operation of
law or otherwise:

        (a) form any Subsidiary or merge with,  consolidate with, acquire all or
substantially  all of the assets or capital stock of, or otherwise  combine with
or make any  investment in or, except as provided in clause 5(c) below,  loan or
advance to, any Person, except that Salix Ltd. and Glycyx may be domesticated in
Delaware;

        (b) cancel any debt  owing to it or create,  incur,  assume or permit to
exist any Indebtedness,  except: (i) the Obligations, (ii) Indebtedness existing
as of the Closing Date set forth on Disclosure  Schedule  5(b),  (iii)  deferred
taxes, (iv) by endorsement of instruments or items of payment for deposit to the
general account of such Credit Party, (v) for Guaranteed  Indebtedness  incurred
for the  benefit of  Borrower if the primary  obligation  is  permitted  by this
Agreement,  (vi) the Salix Ltd. Subordinated Debt provided the repayment thereof
is subject  to the Salix  Ltd.  Subordination  Agreement,  and (vii)  additional
Indebtedness  (including Purchase Money Indebtedness) incurred after the Closing
Date in an aggregate  outstanding  amount for all such Corporate  Credit Parties
combined not exceeding $50,000.

        (c) enter into any lending,  borrowing or other  commercial  transaction
with any of its  employees,  directors,  Affiliates  or any other  Credit  Party
(including  upstreaming and downstreaming of cash and intercompany  advances and
payments  by a Credit  Party on behalf of  another  Credit  Party  which are not
otherwise permitted  hereunder) other than loans or advances to employees in the
ordinary  course of business in an aggregate  outstanding  amount not  exceeding
$50,000;

        (d) make any changes in any of its  business  objectives,  purposes,  or
operations  which could  reasonably be expected to adversely affect repayment of
the  Obligations  or could  reasonably  be expected  to have a Material  Adverse
Effect  or engage in any  business  other  than  that  presently  engaged  in or
proposed  to be engaged in the  Projections  delivered  to Lender on the Closing
Date;

        (e) create or permit any Lien on any of its properties or assets, except
for Permitted Encumbrances;

        (f) sell, transfer, issue, convey, assign or otherwise dispose of any of
its assets or  properties,  including its Accounts or any shares of its Stock or
engage in any sale-leaseback,  synthetic lease or similar transaction (provided,
that the  foregoing  shall not  prohibit  the sale of  Inventory  or obsolete or
unnecessary Equipment in the ordinary course of its business);

        (g)  change  its  name,  chief  executive  office,   corporate  offices,
warehouses or other Collateral locations,  or location of its records concerning
the Collateral,  or acquire, lease or use any real estate after the Closing Date
without such Person,  in each  instance,  giving  twenty (20) days prior written
notice thereof to Lender and taking all actions deemed  necessary or appropriate
by  Lender  to  continuously   protect  and  perfect  Lender's  Liens  upon  the
Collateral;

        (h) establish any  depository or other bank account of any kind with any
financial  institution  (other than the  accounts  set forth on  Attachment I to
Schedule D); or

        (i) make or permit any Restricted Payment.

6. SECURITY INTEREST

                                       10

<PAGE>

6.1 Grant of Security  Interest.  (a) As collateral  security for the prompt and
    ---------------------------
complete  payment and performance of the  Obligations,  each of the Borrower and
any other Credit Party  executing this  Agreement  hereby grants to the Lender a
security  interest in and Lien upon all of the following  property and assets of
the Borrower, whether now owned or hereafter acquired, or in which it now has or
at any time in the future  may  acquire  any  right,  title,  or  interest:  all
Accounts;  all bank and deposit accounts and all funds on deposit  therein;  all
Inventory; all Books and Records related any of the foregoing; and to the extent
not  otherwise  included,  all  Proceeds  and  products  of all  and  any of the
foregoing and all collateral  security and  guarantees  given by any Person with
respect to any of the  foregoing,  but excluding in all events  Hazardous  Waste
(all of the foregoing,  together with any other collateral pledged to the Lender
pursuant to any other Loan Document, collectively, the "Collateral").

        (b)  Borrower,  Lender  and  each  other  Credit  Party  executing  this
Agreement agree that this Agreement  creates,  and is intended to create,  valid
and continuing  Liens upon the Collateral in favor of Lender.  Borrower and each
other Credit Party executing this Agreement represents, warrants and promises to
Lender  that:  (i)  Borrower  and each  other  Credit  Party  granting a Lien in
Collateral  is the  sole  owner of each  item of the  Collateral  upon  which it
purports  to  grant a Lien  pursuant  to the  Loan  Documents,  and has good and
marketable  title  thereto  free and  clear of any and all  Liens or  claims  of
others, other than Permitted  Encumbrances;  (ii) the security interests granted
pursuant to this  Agreement,  upon  completion  of the filings and other actions
listed on Disclosure Schedule (6.1) (which, in the case of all filings and other
          -------------------------
documents  referred to in said  Schedule,  have been  delivered to the Lender in
duly executed form) will constitute valid perfected security interests in all of
the  Collateral  in favor of the Lender as security  for the prompt and complete
payment and performance of the  Obligations,  enforceable in accordance with the
terms hereof  against any and all  creditors of and  purchasers  from any Credit
Party (other than  purchasers  of Inventory in the ordinary  course of business)
and such security  interests  are prior to all other Liens on the  Collateral in
existence  on the date  hereof  except  for  Permitted  Encumbrances  which have
priority  by  operation  of law;  and  (iii) no  effective  security  agreement,
financing  statement,  equivalent  security or Lien  instrument or  continuation
statement covering all or any part of the Collateral is or will be on file or of
record in any public office,  except those  relating to Permitted  Encumbrances.
Borrower and each other Credit Party executing this Agreement  promise to defend
the right,  title and  interest of Lender in and to the  Collateral  against the
claims and demands of all Persons whomsoever,  and each shall take such actions,
including (x) the prompt delivery of all original Instruments, Chattel Paper and
certificated Stock owned by Borrower and each other Credit Party granting a Lien
on Collateral to Lender,  (y) notification of Lender's interest in Collateral at
Lender's request, and (z) the institution of litigation against third parties as
shall be  prudent in order to protect  and  preserve  each  Credit  Party's  and
Lender's  respective and several interests in the Collateral.  Borrower (and any
other  Credit  Party  granting  a Lien in  Collateral)  shall mark its Books and
Records  pertaining  to the  Collateral  to evidence the Loan  Documents and the
Liens granted under the Loan  Documents.  All Chattel Paper shall be marked with
the following  legend:  "This writing and the  obligations  evidenced or secured
hereby  are  subject  to the  security  interest  of  General  Electric  Capital
Corporation."

6.2 Lender's Rights.  (a) Lender may, (i) at any time in Lender's own name or in
    ---------------
the name of Borrower,  communicate with Account  Debtors,  parties to Contracts,
and obligors in respect of  Instruments,  Chattel  Paper or other  Collateral to
verify to Lender's  satisfaction,  the  existence,  amount and terms of any such
Accounts, Contracts,  Instruments or Chattel Paper or other Collateral, and (ii)
at any time and without  prior  notice to Borrower  or any other  Credit  Party,
notify Account Debtors, parties to Contracts, and obligors in respect of Chattel
Paper, Instruments, or other Collateral that the Collateral has been assigned to
Lender and that payments  shall be made directly to Lender.  Upon the request of
Lender, Borrower shall so notify such Account Debtors, parties to Contracts, and
obligors in respect of Instruments,  Chattel Paper or other Collateral. Borrower
hereby constitutes Lender or Lender's designee as Borrower's attorney with power
to endorse Borrower's name upon any notes,  acceptance  drafts,  money orders or
other evidences of payment or Collateral.

        (b) Borrower  shall remain liable under each  Contract,  Instrument  and
License to observe and perform all the conditions and obligations to be observed
and performed by it thereunder, and Lender shall have no obligation or liability
whatsoever  to any Person under any  Contract,  Instrument  or License  (between
Borrower or any other  Credit  Party and any Person other than Lender) by reason
of or arising out of the execution,  delivery or performance of this  Agreement,
and Lender  shall not be required or  obligated  in any manner (i) to perform or
fulfill any of the obligations of Borrower, (ii) to make any payment or inquiry,
or (iii) to take any action of any kind to  collect,  compromise  or enforce any
performance  or the payment of any amounts which may have been assigned to it or
to  which it may be  entitled  at any time or  times  under or  pursuant  to any
Contract, Instrument or License.

                                       11

<PAGE>

        (c) Borrower  and each other  Credit  Party shall,  with respect to each
owned,  leased,  or controlled  property,  during normal business hours and upon
reasonable  advance  notice  (unless  a  Default  shall  have  occurred  and  be
continuing,  in which event no notice  shall be required  and Lender  shall have
access at any and all times):  (i) provide access to such property to Lender and
any of its officers, employees and agents, as frequently as Lender determines to
be appropriate; (ii) permit Lender and any of its officers, employees and agents
to inspect,  audit and make extracts and copies (or take originals if reasonably
necessary) from all of Borrower's and such Credit Party's Books and Records; and
(iii) permit Lender to inspect, review, evaluate and make physical verifications
and  appraisals of the Inventory and other  Collateral in any manner and through
any medium that Lender considers  advisable,  and Borrower and such Credit Party
agree to render to  Lender,  at  Borrower's  and such  Credit  Party's  cost and
expense,  such clerical and other assistance as may be reasonably requested with
regard thereto.

        (d) After the  occurrence  and  during  the  continuance  of a  Default,
Borrower,  at its own expense,  shall cause the certified public accountant then
engaged by  Borrower  to prepare and deliver to Lender at any time and from time
to  time,  promptly  upon  Lender's  request,   the  following  reports:  (i)  a
reconciliation  of all  Accounts;  (ii) an aging of all  Accounts-,  (iii) trial
balances;  and (iv) test  verifications  of such Accounts as Lender may request.
Borrower,  at its own  expense,  shall cause its  certified  independent  public
accountants  to deliver to Lender the results of any physical  verifications  of
all or any portion of the Inventory  made or observed by such  accountants  when
and if such verification is conducted.  Lender shall be permitted to observe and
consult with Borrower's accountants in the performance of these tasks.

6.3 Lender's Appointment as Attorney-in-fact.  On the Closing Date, Borrower and
    ----------------------------------------
each other Credit Party  executing  this  Agreement  shall execute and deliver a
Power of  Attorney  in the form  attached  as Exhibit  1. The power of  attorney
granted  pursuant to the Power of Attorney and all powers granted under any Loan
Document are powers coupled with an interest and shall be irrevocable  until the
Termination Date. The powers conferred on Lender under the Power of Attorney are
solely to protect Lender's  interests in the Collateral and shall not impose any
duty upon it to exercise  any such  powers.  Lender  agrees not to exercise  any
power or  authority  granted  under  the  Power of  Attorney  unless an Event of
Default has  occurred  and is  continuing.  Borrower and each other Credit Party
executing this Agreement authorizes Lender to file any financing or continuation
statement  without the  signature of Borrower or such Credit Party to the extent
permitted by applicable law.

6.4 Grant of License to Use Intellectual Property Collateral.  Borrower and each
    --------------------------------------------------------
other  Credit  Party  executing  this  Agreement  hereby  grants  to  Lender  an
irrevocable,  non-exclusive  license (exercisable upon the occurrence and during
the  continuance  of an Event of  Default  without  payment  of royalty or other
compensation  to  Borrower or such Credit  Party) to use,  transfer,  license or
sublicense  any  Intellectual  Property  now owned,  licensed  to, or  hereafter
acquired by Borrower or such Credit Party, and wherever the same may be located,
and  including in such license  access to all media in which any of the licensed
items may be recorded or stored and to all computer  software and programs  used
for the compilation or printout  thereof,  and  represents,  promises and agrees
that any such license or  sublicense is not and will not be in conflict with the
contractual  or  commercial  rights of any  third  Person;  provided,  that such
license will terminate on the Termination Date.

7. EVENTS OF DEFAULT: RIGHTS AND REMEDIES

7.1 Events of Default. The occurrence of any one or more of the following events
    -----------------
(regardless  of the reason  therefor)  shall  constitute  an "Event of  Default"
hereunder  which  shall be deemed to be  continuing  until  waived in writing by
Lender in accordance with Section 9.3:

        (a)  Borrower  shall  fail  to  make  any  payment  in  respect  of  any
Obligations when due and payable or declared due and payable; or
        (b) Borrower or any other Credit Party (whether or not such Credit Party
has signed this Agreement) shall fail or neglect to perform, keep or observe any
of the covenants, promises, agreements, requirements,  conditions or other terms
or provisions contained in this Agreement or any of the other Loan Documents; or
        (c) an event of default shall occur under any Contractual  Obligation of
the Borrower or any other Credit Party (other than this  Agreement and the other
Loan Documents),  and such event of default (i) involves the failure to make any
payment  (whether  or not such  payment is blocked  pursuant  to the terms of an
intercreditor  agreement  or  otherwise),  whether  of  principal,  interest  or
otherwise,   and  whether  due  by  scheduled  maturity,   required  prepayment,
acceleration,  demand or otherwise,  in respect of any Indebtedness  (other than
the Obligations) of such Person in an

                                       12

<PAGE>

aggregate amount  exceeding the Minimum  Actionable  Amount,  or (ii) causes (or
permits  any  holder  of  such   Indebtedness   or  a  trustee  to  cause)  such
Indebtedness, or a portion thereof, in an aggregate amount exceeding the Minimum
Actionable  Amount to become  due prior to its stated  maturity  or prior to its
regularly scheduled date of payment; or
        (d) any  representation  or warranty in this Agreement or any other Loan
Document,  or in any written  statement  pursuant  hereto or thereto,  or in any
report,  financial  statement  or  certificate  made or  delivered  to Lender by
Borrower or any other  Credit  Party shall be untrue or incorrect as of the date
when  made or  deemed  made,  regardless  of  whether  such  breach  involves  a
representation  or warranty  with  respect to a Credit Party that has not signed
this Agreement; or
        (e) there shall be  commenced  against the  Borrower or any other Credit
Party any Litigation  seeking  issuance of a warrant of  attachment,  execution,
distraint or similar process  against all or any substantial  part of its assets
which  results  in the  entry of an  order  for any such  relief  which  remains
unstayed or  undismissed  for sixty (60)  consecutive  days;  or Borrower or any
other Credit Party shall have concealed, removed or permitted to be concealed or
removed, any part of its property with intent to hinder, delay or defraud any of
its  creditors  or made or  suffered a transfer  of any of its  property  or the
incurring  of an  obligation  which  may be  fraudulent  under  any  bankruptcy,
fraudulent transfer or other similar law; or
        (f) a case or proceeding shall have been commenced involuntarily against
Borrower or any other  Credit  Party in a court  having  competent  jurisdiction
seeking a decree or order:  (i) under the United States  Bankruptcy  Code or any
other applicable Federal,  state or foreign bankruptcy or other similar law, and
seeking  either  (x)  the  appointment  of a  custodian,  receiver,  liquidator,
assignee,  trustee or sequestrator  (or similar  official) for such Person or of
any substantial part of its properties,  or (y) the reorganization or winding up
or  liquidation  of the affairs of any such Person,  and such case or proceeding
shall remain  undismissed  or unstayed for sixty (60)  consecutive  days or such
court shall enter a decree or order  granting the relief  sought in such case or
proceeding;  or (ii)  invalidating  or denying any  Person's  right,  power,  or
competence  to enter  into or  perform  any of its  obligations  under  any Loan
Document or  invalidating  or denying the  validity  or  enforceability  of this
Agreement  or  any  other  Loan  Document  or  any  action  taken  hereunder  or
thereunder; or
        (g)  Borrower or any other  Credit  Party shall (i)  commence  any case,
proceeding or other action under any existing or future law of any jurisdiction,
domestic  or  foreign,  relating  to  bankruptcy,  insolvency,   reorganization,
conservatorship  or  relief of  debtors,  seeking  to have an order  for  relief
entered with  respect to it or seeking  appointment  of a  custodian,  receiver,
liquidator,  assignee,  trustee or sequestrator (or similar  official) for it or
any substantial part of its properties,  (ii) make a general  assignment for the
benefit of creditors, (iii) consent to or take any action in furtherance of, or,
indicating its consent to, approval of, or acquiescence  in, any of the acts set
forth in  paragraphs  (e) or (f) of this  Section 7.1 or clauses (i) and (ii) of
this paragraph (g), or (iv) shall admit in writing its inability to, or shall be
generally unable to, pay its debts as such debts become due; or
        (h) a final  judgment or judgments for the payment of money in excess of
the  Minimum  Actionable  Amount  in the  aggregate  shall be  rendered  against
Borrower or any other Credit  Party,  unless the same shall be (i) fully covered
by  insurance  and  the  issuer(s)  of  the   applicable   policies  shall  have
acknowledged  full coverage in writing within fifteen (15) days of judgment,  or
(ii) vacated, stayed, bonded, paid or discharged within a period of fifteen (15)
days from the date of such judgment; or
        (i)  any  other  event  shall  have  occurred  which  has  had or  could
reasonably be expected to have a Material  Adverse Effect;  or
        (j) any provision of any Loan Document  shall for any reason cease to be
valid,  binding  and  enforceable  in  accordance  with its  terms,  or any Lien
granted,  or intended by the Loan Documents to be granted, to Lender shall cease
to be a valid and perfected Lien having the first priority (or a lesser priority
if expressly  permitted in the Loan  Documents) in any of the Collateral (or any
Credit Party shall so assert any of the foregoing); or
        (k) a  Change  of  Control  shall  have  occurred  with  respect  to any
Corporate Credit Party; or
        (1) an ERISA  Event  shall have  occurred  that,  in the  opinion of the
Lender,  when taken  together with all other ERISA Events that have occurred and
are then continuing,  could reasonably be expected to result in liability of any
Credit Party in an aggregate amount exceeding the Minimum Actionable Amount.

7.2 Remedies.  (a) If any Default shall have  occurred and be  continuing,  then
    --------
Lender may terminate or suspend its obligation to make further  Revolving Credit
Advances and to incur additional Letter of Credit Obligations.  In addition,  if
any Event of Default shall have occurred and be continuing,  Lender may, without
notice,  take any one or more of the following  actions:  (i) declare all or any
portion of the Obligations to be forthwith due and payable, including contingent
liabilities  with  respect  to  Letter  of Credit  Obligations,  whereupon  such
Obligations shall become and be due and payable; (ii) require that all Letter of
Credit Obligations be fully cash collateralized pursuant

                                       13

<PAGE>

to  Schedule C; or (iii)  exercise  any rights and  remedies  provided to Lender
    ----------
under the Loan  Documents or at law or equity,  including all remedies  provided
under  the Code;  provided,  that upon the  occurrence  of any Event of  Default
specified  in  Sections  7.1  (e),  (f) or (g),  the  Obligations  shall  become
immediately due and payable (and any obligation of Lender to make further Loans,
if  not  previously   terminated,   shall  immediately  be  terminated)  without
declaration, notice or demand by Lender.

        (b) Without limiting the generality of the foregoing,  Borrower and each
other Credit  Party  executing  this  Agreement  expressly  agrees that upon the
occurrence  of any Event of Default  that is  continuing,  Lender  may  collect,
receive, assemble, process,  appropriate and realize upon the Collateral, or any
part thereof,  and may forthwith sell, lease,  assign, give an option or options
to purchase or otherwise  dispose of and deliver said Collateral (or contract to
do so), or any part thereof, in one or more parcels at public or private sale or
sales, at any exchange at such prices as it may deem best, for cash or on credit
or for future delivery without  assumption of any credit risk. Lender shall have
the right upon any such public sale, to the extent permitted by law, to purchase
for the benefit of Lender the whole or any part of said Collateral so sold, free
of any right of equity of  redemption,  which equity of redemption  Borrower and
each other Credit Party executing this Agreement hereby releases. Such sales may
be adjourned or continued from time to time with or without notice. Lender shall
have the right to conduct such sales on any Credit Party's premises or elsewhere
and shall  have the right to use any Credit  Party's  premises  without  rent or
other charge for such sales or other action with respect to the  Collateral  for
such time as Lender deems necessary or advisable.

        (c)  Upon the  occurrence  and  during  the  continuance  of an Event of
Default and at Lender's request,  Borrower and each other Credit Party executing
this Agreement agrees to assemble the Collateral and make it available to Lender
at places  which  Lender  shall  reasonably  select,  whether at its premises or
elsewhere. Until Lender is able to effect a sale, lease, or other disposition of
the  Collateral,  Lender  shall  have the right to  complete,  assemble,  use or
operate the  Collateral  or any part  thereof,  to the extent that Lender  deems
appropriate,  for the purpose of preserving such Collateral or its value. Lender
shall have no  obligation to any Credit Party to maintain or preserve the rights
of any Credit Party as against  third  parties  with  respect to any  Collateral
while such  Collateral  is in the  possession  of Lender.  Lender  may, if it so
elects,  seek the  appointment of a receiver or keeper to take possession of any
Collateral and to enforce any of Lender's  remedies with respect thereto without
prior notice or hearing.  To the maximum  extent  permitted by  applicable  law,
Borrower and each other Credit Party executing this Agreement waives all claims,
damages,  and demands against Lender,  its Affiliates,  agents, and the officers
and employees of any of them arising out of the repossession,  retention or sale
of any  Collateral  except such as are determined in a final judgment by a court
of competent  jurisdiction to have arisen solely out of the gross  negligence or
willful  misconduct  of such  Person.  Borrower  and  each  other  Credit  Party
executing  this  Agreement  agrees that ten (10) days prior  notice by Lender to
such Credit  Party of the time and place of any public sale or of the time after
which a private sale may take place is reasonable  notification of such matters.
Borrower and each other Credit Party shall remain  liable for any  deficiency if
the proceeds of any sale or disposition of the  Collateral are  insufficient  to
pay all amounts to which Lender is entitled.

        (d)  Lender's   rights  and  remedies  under  this  Agreement  shall  be
cumulative  and  nonexclusive  of any other rights and remedies which Lender may
have under any Loan Document or at law or in equity.  Recourse to the Collateral
shall not be  required.  All  provisions  of this  Agreement  are intended to be
subject to all  applicable  mandatory  provisions of law that may be controlling
and to be  limited,  to the extent  necessary,  so that they do not render  this
Agreement invalid or unenforceable, in whole or in part.

7.3  Waivers  by  Credit  Parties.  Except  as  otherwise  provided  for in this
     ----------------------------
Agreement and to the fullest extent  permitted by applicable  law,  Borrower and
each other Credit Party executing this Agreement waives: (a) presentment, demand
and  protest,  and  notice  of  presentment,  dishonor,  intent  to  accelerate,
acceleration,  protest,  default,  nonpayment,  maturity,  release,  compromise,
settlement,  extension or renewal of any or all Loan Documents, the Notes or any
other notes,  commercial paper,  Accounts,  Contracts,  Documents,  Instruments,
Chattel  Paper and  guaranties  at any time held by Lender on which such  Credit
Party may in any way be liable, and hereby ratifies and confirms whatever Lender
may do in this regard;  (b) all rights to notice and a hearing prior to Lender's
taking  possession  or control of, or to Lender's  replevy,  attachment  or levy
upon,  any  Collateral  or any bond or  security  which might be required by any
court prior to  allowing  Lender to exercise  any of its  remedies;  and (c) the
benefit of all valuation,  appraisal and exemption laws. Borrower and each other
Credit Party executing this Agreement  acknowledges  that it has been advised by
counsel of its choices and decisions with respect to this  Agreement,  the other
Loan Documents and the transactions evidenced hereby and thereby.

                                       14

<PAGE>

7.4 Proceeds.  The Proceeds of any sale,  disposition or other  realization upon
    --------
any  Collateral  shall be applied by Lender upon receipt to the  Obligations  in
such order as Lender may deem  advisable in its sole  discretion  (including the
cash  collateralization  of any  Letter  of Credit  Obligations),  and after the
indefeasible payment and satisfaction in full in cash of all of the Obligations,
and after the payment by Lender of any other amount required by any provision of
law,  including  Section  9-504(l)(c)  of the Code (but only  after  Lender  has
received  what  Lender  considers  reasonable  proof  of a  subordinate  party's
security  interest),  the  surplus,  if any,  shall be paid to  Borrower  or its
representatives  or to whomsoever may be lawfully  entitled to receive the same,
or as a court of competent jurisdiction may direct.

8. SUCCESSORS AND ASSIGNS

Each Loan  Document  shall be  binding  on and  shall  inure to the  benefit  of
Borrower and each other Credit Party executing such Loan Document,  Lender,  and
their respective successors and assigns,  except as otherwise provided herein or
therein.  Neither  Borrower  nor any other  Credit  Party may assign,  transfer,
hypothecate,  delegate or otherwise convey its rights, benefits,  obligations or
duties under any Loan  Document  without the prior  express  written  consent of
Lender,  except for the domestication of Salix Ltd. and Glycyx in Delaware.  Any
such  purported  conveyance  by Borrower or such Credit Party  without the prior
express written  consent of Lender shall be void.  There shall be no third party
beneficiaries  of any of the terms and provisions of any of the Loan  Documents.
Lender reserves  the-right at any time to create and sell  participations in the
Loans and the Loan  Documents and to sell,  transfer or assign any or all of its
rights in the Loans and under the Loan Documents.

9. MISCELLANEOUS

9.1 Complete Agreement,  Modification of Agreement. This Agreement and the other
    ----------------------------------------------
Loan  Documents  constitute  the  complete  agreement  between the parties  with
respect  to  the  subject  matter  hereof  and  thereof,   supersede  all  prior
agreements,  commitments,   understandings  or  inducements  (oral  or  written,
expressed or  implied).  No Loan  Document  may be modified,  altered or amended
except by a written  agreement  signed by Lender,  and each other Credit Party a
party to such Loan Document. Borrower and each other Credit Party executing this
Agreement or any other Loan Document shall have all duties and obligations under
this  Agreement and such other Loan Documents from the date of its execution and
delivery, regardless of whether the initial Loan has been funded at that time.

9.2  Expenses.  Borrower  agrees to pay or  reimburse  Lender  for all costs and
     --------
expenses (including the fees and expenses of all counsel, `advisors, consultants
(including  environmental  and management  consultants) and auditors retained in
connection   therewith)  incurred  in  connection  with:  (a)  the  preparation,
negotiation,  execution,  delivery,  performance  and  enforcement  of the  Loan
Documents  and  the  preservation  of any  rights  thereunder;  (b)  collection,
including  deficiency  collections;  (c) the forwarding to Borrower or any other
Person on behalf of Borrower by Lender of the proceeds of any Loan  (including a
wire transfer fee of $25 per wire transfer); (d) any amendment,  waiver or other
modification  with respect to any Loan Document or advice in connection with the
administration  of the  Loans  or the  rights  thereunder;  (e) any  litigation,
dispute,  suit,  proceeding  or action  (whether  instituted  by or between  any
combination of Lender,  Borrower or any other  Person),  and an appeal or review
thereof, in any way relating to the Collateral, any Loan Document, or any action
taken  or any  other  agreements  to be  executed  or  delivered  in  connection
therewith,  whether as a party, witness or otherwise;  and (f) any effort (i) to
monitor the Loans,  (ii) to  evaluate,  observe or assess  Borrower or any other
Credit  Party or the  affairs  of such  Person,  and (iii) to  verify,  protect,
evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of the
Collateral.

9.3 No  Waiver.  Neither  Lender's  failure,  at any  time,  to  require  strict
    ----------
performance  by Borrower or any other Credit Party of any  provision of any Loan
Document,  nor Lender's  failure to exercise,  nor any delay in exercising,  any
right, power or privilege hereunder, shall operate as a waiver thereof or waive,
affect or diminish any right of Lender  thereafter to demand  strict  compliance
and performance therewith.  No single or partial exercise of any right, power or
privilege  hereunder shall preclude any other or future exercise  thereof or the
exercise of any other right,  power or privilege.  Any suspension or waiver of a
Default or other provision under the Loan Documents shall not suspend,  waive or
affect any other Default or other provision  under any Loan Document,  and shall
not be  construedas  a bar to any right or remedy which  Lender would  otherwise
have  had  on any  future  occasion.  None  of  the  undertakings,  indemnities,
agreements,  warranties,  covenants and representations of Borrower or any other
Credit

                                       15

<PAGE>

Party to Lender contained in any Loan Document and no Default by Borrower or any
other  Credit  Party  under  any Loan  Document  shall be  deemed  to have  been
suspended  or waived by  Lender,  unless  such  waiver  or  suspension  is by an
instrument  in  writing  signed by an officer or other  authorized  employee  of
Lender and directed to Borrower  specifying  such suspension or waiver (and then
such waiver shall be effective only to the extent therein  expressly set forth),
and Lender  shall not,  by any act (other  than  execution  of a formal  written
waiver),  delay,  omission  or  otherwise,  be deemed to have  waived any of its
rights or remedies hereunder.

9.4 Severability;  Section Titles. Wherever possible, each provision of the Loan
    -----------------------------
Documents shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of any Loan Document shall be prohibited by
or invalid under  applicable  law, such  provision  shall be  ineffective to the
extent of such prohibition or invalidity,  without invalidating the remainder of
such  provision or the  remaining  provisions of such Loan  Document.  Except as
otherwise  expressly  provided  for in the Loan  Documents,  no  termination  or
cancellation  (regardless  of cause or procedure)  of any financing  arrangement
under the Loan  Documents  shall in any way  affect or impair  the  Obligations,
duties, covenants,  representations and warranties, indemnities, and liabilities
of Borrower or any other  Credit  Party or the rights of Lender  relating to any
unpaid Obligation, (due or not due, liquidated,  contingent or unliquidated), or
any transaction or event occurring prior to such termination, or any transaction
or event,  the  performance  of which is not required until after the Commitment
Termination  Date, all of which shall not terminate or expire,  but rather shall
survive such  termination or  cancellation  and shall continue in full force and
effect until the Termination Date; provided,  that all indemnity  obligations of
the Credit Parties under the Loan Documents shall survive the Termination  Date.
The  Section  titles  contained  in any Loan  Document  are and shall be without
substantive  meaning or content of any kind whatsoever and are not a part of the
agreement between the parties hereto.

9.5 Authorized Signature.  Until Lender shall be notified in writing by Borrower
    --------------------
or any other Credit Party to the contrary,  the  signature  upon any document or
instrument  delivered  pursuant hereto and believed by Lender or any of Lender's
officers,  agents,  or  employees  to be that of an officer of  Borrower or such
other Credit Party shall bind Borrower and such other Credit Party and be deemed
to be the act of Borrower or such other Credit Party affixed  pursuant to and in
accordance  with  resolutions  duly adopted by  Borrower's  or such other Credit
Party's Board of Directors, and Lender shall be entitled to assume the authority
of each  signature and authority of the person whose  signature it is or appears
to be unless the person acting in reliance  thereon shall have actual  knowledge
to the contrary.

9.6 Notices.  Except as otherwise provided herein,  whenever any notice, demand,
    -------
request or other communication shall or may be given to or served upon any party
by any other  party,  or  whenever  any party  desires to give or serve upon any
other  party  any  communication  with  respect  to this  Agreement,  each  such
communication  shall be in  writing  and shall be  deemed  to have been  validly
served,  given or delivered (a) upon the earlier of actual receipt and three (3)
days after  deposit in the United  States Mail,  registered  or certified  mail,
return receipt  requested,  with proper postage prepaid,  (b) upon transmission,
when  sent by  telecopy  or other  similar  facsimile  transmission  (with  such
telecopy  or  facsimile  promptly  confirmed  by  delivery of a copy by personal
delivery or United States Mail as otherwise  provided in this Section 9.6),  (c)
one (1) Business Day after deposit with a reputable  overnight  courier with all
charges prepaid or (d) when  hand-delivered,  all of which shall be addressed to
the party to be notified and sent to the address or facsimile  number  indicated
in  Schedule  B or to  such  other  address  (or  facsimile  number)  as  may be
substituted by notice given as herein  provided.  Failure or delay in delivering
copies of any such  communication  to any Person (other than Borrower or Lender)
designated in Schedule B to receive copies shall in no way adversely  affect the
              ----------
effectiveness of such communication.

9.7  Counterparts.  Any Loan  Document may be executed in any number of separate
     ------------
counterparts  by any  one or  more  of the  parties  thereto,  and  all of  said
counterparts taken together shall constitute one and the same instrument.

9.8  Time  of  the  Essence.  Time  is of the  essence  for  performance  of the
     ----------------------
Obligations under the Loan Documents.

9.9 GOVERNING LAW. THE LOAN DOCUMENTS AND THE OBLIGATIONS ARISING UNDER THE LOAN
    -------------
DOCUMENTS  SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE  WITH,
THE LAWS OF THE STATE OF NEW YORK  APPLICABLE TO CONTRACTS MADE AND PERFORMED IN
SUCH STATE,  WITHOUT REGARD TO THE  PRINCIPLES  THEREOF  REGARDING  CONFLICTS OF
LAWS.

                                       16

<PAGE>

9.10  SUBMISSION TO  JURISDICTION;  WAIVER OF JURY TRIAL.  (A) BORROWER AND EACH
      --------------------------------------------------
OTHER CREDIT PARTY  EXECUTING THIS  AGREEMENT  HEREBY CONSENT AND AGREE THAT THE
STATE OR FEDERAL COURTS LOCATED IN NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN BORROWER AND SUCH CREDIT PARTY
AND LENDER PERTAINING TO THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR TO
ANY MATTER  ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OF THE OTHER LOAN
DOCUMENTS;  PROVIDED,  THAT LENDER,  BORROWER AND SUCH CREDIT PARTY  ACKNOWLEDGE
THAT ANY  APPEALS  FROM  THOSE  COURTS  MAY HAVE TO BE HEARD BY A COURT  LOCATED
OUTSIDE OF NEW YORK; AND FURTHER PROVIDED,  THAT NOTHING IN THIS AGREEMENT SHALL
BE DEEMED OR OPERATE TO PRECLUDE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL
ACTION IN ANY OTHER  JURISDICTION TO COLLECT THE OBLIGATIONS,  TO REALIZE ON THE
COLLATERAL OR ANY OTHER SECURITY FOR THE  OBLIGATIONS,  OR TO ENFORCE A JUDGMENT
OR OTHER COURT ORDER IN FAVOR OF LENDER.  BORROWER  AND EACH OTHER  CREDIT PARTY
EXECUTING  THIS  AGREEMENT  EXPRESSLY  SUBMIT  AND  CONSENT  IN  ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER AND
SUCH CREDIT PARTY HEREBY WAIVE ANY  OBJECTION  WHICH IT MAY HAVE BASED UPON LACK
OF PERSONAL JURISDICTION,  IMPROPER VENUE OR FORUM NON CONVENIENS.  BORROWER AND
EACH OTHER CREDIT PARTY EXECUTING THIS AGREEMENT  HEREBY WAIVE PERSONAL  SERVICE
OF THE SUMMONS,  COMPLAINT AND OTHER  PROCESS  ISSUED IN ANY SUCH ACTION OR SUIT
AND AGREE THAT SERVICE OF SUCH SUMMONS,  COMPLAINT AND OTHER PROCESS MAY BE MADE
BY  REGISTERED OR CERTIFIED  MAIL  ADDRESSED TO BORROWER OR SUCH CREDIT PARTY AT
THE ADDRESS SET FORTH IN SCHEDULE B OF THIS  AGREEMENT  AND THAT SERVICE SO MADE
SHALL BE DEEMED  COMPLETED UPON THE EARLIER OF BORROWER'S OR SUCH CREDIT PARTY'S
ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
POSTAGE PREPAID.

        (B) THE PARTIES  HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT,
TORT, OR OTHERWISE BETWEEN LENDER, BORROWER AND ANY CREDIT PARTY ARISING OUT OF,
CONNECTED WITH,  RELATED OR INCIDENTAL TO THE RELATIONSHIP  ESTABLISHED  BETWEEN
THEM IN CONNECTION WITH THE LOAN DOCUMENTS OR THE TRANSACTIONS RELATED THERETO.

9.11 Press Releases.  Neither any Credit Party nor any of its Affiliates will in
     --------------
the future issue any press release or other public  disclosure using the name of
General  Electric  Capital  Corporation  or its  affiliates or referring to this
Agreement or the other Loan  Documents  without at least two (2) Business  Days'
prior notice to Lender and without the prior  written  consent of Lender  unless
(and only to the extent  that) such Credit  Party or Affiliate is required to do
so under law and then, in any event, such Credit Party or Affiliate will consult
with Lender before issuing such press release or other public disclosure.

9.12  Reinstatement.  This  Agreement  shall  continue  to be  effective,  or be
      -------------
reinstated, as the case may be, if at any time payment of all or any part of the
Obligations  is  rescinded  or must  otherwise be returned or restored by Lender
upon the insolvency, bankruptcy,  dissolution,  liquidation or reorganization of
Borrower or any other Credit Party,  or  otherwise,  all as though such payments
had not been made.

9.13  Confidentiality.  Lender  agrees to use its best  efforts to maintain  the
      ---------------
confidentiality  of the Information (as defined below),  except that Information
may be disclosed (a) to its and its affiliates' directors,  officers,  employees
and agents,  including  accountants,  legal counsel and other advisors (it being
understood  that the Persons to whom such disclosure is made will be informed of
the  confidential  nature  of such  Information  and  instructed  to  keep  such
Information  confidential);  (b)  to the  extent  requested  by  any  regulatory
authority;  (c) to the extent  required by applicable  laws or regulations or by
any subpoena or similar legal process; (d) to any other party to this Agreement;
(e) in connection  with the exercise of any remedies this Agreement or any suit,
action or proceeding relating to the Loan Agreement or the enforcement of rights
thereunder;  (f)  with the  consent  of the  Borrower;  (g) to the  extent  such
Information  becomes  publicly  available  other than as a result of a breach of
this Section 9.13; or (i) to the National Association of Insurance Commissioners
or any other similar organization or any nationally recognized rating

                                       17

<PAGE>

agency that requires  access to information  about  Lender's or its  affiliates'
investment portfolio in connection with ratings issued with respect to Lender or
its affiliates.  For the purposes of this Section 9.13,  "Information" means all
information  received from Borrower relating to Borrower or its business,  other
than any such information that is available to Lender on a nonconfidential basis
prior to disclosure by Borrower.

IN WITNESS WHEREOF,  this Loan and Security  Agreement has been duly executed as
of the date first written above.

                                            SALIX PHARMACEUTICALS, INC.

                                            By:      /s/ Adam C. Derbyshire
                                               ---------------------------------

                                            Name: Adam C. Derbyshire
                                            Title: Secretary

                                            GENERAL ELECTRIC CAPITAL CORPORATION

                                            By:      /s/ Keri A. Wass
                                               ---------------------------------
                                            Name: Keri A. Wass
                                            Title: Duly Authorized Signatory

                                       18

<PAGE>

                            SCHEDULE A - DEFINITIONS

Capitalized terms used in this Agreement and the other Loan Documents shall have
(unless  otherwise  provided  elsewhere  in this  Agreement or in the other Loan
Documents) the following respective meanings:

"Account  Debtor"  shall mean any Person  who is or may  become  obligated  with
respect to, or on account of, an Account.

"Accounts"  shall mean all  "accounts," as such term is defined in the Code, now
owned  or  hereafter  acquired  by  any  Person,  including:  (i)  all  accounts
receivable, other receivables,  book debts and other forms of obligations (other
than forms of obligations evidenced by Chattel Paper, Documents or Instruments),
whether  arising  out of goods  sold or  services  rendered  or from  any  other
transaction  (including any such  obligations  which may be  characterized as an
account or contract right under the Code);  (ii) all of such Person's rights in,
to and under all purchase orders or receipts for goods or services; (iii) all of
such Person's rights to any goods represented by any of the foregoing (including
unpaid  sellers'  rights of rescission,  replevin,  reclamation  and stoppage in
transit and rights to returned, reclaimed or repossessed goods); (iv) all moneys
due or to become due to such Person under all purchase  orders and contracts for
the sale of goods or the  performance  of  services or both by such Person or in
connection with any other transaction  (whether or not yet earned by performance
on the part of such Person), including the right to receive the proceeds of said
purchase orders and contracts; and (v) all collateral security and guarantees of
any kind given by any other Person with respect to any of the foregoing.

"Accounts Payable Analysis" shall mean a certificate in the form of Exhibit D

"Accounts Receivable Roll Forward Analysis" shall mean a certificate in the form
of Exhibit E.

"Affiliate" shall mean, with respect to any Person:  (i) each other Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian  or other  fiduciary,  five  percent  (5%) or more of the Stock  having
ordinary  voting power for the  election of directors of such Person;  (ii) each
other Person that  controls,  is controlled  by or is under common  control with
such Person or any  Affiliate  of such  Person;  or (iii) each of such  Person's
officers,  directors,  joint  venturers  and  partners.  For the purpose of this
definition,  "control"  of a Person  shall  mean  the  possession,  directly  or
indirectly,  of the power to direct or cause the direction of its  management or
policies,  whether  through the ownership of voting  securities,  by contract or
otherwise.

"Agreement"  shall mean this  Agreement  including all  appendices,  exhibits or
schedules   attached  or  otherwise   identified   thereto,   restatements   and
modifications and supplements thereto, and any appendices, exhibits or schedules
to any of the foregoing,  each as in effect at the time such  reference  becomes
operative;  provided,  that except as specifically  set forth in this Agreement,
any reference to the Disclosure  Schedules to this  Agreement  shall be deemed a
reference to the  Disclosure  Schedules as in effect on the Closing Date or in a
written amendment thereto executed by Borrower and Lender.

"Books and Records" shall mean all books,  records,  board  minutes,  contracts,
licenses,  insurance  policies,  environmental  audits,  business plans,  files,
computer  files,  computer  discs and other data and software  storage and media
devices,  accounting  books and records,  financial  statements  (actual and pro
forma),  filings  with  Governmental  Authorities  and any and all  records  and
instruments relating to the Collateral or Borrower's business.

"Borrower"  shall mean the Person  identified  as such in the  preamble  of this
Agreement.

"Borrowing  Availability" shall mean, at any time, the lesser of (i) the Maximum
Amount or (ii) the Borrowing  Base, in each case less  reserves  established  by
Lender from time to time.

"Borrowing  Base" shall mean at any time an amount equal to the sum at such time
of (a)  eighty  five  percent  (85%) of the value (as  determined  by Lender) of
Borrower's  Eligible  Accounts arising on and after February 1, 2001 that remain
unpaid for less than ninety (90) days after  invoice date plus (b) the lesser of
(i)  $6,000,000  or (ii) seventy  percent  (70%) of the value (as  determined by
Lender) of  Borrower's  Eligible  Accounts  arising in December 2000 and January
2001 that  remain  unpaid  for less than one  hundred  twenty  (120)  days after
invoice date plus;  provided that Lender shall reduce the foregoing  percentages
by one percentage point for each percentage point that the

                               Schedule A: Page 1

<PAGE>

dilution of Borrower's  Accounts  (calculated by Lender as the average  dilution
over the most recent 3 months) exceeds 5%.

"Borrowing Base Certificate" shall mean a certificate in the form of Exhibit C.

"Business  Day" shall mean any day that is not a Saturday,  a Sunday or a day on
which banks are required or permitted to be closed in the State of New York.

"Capital  Expenditures"  shall mean all payments or accruals  (including Capital
Lease  Obligations)  for any fixed assets or improvements  or for  replacements,
substitutions  or  additions  thereto,  that have a useful life of more than one
year and that are required to be capitalized under GAAP.

"Capital  Lease"  shall  mean,  with  respect  to any  Person,  any lease of any
property  (whether  real,  personal or mixed) by such Person as lessee that,  in
accordance  with GAAP,  either would be required to be classified  and accounted
for as a capital lease on a balance  sheet of such Person or otherwise  would be
disclosed as such in a note to such balance  sheet,  other than,  in the case of
Borrower, any such lease under which Borrower is the lessor.

"Capital Lease  Obligation"  shall mean, with respect to any Capital Lease,  the
amount of the obligation of the lessee thereunder that, in accordance with GAAP,
would appear on a balance  sheet of such lessee in respect of such Capital Lease
or otherwise be disclosed in a note to such balance sheet.

"Cash Collateral Account" shall have the meaning assigned to it in Schedule C.

"Change of  Control"  shall mean,  with  respect to any Person on ` or after the
Closing Date, that any change in the  composition of its  stockholders as of the
Closing  Date  shall  occur  which  would  result  in any  stockholder  or group
acquiring 49.9% or more of any class of Stock of such Person, or that any Person
(or group of Persons acting in concert)  shall  otherwise  acquire,  directly or
indirectly (including through Affiliates),  the power to elect a majority of the
Board of Directors of such Person or otherwise  direct the management or affairs
of such Person by obtaining proxies,  entering into voting agreements or trusts,
acquiring securities or otherwise.

"Charges" shall mean all Federal, state, county, city, municipal, local, foreign
or other  governmental  taxes  (including taxes owed to PBGC at the time due and
payable), levies, customs or other duties, assessments,  charges, liens, and all
additional charges, interest,  penalties,  expenses, claims or encumbrances upon
or relating to (i) the Collateral,  (ii) the  Obligations,  (iii) the employees,
payroll, income or gross receipts of any Credit Party, (iv) the ownership or use
of any assets by any Credit Party, or (v) any other aspect of any Credit Party's
business.

"Chattel  Paper" shall mean all "chattel  paper," as such term is defined in the
Code, now owned or hereafter acquired by any Person, wherever located.

"Closing Date" shall mean the Business Day on which the conditions precedent set
forth in  Section 2 have been  satisfied  or  specifically  waived in writing by
Lender, and the initial Loan has been made.

"Closing Fee" shall have the meaning assigned to it in Schedule E.

"Code"  shall mean the  Uniform  Commercial  Code as the same may,  from time to
time, be in effect in the State of New York;  provided,  that in the event that,
by  reason  of  mandatory  provisions  of  law,  any or  all of the  attachment,
perfection  or priority  of Lender's  security  interest  in any  Collateral  is
governed by the Uniform  Commercial  Code as in effect in a  jurisdiction  other
than the State of New York,  the term "Code"  shall mean the Uniform  Commercial
Code as in effect in such other  jurisdiction  for purposes of the provisions of
this  Agreement  relating to such  attachment,  perfection  or priority  and for
purposes of definitions related to such provisions.

"Collateral" shall have the meaning assigned to it in Section 6.1.

"Collection  Account" shall mean that certain account of Lender,  account number
50-232-854  in the name of GECC CAF  Depository  at  Bankers  Trust  Company,  I
Bankers Trust Plaza, New York, New York, ABA number 021-001-033.

                               Schedule A: Page 2

<PAGE>

"Commitment  Termination  Date" shall mean the earliest of (i) the Stated Expiry
Date, (ii) the date Lender's  obligation to advance funds is terminated pursuant
to  Section  7.2,  and  (iii)  the date of  indefeasible  prepayment  in full by
Borrower of the Obligations in accordance with the provisions of Section 1.2(c).

"Contracts"  shall mean all the contracts,  undertakings,  or agreements  (other
than rights  evidenced by Chattel Paper,  Documents or  Instruments) in or under
which  any  Person  may now or  hereafter  have any  right,  title or  interest,
including  any  agreement  relating  to the  terms of  payment  or the  terms of
performance of any Account.

"Contractual  Obligation"  shall mean as to any  Person,  any  provision  of any
security  issued  by such  Person  or of any  agreement,  instrument,  or  other
undertaking  to  which  such  Person  is a party  or by  which  it or any of its
property is bound.

"Copyright  License" shall mean rights under any written  agreement now owned or
hereafter  acquired by any Person  granting  the right to use any  Copyright  or
Copyright registration.

"Copyrights"  shall mean all of the following now owned or hereafter acquired by
any Person:  (i) all copyrights in any original work of authorship  fixed in any
tangible medium of expression,  now known or later developed,  all registrations
and applications for registration of any such copyrights in the United States or
any other country,  including  registrations,  recordings and applications,  and
supplemental  registrations,  recordings,  and applications in the United States
Copyright  Office;  and (ii) all Proceeds of the  foregoing,  including  license
royalties and proceeds of infringement suits, the right to sue for past, present
and future infringements,  all rights corresponding thereto throughout the world
and all renewals and extensions thereof.

"CORD" shall mean CORD Logistics, Inc., an Ohio corporation.

"Corporate  Credit  Party"  shall mean any Credit  Party that is a  corporation,
partnership or limited liability company.

"Credit  Party" shall mean  Borrower,  and each other Person (other than Lender)
that is or may become a party to this Agreement [or any other Loan Document).

"Default"  shall mean any Event of Default or any event which,  with the passage
of time or notice or both,  would,  unless  cured or waived,  become an Event of
Default.

"Default Rate" shall have the meaning assigned to it in Section 1.5(c).

"Documents" shall mean all "documents," as such term is defined in the Code, now
owned or hereafter acquired by any Person, wherever located, including all bills
of lading, dock warrants, dock receipts, warehouse receipts, and other documents
of title, whether negotiable or non-negotiable.

"Eligible Accounts" shall mean as at the date of determination,  all Accounts of
the Borrower except any Account:

        (a) that does not  arise  from the sale of goods or the  performance  of
services by Borrower in the ordinary course of Borrower's business;
        (b) upon which (i) Borrower's  right to receive  payment is not absolute
or is  contingent  upon the  fulfillment  of any  condition  whatsoever  or (ii)
Borrower is not able to bring suit or otherwise enforce its remedies against the
Account Debtor through judicial process;
        (c)  against  which  any  defense,   counterclaim  or  setoff,   whether
well-founded or otherwise, is asserted or which is a "contra" Account;
        (d) that is not a true and correct statement of a bona fide indebtedness
incurred in the amount of the Account for merchandise sold or services performed
and accepted by the Account Debtor obligated upon such Account;
        (e) with respect to which an invoice,  acceptable  to Lender in form and
substance, has not been sent;
     (f) that is not owned by Borrower or is subject to any right, claim, or
interest of another Person, other than the Lien in favor of Lender;

                               Schedule A: Page 3

<PAGE>

        (g)  that  arises  from a sale  to or  performance  of  services  for an
employee,  Affiliate,  Subsidiary or Stockholder of Borrower or any other Credit
Party,  or an entity which has common officers or directors with Borrower or any
other Credit Party;
        (h) that is the  obligation of an Account Debtor that is the Federal (or
local) government or a political  subdivision thereof,  unless Lender has agreed
to the contrary in writing and Borrower has complied with the Federal Assignment
of Claims Act of 1940 (or the state equivalent  thereof, if any) with respect to
such obligation;
        (i) that is the  obligation  of an Account  Debtor  located in a foreign
country  unless such  Account is supported by a letter of credit in which Lender
has a first  priority  perfected  security  interest  by  possession  or  credit
insurance acceptable to Lender (and naming Lender as loss payee);
        (j) that is the  obligation of an Account  Debtor to whom Borrower is or
may become liable for goods sold or services  rendered by the Account  Debtor to
Borrower, to the extent of Borrower's liability to such Account Debtor;
        (k)  that  arises  with  respect  to  goods  which  are  delivered  on a
cash-on-delivery basis or placed on consignment,  guaranteed sale or other terms
by reason of which the payment by the Account Debtor may be conditional;
        (1) that is an  obligation  for which the total  unpaid  Accounts of the
Account  Debtor exceed 20% of the  aggregate of all  Accounts,  to the extent of
such excess;
        (m)  that is not  paid  within  60 days  from  its due  date or that are
Accounts  of an Account  Debtor if 50% or more of the  Accounts  owing from such
Account Debtor remain unpaid within such time periods;
        (n) is an obligation of an Account  Debtor that has suspended  business,
made a general  assignment  for the benefit of  creditors,  is unable to pay its
debts as they become due or as to which a petition has been filed  (voluntary or
involuntary) under any law relating to bankruptcy, insolvency, reorganization or
relief of debtors;
        (o) that  arises  from any  bill-and-hold  or other sale of goods  which
remain in Borrower's possession or under Borrower's control;
        (p) as to  which  Lender's  interest  therein  is not a  first  priority
perfected security interest;
        (q) to the extent that such Account exceeds any credit limit established
by  Lender  in  Lender's  good  faith  credit  judgment;
        (r)  as  to  which  any  of  Borrower's  representations  or  warranties
pertaining to Accounts are untrue;
        (s) that  represents  interest  payments,  late or finance  charges,  or
service charges owing to Borrower; or
        (t) that is not  otherwise  acceptable  in the good faith  discretion of
Lender,  provided,  that  Lender  shall  have the  right to  create  and  adjust
eligibility  standards and related  reserves from time to time in its good faith
credit judgment.

"Environmental  Laws" shall mean all  Federal,  state and local laws,  statutes,
ordinances  and  regulations,  now or hereafter  in effect,  and in each case as
amended  or  supplemented  from time to time,  and any  applicable  judicial  or
administrative  interpretation thereof relating to the regulation and protection
of human  health,  safety,  the  environment  and natural  resources  (including
ambient air, surface water,  groundwater,  wetlands,  land surface or subsurface
strata, wildlife, aquatic species and vegetation).

"Environmental   Liabilities"   shall   mean   all   liabilities,   obligations,
responsibilities,  remedial actions,  removal costs, losses, damages of whatever
nature,  costs and expenses  (including all reasonable fees,  disbursements  and
expenses of counsel,  experts and  consultants  and costs of  investigation  and
feasibility  studies),  fines,  penalties,  sanctions and interest incurred as a
result of any claim, suit, action or demand of whatever nature by any Person and
which relate to any health or safety condition regulated under any Environmental
Law,  environmental  permits  or in  connection  with  any  Release,  threatened
Release, or the presence of a Hazardous Material.

"Equipment"  shall mean all "equipment" as such term is defined in the Code, now
owned or hereafter acquired by any Person,  wherever located,  including any and
all  machinery,  apparatus,  equipment,  fittings,  furniture,  fixtures,  motor
vehicles and other tangible  personal  property  (other than Inventory) of every
kind  and  description  which  may be now or  hereafter  used in  such  Person's
operations or which are owned by such Person or in which such Person may have an
interest,  and all parts,  accessories and accessions  thereto and substitutions
and replacements therefor.

"ERISA" shall mean the Employee  Retirement  Income Security Act of 1974 (or any
successor   legislation  thereto),  as  amended  from  time  to  time,  and  any
regulations promulgated thereunder.

                               Schedule A: Page 4

<PAGE>

"ERISA Affiliate" shall mean any trade or business (whether or not incorporated)
that,  together with any Credit  Party,  is treated as a single  employer  under
Section  414(b),  (c),  (in) or (o) of the IRC,  or,  solely for the purposes of
Section 302 of ERISA and Section 412 of the IRC, is treated as a single employer
under Section 414 of the IRC.

"ERISA Event" shall mean (a) any "reportable  event", as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to a Plan (other than
an event for which the 30-day notice period is waived);  (b) the existence  with
respect  to any Plan of an  "accumulated  funding  deficiency"  (as  defined  in
Section 412 of the IRC or Section 302 of ERISA),  whether or not waived; (c) the
filing  pursuant to Section  412(b) of the IRC or Section  303(d) of ERISA of an
application  for a waiver of the minimum  funding  standard  with respect to any
Plan;  (d) the  incurrence  by any Credit  Party or any ERISA  Affiliate  of any
liability  under Title IV of ERISA with respect to the  termination of any Plan;
(e) the receipt by any Credit  Party or any ERISA  Affiliate  from the PBGC or a
plan  administrator of any notice relating to an intention to terminate any Plan
or to appoint a trustee to administer any Plan; (f) the incurrence by any Credit
Party or any ERISA  Affiliate of any liability with respect to any withdrawal or
partial  withdrawal from any Plan or  Multiemployer  Plan; or (g) the receipt by
any Credit  Party or any ERISA  Affiliate  of any notice,  or the receipt by any
Multiemployer  Plan from any Credit Party or any ERISA  Affiliate of any notice,
concerning  the  imposition of Withdrawal  Liability or a  determination  that a
Multiemployer  Plan is, or is expected to be,  insolvent  or in  reorganization,
within the meaning of Title IV of ERISA.

"Event of Default" shall have the meaning assigned to it in Section 7.1.

"Fees" shall mean the fees due to Lender as set forth in Schedule E.

"Financial  Statements"  shall mean the  consolidated and  consolidating  income
statement, balance sheet and statement of cash flows of Salix Ltd., Borrower and
the other Subsidiaries of Salix Ltd., internally prepared for each Fiscal Month,
and audited for each Fiscal Year, prepared in accordance with GAAP.

"Fiscal  Month" shall mean any of the monthly  accounting  periods of Salix Ltd.
and Borrower.

"Fiscal  Quarter"  shall mean any of the quarterly  accounting  periods of Salix
Ltd. and Borrower.

"Fiscal  Year" shall mean the 12 month period of Salix Ltd. and Borrower  ending
December 31 of each year. Subsequent changes of the fiscal year of Salix Ltd. or
Borrower  shall not change the term "Fiscal Year" unless Lender shall consent in
writing to such change.

"GAAP" shall mean generally accepted accounting  principles in the United States
of America as in effect from time to time, consistently applied.

"General  Intangibles"  shall mean all  "general  intangibles,"  as such term is
defined in the Code,  now owned or hereafter  acquired by any Person,  including
all fight,  title and interest which such Person may now or hereafter have in or
under any Contract,  Intellectual  Property,  interests in  partnerships,  joint
ventures and other business associations,  permits,  proprietary or confidential
information,  inventions  (whether  or not  patented or  patentable),  technical
information,  procedures,  designs, knowledge,  know-how,  software, data bases,
data, skill, expertise,  experience,  processes,  models,  drawings,  materials,
Books  and  Records,  Goodwill  (including  the  Goodwill  associated  with  any
Intellectual  Property),  all fights and claims in or under  insurance  policies
(including  insurance for fire,  damage,  loss, and casualty,  whether  covering
personal  property,  real property,  tangible fights or intangible  fights,  all
liability,  life,  key-person,  and  business  interruption  insurance,  and all
unearned  premiums),   uncertificated  securities,  choses  in  action,  deposit
accounts,  fights to  receive  tax  refunds  and other  payments  and  fights of
indemnification.

"Glycyx"  shall mean  Glycyx  Pharmaceuticals,  Ltd.,  a company  organized  and
existing under the laws of Bermuda.

"Goods"  shall mean all "goods," as such term is defined in the Code,  now owned
or  hereafter  acquired by any Person,  wherever  located,  including  movables,
fixtures, equipment, inventory, or other tangible personal property.

                               Schedule A: Page 5

<PAGE>

"Goodwill" shall mean all goodwill,  trade secrets,  proprietary or confidential
information,  technical  information,   procedures,  formulae,  quality  control
standards,   designs,  operating  and  training  manuals,  customer  lists,  and
distribution agreements now owned or hereafter acquired by any Person.

"Governmental Authority" shall mean any nation or government, any state or other
political  subdivision  thereof,  and any  agency,  department  or other  entity
exercising  executive,  legislative,   judicial,  regulatory  or  administrative
functions of or pertaining to government.

"Guaranteed  Indebtedness"  shall mean, as to any Person, any obligation of such
Person  guaranteeing  any  indebtedness,  lease,  dividend,  or other obligation
("primary  obligations")  of any other  Person (the  "primary  obligor")  in any
manner,  including any  obligation or arrangement  of such  guaranteeing  Person
(whether or not  contingent):  (i) to purchase or  repurchase  any such  primary
obligation;  (ii) to advance or supply  funds (a) for the purchase or payment of
any such primary obligation or (b) to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or solvency or any
balance  sheet  condition of the primary  obligor;  (iii) to purchase  property,
securities  or services  primarily  for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such  primary  obligation;  or (iv)  to  indemnify  the  owner  of such  primary
obligation against loss in respect thereof.

"Guarantor" shall mean Glycyx,  Salix. Ltd. and each other Person which executes
a guaranty or a support,  put or other  similar  agreement in favor of Lender in
connection with the transactions contemplated by this Agreement.

"Guaranty"  shall  mean any  agreement  to  perform  all or any  portion  of the
Obligations on behalf of Borrower or any other Credit Party, in favor of, and in
form and  substance  satisfactory  to,  Lender,  together  with all  amendments,
modifications and supplements  thereto,  and shall refer to such Guaranty as the
same may be in effect at the time such reference becomes operative.

"Hazardous  Material"  shall  mean any  substance,  material  or waste  which is
regulated  by or forms  the  basis of  liability  now or  hereafter  under,  any
Environmental Laws,  including any material or substance which is (a) defined as
a "solid waste," "hazardous waste," "hazardous material," "hazardous substance,"
"extremely   hazardous  waste,"  "restricted   hazardous  waste,"   "pollutant,"
"contaminant,"  "hazardous  constituent,"  "special waste," "toxic substance" or
other similar term or phrase under any Environmental  Laws, (b) petroleum or any
fraction or by-product thereof, asbestos,  polychlorinated biphenyls (PCB's), or
any radioactive substance.

"Hazardous  Waste" shall have the meaning  ascribed to such term in the Resource
Conservation and Recovery Act (42 U.S.C.ss.ss.6901 et. seq.).

"Indebtedness" of any Person shall mean: (i) all indebtedness of such Person for
borrowed  money or for the  deferred  purchase  price of  property  or  services
(including reimbursement and all other obligations with respect to surety bonds,
letters of credit and  bankers'  acceptances,  whether or not  matured,  but not
including  obligations  to trade  creditors  incurred in the ordinary  course of
business and not more than 45 days past due); (ii) all obligations  evidenced by
notes, bonds, debentures or similar instruments;  (iii) all indebtedness created
or arising under any conditional  sale or other title retention  agreements with
respect to property acquired by such Person (even though the rights and remedies
of the  seller or lender  under  such  agreement  in the  event of  default  are
"limited to  repossession  or sale of such  property);  (iv) all  Capital  Lease
Obligations; (v) all Guaranteed Indebtedness;  (vi) all Indebtedness referred to
in clauses  (i),  (ii),  (iii),  (iv) or (v) above  secured by (or for which the
holder of such Indebtedness has an existing right,  contingent or otherwise,  to
be secured by) any Lien upon or in property  (including  accounts  and  contract
rights) owned by such Person,  even though such Person has not assumed or become
liable for the payment of such Indebtedness;  (vii) the Obligations;  and (viii)
all liabilities under Title IV of ERISA.

"Indemnified  Liabilities"  and  "Indemnified  Person"  shall  have the  meaning
assigned to such terms in Section 1.11.

"Index  Rate" shall mean the latest  rate for 30-day  dealer  placed  commercial
paper (which for  purposes  hereof  shall mean high grade  unsecured  notes sold
through dealers by major corporations in multiples of $1,000), which normally is
published in the "Money  Rates"  section of The Wall Street  Journal (or if such
rate ceases to be so published,  as quoted from such other  generally  available
and recognizable source as Lender may select). The Index

                               Schedule A: Page 6

<PAGE>

Rate shall be determined (i) on the first Business Day immediately  prior to the
Closing Date and (ii)  thereafter,  on the last  Business  Day of each  calendar
month for calculation of interest for the following month.

"Instruments" shall mean all "instruments," as such term is defined in the Code,
now owned or hereafter acquired by any Person,  wherever located,  including all
certificated securities and all notes and other evidences of indebtedness, other
than  instruments  that  constitute,  or are a part of a group of writings  that
constitute, Chattel Paper.

"Intellectual  Property" shall mean any and all Licenses,  Patents,  Copyrights,
Trademarks, trade secrets and customer lists.

"Inventory" shall mean all "inventory," as such term is defined in the Code, now
or hereafter owned or acquired by any Person,  wherever  located,  including all
inventory,  merchandise,  goods and other personal property which are held by or
on  behalf  of such  Person  for  sale or lease  or are  furnished  or are to be
furnished under a contract of service or which constitute raw materials, work in
process or materials used or consumed or to be used or consumed in such Person's
business or in the processing,  production,  packaging,  promotion,  delivery or
shipping of the same, including other supplies.

"Investment  Property"  shall mean all  "investment  property,"  as such term is
defined in the Code, now or hereafter acquired by any Person, wherever located.

"IRC" and "IRS" shall mean  respectively,  the Internal Revenue Code of 1986 and
the Internal Revenue Service, and any successors thereto.

"Lender" shall mean General  Electric  Capital  Corporation  and, if at any time
Lender shall decide to assign or syndicate all or any of the  Obligations,  such
term shall include such assignee or such other members of the syndicate.

"Letters  of Credit"  shall mean any and all  commercial  or standby  letters of
credit  issued at the request and for the account of Borrower  for which  Lender
has incurred Letter of Credit Obligations.

"Letter of Credit Fee" shall have the meaning assigned to it in Schedule E.

"Letter of Credit Obligations" shall mean all outstanding obligations (including
all duty, freight,  taxes, costs,  insurance and any other charges and expenses)
incurred by Lender, whether direct or indirect,  contingent or otherwise, due or
not due, in connection with the issuance or guarantee,  by Lender or another, of
Letters of Credit, all as further set forth in Schedule C.

"License" shall mean any Copyright License, Patent License, Trademark License or
other  license of rights or  interests  now held or  hereafter  acquired  by any
Person.

"Lien"  shall  mean  any  mortgage,  security  deed or deed  of  trust,  pledge,
hypothecation,  assignment,  deposit arrangement,  lien, charge, claim, security
interest,  security title, easement or encumbrance,  or preference,  priority or
other  security  agreement  or  preferential  arrangement  of any kind or nature
whatsoever  (including  any lease or title  retention  agreement,  any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or  agreement  to give,  any  financing  statement  perfecting  a
security interest under the Code or comparable law of any jurisdiction).

"Litigation"  shall  mean  any  claim,  lawsuit,  litigation,  investigation  or
proceeding of or before any arbitrator or Governmental Authority.

"Loan Documents" shall mean this Agreement, the Notes, the Financial Statements,
each Guaranty, the Power of Attorney,  the Lock Box Account Agreements,  and the
other  documents  and  instruments  listed  in  Schedule  F,  and  all  security
agreements,  mortgages and all other documents,  instruments,  certificates, and
notices at any time  delivered by any Person  (other than Lender) in  connection
with any of the foregoing.

"Loans"  shall mean the  Revolving  Credit Loan  including  the Letter of Credit
Obligations.

                               Schedule A: Page 7

<PAGE>

"Lock Box  Account"  and "Lock Box  Account  Agreement"  shall have the  meaning
assigned to such terms in Schedule D.

"Material  Adverse  Effect"  shall mean:  a material  adverse  effect on (a) the
business,  assets,  operations,  prospects or  financial  or other  condition of
Borrower or any other Credit Party or the industry  within which Borrower or any
other Credit Party operates,  (b) Borrower's or any other Credit Party's ability
to pay or perform the Obligations  under the Loan Documents to which such Credit
Party is a party in accordance  with the terms  thereof,  (c) the  Collateral or
Lender's  Liens on the  Collateral  or the  priority  of any such  Lien,  or (d)
Lender's rights and remedies under this Agreement and the other Loan Documents.

"Maximum Amount" shall mean $7,000,000.

"Minimum Actionable Amount" shall mean $50,000.

"Multiemployer  Plan" shall mean a  "multiemployer  plan," as defined in Section
4001 (a) (3) of ERISA,  to which  Borrower,  any other Credit Party or any ERISA
Affiliate is making,  is obligated to make,  has made or been obligated to make,
contributions on behalf of participants who are or were employed by any of them.

"Net Borrowing  Availability" shall mean at any time the Borrowing  Availability
less the Revolving Credit Loan.

"Notes" shall mean the Revolving Credit Note.

"Notice of Revolving  Credit  Advance" shall have the meaning  assigned to it in
Section 1.1 (b).

"Obligations"  shall mean all loans,  advances,  debts,  expense  reimbursement,
fees,  liabilities,  and obligations for the performance of covenants,  tasks or
duties or for payment of monetary  amounts  (whether or not such  performance is
then required or contingent, or amounts are liquidated or determinable) owing by
Borrower and any other Credit Party to Lender, of any kind or nature, present or
future,  whether or not  evidenced by any note,  agreement or other  instrument,
arising under any of the Loan Documents,  and all covenants and duties regarding
such amounts.  This term includes all principal,  interest  (including  interest
accruing  at the then  applicable  rate  provided  in this  Agreement  after the
maturity of the Loans and interest accruing at the then applicable rate provided
in this  Agreement  after  the  filing of any  petition  in  bankruptcy,  or the
commencement of any insolvency,  reorganization  or like proceeding,  whether or
not a claim  for  post-filing  or  post-petition  interest  is  allowed  in such
proceeding),  Fees,  Charges,  expenses,  attorneys'  fees  and  any  other  sum
chargeable to Borrower  under any of the Loan  Documents,  and all principal and
interest due in respect of the Loans and all  obligations and liabilities of any
Guarantor under any Guaranty.

"Patent  License"  shall mean rights  under any written  agreement  now owned or
hereafter  acquired  by any  Person  granting  any  right  with  respect  to any
invention on which a Patent is in existence.

"Patents"  shall  mean all of the  following  in which any  Person  now holds or
hereafter acquires any interest:  (i) all letters patent of the United States or
any  other  country,   all  registrations  and  recordings   thereof,   and  all
applications  for  letters  patent of the  United  States or any other  country,
including registrations, recordings and applications in the United States Patent
and Trademark  Office or in any similar  office or agency of the United  States,
any State or Territory  thereof,  or any other  country;  and (ii) all reissues,
continuations, continuations-in-part or extensions thereof.

"PBGC" shall mean the Pension  Benefit  Guaranty  Corporation  or any  successor
thereto.

"Permitted  Encumbrances" shall mean the following  encumbrances:  (i) Liens for
taxes or assessments or other governmental Charges or levies, either not yet due
and payable or to the extent that  nonpayment  thereof is permitted by the terms
of Section 3.10; (ii) pledges or deposits  securing  obligations  under worker's
compensation,  unemployment insurance,  social security or public liability laws
or similar  legislation;  (iii)  pledges or  deposits  securing  bids,  tenders,
contracts (other than contracts for the payment of money) or leases to which any
Credit Party is a party as lessee made in the ordinary course of business;  (iv)
deposits securing public or statutory obligations of

                   Schedule A: Page 8

<PAGE>

any Credit Party; (v) inchoate and unperfected workers',  mechanics', or similar
liens  arising in the  ordinary  course of business so long as such Liens attach
only to  Equipment,  fixtures or real estate;  (vi)  carriers',  warehousemen's,
suppliers' or other similar  possessory  liens arising in the ordinary course of
business and  securing  indebtedness  not yet due and payable in an  outstanding
aggregate  amount  not in excess of  $25,000  at any time so long as such  Liens
attach  only to  Inventory;  (vii)  deposits of money  securing,  or in lieu of,
surety,  appeal or customs bonds in  proceedings  to which any Credit Party is a
party; (viii) zoning restrictions, easements, licenses, or other restrictions on
the use of real  property  or other  minor  irregularities  in title  (including
leasehold title) thereto,  so long as the same do not materially impair the use,
value, or marketability of such real estate;  (ix) Purchase Money Liens securing
Purchase  Money  Indebtedness  (or rent) to the extent  permitted  under Section
5(b)(vii); (x) Liens in existence on the Closing Date as disclosed on Disclosure
Schedule 5(e) provided that no such Lien is spread to cover additional  property
after the Closing  Date and the amount of  Indebtedness  secured  thereby is not
increased.; and (xi) Liens in favor of Lender securing the Obligations.

"Person" shall mean any individual,  sole proprietorship,  partnership,  limited
liability  partnership,   joint  venture,  trust,  unincorporated  organization,
association, corporation, limited liability company, institution, public benefit
corporation,  entity  or  government  (whether  Federal,  state,  county,  city,
municipal or otherwise, including any instrumentality, division, agency, body or
department thereof), and shall include such Person's successors and assigns.

"Plan" shall mean any employee  pension benefit plan (other than a Multiemployer
Plan)  subject to the  provisions of Title IV of ERISA or Section 412 of the IRC
or Section 302 of ERISA,  and in respect of which any Credit  Party or any ERISA
Affiliate  is (or, if such plan were  terminated,  would under  Section  4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.

"Post-Closing  Letter"  shall mean the letter  agreement  executed by Lender and
Borrower  on the  date of  this  Agreement  in the  form  of  Exhibit  U to this
Agreement.

"Prepayment Fee" shall mean the prepayment fee specified in Schedule E.

"Proceeds"  shall mean  "proceeds,"  as such term is defined in the Code and, in
any event, shall include: (i) any and all proceeds of any insurance,  indemnity,
warranty or guaranty  payable to Borrower or any other Credit Party from time to
time with  respect to any  Collateral;  (ii) any and all  payments  (in any form
whatsoever)  made or due and payable to Borrower or any other  Credit Party from
time to time in connection  with any  requisition,  confiscation,  condemnation,
seizure or forfeiture of any  Collateral by any  governmental  body,  authority,
bureau or agency (or any person acting under color of  governmental  authority);
(iii) any recoveries by Borrower or any other Credit Party against third parties
with respect to any litigation or dispute  concerning any  Collateral;  and (iv)
any  and all  other  amounts  from  time to time  paid or  payable  under  or in
connection with any Collateral, upon disposition or otherwise.

"Projections"  shall  mean as of any date  the  consolidated  and  consolidating
balance sheet,  statements of income and cash flow for Salix Ltd.,  Borrower and
the other Subsidiaries of Salix Ltd. (including  forecasted Capital Expenditures
and Net Borrowing  Availability) (i) by month for the next Fiscal Year, and (ii)
by year for the following  three Fiscal Years, in each case prepared in a manner
consistent  with GAAP and  accompanied  by senior  management's  discussion  and
analysis of such plan.

"Purchase Money Indebtedness"  shall mean (i) any Indebtedness  incurred for the
payment of all or any part of the purchase  price of any fixed  asset,  (ii) any
Indebtedness  incurred for the sole purpose of financing or  refinancing  all or
any part of the  purchase  price of any fixed  asset,  and  (iii) any  renewals,
extensions  or  refinancings  thereof (but not any  increases  in the  principal
amounts thereof outstanding at that time).

"Purchase  Money Lien" shall mean any Lien upon any fixed assets  which  secures
the Purchase Money  Indebtedness  related thereto but only if such Lien shall at
all times be  confined  solely to the-  asset  the  purchase  price of which was
financed or refinanced through the incurrence of the Purchase Money Indebtedness
secured  by such Lien and only if such Lien  secures  only such  Purchase  Money
Indebtedness.

"Real Property" shall have the meaning assigned to it in Section 3.15.

                               Schedule A: Page 9

<PAGE>

"Release" shall mean, as to any Person, any release,  spill, emission,  leaking,
pumping, injection, deposit, disposal,  discharge,  dispersal, dumping, leaching
or migration of Hazardous Materials in the indoor or outdoor environment by such
Person,  including  the movement of Hazardous  Materials  through or in the air,
soil, surface water, ground water or property.

"Requirement of Law" shall mean as to any Person, the Certificate or Articles of
Incorporation and By-Laws or other organizational or governing documents of such
Person,  and  any  law,  treaty,  rule  or  regulation  or  determination  of an
arbitrator or a court or other Governmental Authority, in each case binding upon
such  Person  or any of its  property  or to  which  such  Person  or any of its
property is subject.

"Restricted  Payment" shall mean: (i) the declaration or payment of any dividend
or the incurrence of any liability to make any other payment or  distribution of
cash or other  property  or assets on or in respect of  Borrower's  or any other
Credit Party's Stock;  (ii) any payment or  distribution  made in respect of any
subordinated  Indebtedness of Borrower or any other Credit Party in violation of
any subordination or other agreement made in favor of Lender;  (iii) any payment
on  account of the  purchase,  redemption,  defeasance  or other  retirement  of
Borrower's  or any  other  Credit  Party's  Stock or  Indebtedness  or any other
payment or  distribution  made in respect of any  thereof,  either  directly  or
indirectly; other than (a) that arising under this Agreement or (b) interest and
principal,  when due without acceleration or modification of the amortization as
in effect on the Closing Date, under  Indebtedness  (not including  subordinated
Indebtedness,  payments of which shall be permitted only in accordance  with the
terms of the relevant subordination agreement made in favor of Lender) described
in Disclosure Schedule (5(b)) or otherwise permitted under Section 5(b)(vi);  or
(iv)  any  payment,  loan,  contribution,  or other  transfer  of funds or other
property  to  any  Stockholder  of  such  Person  which  is  not  expressly  and
specifically  permitted in this Agreement;  provided,  that no payment to Lender
shall constitute a Restricted Payment.

"Revolving  Credit Advance" shall have the meaning assigned to it in Section 1.1
(a).

"Revolving Credit Loan" shall mean at any time the sum of (i) the aggregate
amount of Revolving Credit Advances then outstanding, plus (ii) the total Letter
of Credit Obligations incurred by Lender and outstanding at such time, plus
(iii) the amount of accrued but unpaid interest thereon and Letter of Credit
Fees with respect thereto.

"Revolving  Credit Note" shall mean the  promissory  note of Borrower  dated the
Closing Date, substantially in the form of Exhibit F.

"Revolving Credit Rate" shall have the meaning assigned to it in Section 1.5(a).

"Salix Ltd." shall mean Salix  Pharmaceuticals,  Ltd., a company  organized  and
existing under the laws of the British Virgin Islands.

"Salix Ltd.  Subordinated Debt" shall mean the Indebtedness owing by Borrower to
Salix Ltd.

"Salix  Subordination  Agreement" shall mean the intercreditor and subordination
agreement  substantially  in the form of Exhibit P hereto,  to be executed on or
before the Closing Date between Salix Ltd. and Lender, and to be acknowledged by
Borrower,  subordinating the payment of the Salix Ltd.  Subordinated Debt to the
payment of the Obligations.

"Stated Expiry Date" shall mean March 30, 2003;  provided that the Stated Expiry
                                                 -------- ----
Date shall  automatically  be extended  for three (3)  consecutive  one (1) year
periods,  the first of which shall commence on the third (P)  anniversary of the
date of this Agreement  and, if so extended for such first one year period,  the
second of which shall  commence on the fourth (4th)  anniversary  of the date of
this Agreement and, if so extended for such second one year period, the third of
which  shall  commence  on the  fifth  (5th)  anniversary  of the  date  of this
Agreement,  unless,  in each case, prior to the then-current  Stated Expiry Date
(a) Borrower  provides  written  notice to Lender not less than ninety (90) days
prior to the then current  Stated  Expiry Date that  Borrower has elected not to
extend the then current  Stated  Expiry  Date,  or (b) Lender  provides  written
notice to  Borrower  not less than  ninety  (90) days prior to the then  current
Stated Expiry Date that Lender has elected not to extend the then current Stated
Expiry Date. The foregoing notwithstanding,  the Stated Expiry Date shall not be
extended if, as of the then current Stated Expiry Date, a Default

                              Schedule A: Page 10

<PAGE>

shall have occurred and is continuing.  Nothing contained herein shall be deemed
to be a  commitment  by Lender to extend the Stated  Expiry  Date at any time in
effect.  The Stated  Expiry Date shall in no event be later than the sixth (6th)
anniversary of the date of this Agreement.

"Stock"  shall  mean  all  certificated  and  uncertificated  shares,   options,
warrants,  membership  interests,  general  or  limited  partnership  interests,
participation  or other  equivalents  (regardless of how  designated) of or in a
corporation, partnership, limited liability company or equivalent entity whether
voting or nonvoting,  including  common  stock,  preferred  stock,  or any other
"equity  security"  (as such term is defined in Rule 3all-I of the General Rules
and Regulations  promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934).

"Stockholder"  shall mean each holder of Stock of  Borrower or any other  Credit
Party.

"Subsidiary"  shall mean,  with respect to any Person,  (i) any  corporation  of
which an aggregate  of more than 50% of the  outstanding  Stock having  ordinary
voting power to elect a majority of the board of  directors of such  corporation
(irrespective  of whether,  at the time,  Stock of any other class or classes of
such  corporation  shall  have or  might  have  voting  power by  reason  of the
happening of any  contingency)  is at the time,  directly or  indirectly,  owned
legally or beneficially  by such Person and/or one or more  Subsidiaries of such
Person,  or with  respect  to which  any such  Person  has the  right to vote or
designate  the vote of 50% or more of such Stock  whether  by proxy,  agreement,
operation of law or otherwise,  and (ii) any  partnership  or limited  liability
company in which such Person or one or more  Subsidiaries  of such Person has an
equity interest  (whether in the form of voting or  participation  in profits or
capital  contribution) of more than 50% or of which any such Person is a general
partner or manager or may exercise the powers of a general partner or manager.

"Taxes" shall mean taxes, levies, imposts, deductions,  Charges or withholdings,
and all liabilities with respect thereto, excluding taxes imposed on or measured
by the net income of Lender.

"Termination  Date"  shall  mean the date on which all  Obligations  under  this
Agreement are indefeasibly  paid in full, in cash (other than amounts in respect
of Letter of Credit Obligations if any, then outstanding, provided that Borrower
shall  have  funded  such  amounts  in cash in full  into  the  Cash  Collateral
Account),  and  Borrower  shall  have no  further  right to borrow any moneys or
obtain  ~other  credit  extensions  or  financial   accommodations   under  this
Agreement.

"Trademark  License" shall mean rights under any written  agreement now owned or
hereafter  acquired by any Person  granting  any right to use any  Trademark  or
Trademark registration.

"Trademarks"  shall mean all of the following now owned or hereafter acquired by
any Person: (i) all trademarks,  trade names,  corporate names,  business names,
trade styles, service marks, logos, other source or business identifiers, prints
and labels on which any of the foregoing  have  appeared or appear,  designs and
general  intangibles  of like  nature,  now  existing  or  hereafter  adopted or
acquired,  all  registrations  and recordings  thereof,  and all applications in
connection therewith,  including all registrations,  recordings and applications
in the United  States Patent and  Trademark  Office or in any similar  office or
agency of the  United  States,  any  State or  Territory  thereof,  or any other
country or any political subdivision thereof, and (ii) all reissues,  extensions
or renewals thereof.

"Withdrawal  Liability" shall mean liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer  Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.

Any accounting  term used in this  Agreement or the other Loan  Documents  shall
have, unless otherwise  specifically  provided therein,  the meaning customarily
given  such  term  in  accordance  with  GAAP,  and all  financial  computations
thereunder shall be computed, unless otherwise specifically provided therein, in
accordance  with  GAAP  consistently  applied;   provided,  that  all  financial
covenants and  calculations  in the Loan  Documents  shall be made in accordance
with GAAP as in effect on the Closing  Date  unless  Borrower  and Lender  shall
otherwise  specifically agree in writing. That certain items or computations are
explicitly  modified by the phrase "in accordance  with GAAP" shall in no way be
construed to limit the foregoing.  All other  undefined  terms contained in this
Agreement  or the other  Loan  Documents  shall,  unless the  context  indicates
otherwise,  have the  meanings  provided  for by the Code.  The words  "herein,"
"hereof' and "hereunder" or other words of similar import refer to this

                              Schedule A: Page 11

<PAGE>

Agreement as a whole,  including the exhibits and schedules thereto, as the same
may from  time to time be  amended,  modified  or  supplemented,  and not to any
particular section, subsection or clause contained in this Agreement.

For  purposes of this  Agreement  and the other Loan  Documents,  the  following
additional rules of construction shall apply, unless  specifically  indicated to
the contrary:  (a) wherever from the context it appears  appropriate,  each term
stated in either the  singular  or plural  shall  include the  singular  and the
plural,;  (b) the term "or" is not exclusive;  (c) the term  "including" (or any
form thereof) shall not be limiting or exclusive; (d) all references to statutes
and related  regulations  shall include any amendments of same and any successor
statutes  and  regulations;  and  (e)  all  references  to  any  instruments  or
agreements, including references to any of the Loan Documents, shall include any
and all  modifications  or  amendments  thereto  and any and all  extensions  or
renewals thereof.

                              Schedule A: Page 12

<PAGE>

                                   Schedule B
                   LENDER'S AND BORROWER'S ADDRESS FOR NOTICES

Lender's Address

Name:             General Electric Capital Corporation

Address:          6100 Fairview Road, Suite 350

                  Charlotte, NC 28210

Attn:             SALIX PHARMACEUTICALS, INC. Account Manager

Telephone:        704-553-4155

Facsimile:        704-553-4150

Borrower's Address

Name:             SALIX PHARMACEUTICALS, INC.

Address:          (through April 30, 2001)

                  3801 Wake Forest Road, Suite 205

                  Raleigh, NC 27607

                  (after April 30, 2001)

                  8501 Colonnade Drive, Suite 500

                  Raleigh, NC 27615

Attn:             Robert P. Ruscher, President

Telephone:        919-862-1000

Facsimile:        919-862-1095

                               Schedule B: Page 1

<PAGE>

                         SCHEDULE C - LETTERS OF CREDIT

1. Lender agrees,  subject to the terms and conditions hereinafter set forth, to
incur  Letter of Credit  Obligations  in respect of the  issuance  of Letters of
Credit  issued on terms  acceptable  to Lender  and  supporting  obligations  of
Borrower  incurred in the ordinary  course of Borrower's  business,  in order to
support the payment of  Borrower's  inventory  purchase  obligations,  insurance
premiums,  or utility or other operating  expenses and obligations,  as Borrower
shall  request by written  notice to Lender  that is received by Lender not less
than five  Business  Days prior to the  requested  date of  issuance of any such
Letter of Credit; provided, that: (a) that the aggregate amount of all Letter of
Credit  Obligations  at any one time  outstanding  (whether  or not then due and
payable) shall not exceed $ [n/a];  (b) no Letter of Credit shall have an expiry
date which is later than the Stated  Expiry Date or one year  following the date
of issuance  thereof-,  and (c) Lender shall be under no obligation to incur any
Letter of Credit  Obligation  if after giving  effect to the  incurrence of such
Letter of Credit Obligation,  the Net Borrowing  Availability would be less than
zero. The maximum  amount payable in respect of each Letter of Credit  requested
by Borrower  will be  guaranteed  by Lender in favor of the  issuing  bank under
terms of a separate agreement between Lender and the issuing bank. Borrower will
enter into an  application  and  agreement  for such  Letter of Credit  with the
issuing bank selected by Lender (which may be an Affiliate of Lender).  The bank
that issues any Letter of Credit  pursuant to this Agreement shall be determined
by Lender in its sole discretion.

2. The notice to be provided to Lender  requesting  that Lender  incur Letter of
Credit Obligations shall be in the form of a Letter of Credit application in the
form customarily  employed by the issuing bank,  together with a written request
by  Borrower  and the bank that  Lender  approve  Borrower's  application.  Upon
receipt of such notice  Lender shall  establish a reserve  against the Borrowing
Availability  in the  amount of 100% of the face  amount of the Letter of Credit
Obligation  to be  incurred.  Approval by Lender in the written form agreed upon
between  Lender and the issuing  bank (a) will  authorize  the bank to issue the
requested Letter of Credit, and (b) will conclusively establish the existence of
the Letter of Credit Obligation as of the date of such approval.

3. In the event that Lender  shall make any payment on or pursuant to any Letter
of Credit Obligation,  Borrower shall be unconditionally  obligated to reimburse
Lender therefor, and such payment shall then be deemed to constitute a Revolving
Credit  Advance.  For  purposes  of  computing  interest  under  Section  1.5, a
Revolving  Credit Advance made in satisfaction of a Letter of Credit  Obligation
shall be deemed to have been made as of the date on which the issuer or endorser
makes the related payment under the underlying Letter of Credit.

4. In the event that any Letter of Credit  Obligations,  whether or not then due
or payable,  shall for any reason be outstanding  on the Commitment  Termination
Date,  Borrower  will  either  (a) cause the  underlying  Letter of Credit to be
returned and canceled and each  corresponding  Letter of Credit Obligation to be
terminated,  or (b) pay to Lender,  in immediately  available  funds,  an amount
equal to 105% of the maximum amount then available to be drawn under all Letters
of Credit not so returned and  canceled to be held by Lender as cash  collateral
in an account  under the  exclusive  dominion  and  control of Lender (the "Cash
Collateral Account").

5. In the  event  that  Lender  shall  incur any  Letter of Credit  Obligations,
Borrower  agrees to pay the  Letter of Credit Fee to Lender as  compensation  to
Lender for incurring such Letter of Credit  Obligations.  In addition,  Borrower
shall reimburse Lender for all fees and charges paid by Lender on account of any
such Letters of Credit or Letter of Credit Obligations to the issuing bank.

6.  Borrower's  Obligations  to Lender  with  respect to any Letter of Credit or
Letter of Credit  Obligation shall be evidenced by Lender's records and shall be
absolute,  unconditional and irrevocable and shall not be affected,  modified or
impaired  by (a) any lack of  validity  or  enforceability  of the  transactions
contemplated  by or  related  to such  Letter  of  Credit  or  Letter  of Credit
Obligation;  (b) any amendment or waiver of or consent to depart from all or any
of the terms of the  transactions  contemplated  by or related to such Letter of
Credit or Letter of Credit Obligation;  (c) the existence of any claim, set-off,
defense or other right which Borrower or any other Credit Party may have against
Lender, the issuer or beneficiary of such Letter of Credit, or any other Person,
whether in  connection  with this  Agreement,  any other Loan  Document  or such
Letter of Credit  or the  transactions  contemplated  thereby  or any  unrelated
transactions;  or (d) the fact that any draft, affidavit,  letter,  certificate,
invoice,  bill of lading  or other  document  presented  under or  delivered  in
connection  with such Letter of Credit or any other  Letter of Credit  proves to
have been  forged,  fraudulent,  invalid or  insufficient  in any respect or any
statement therein proves to have been untrue or incorrect in any respect.

                               Schedule C: Page 1

<PAGE>

7. In addition to any other  indemnity  obligations  which  Borrower may have to
Lender under this  Agreement  and without  limiting  such other  indemnification
provisions,  Borrower hereby agrees to indemnify  Lender from and to hold Lender
harmless  against any and all claims,  liabilities,  losses,  costs and expenses
(including,  attorneys'  fees and  expenses)  which  Lender may (other than as a
result of its own gross negligence or willful misconduct) incur or be subject to
as a consequence,  directly or indirectly,  of (a) the issuance of or payment of
or failure to pay under any Letter of Credit or Letter of Credit  Obligation  or
(b) any suit,  investigation or proceeding as to which Lender is or may become a
party as a consequence, directly or indirectly, of the issuance of any Letter of
Credit,  the  incurring of any Letter of Credit  Obligation or any payment of or
failure  to pay under any Letter of Credit or Letter of Credit  Obligation.  The
obligations of Borrower under this  paragraph  shall survive any  termination of
this Agreement and the payment in full of the Obligations.

8. Borrower  hereby  assumes all risks of the acts,  omissions or misuse of each
Letter  of Credit  by the  beneficiary  or issuer  thereof  and,  in  connection
therewith,  Lender shall not be responsible  (a) for the validity,  sufficiency,
genuineness  or legal effect of any document  submitted in  connection  with any
drawing  under  any  Letter of  Credit  even if it  should in fact  prove in any
respect to be invalid,  insufficient,  inaccurate, untrue, fraudulent or forged;
(b) for the validity or sufficiency of any instrument  transferring or assigning
or  purporting  to  transfer  or assign  any  Letter of Credit or any  fights or
benefits  thereunder or any proceeds  thereof,  in whole or in part,  even if it
should prove to be invalid or ineffective for any reason; (c) for the failure of
any issuer or beneficiary of any Letter of Credit to comply fully with the terms
thereof,  including the conditions  required in order to effect or pay a drawing
thereunder;   (d)  for  any  errors,  omissions,   interruptions  or  delays  in
transmission or delivery of any messages, by mail, telecopy, telex or otherwise;
(e) for any loss or delay in the  transmission  or  otherwise of any document or
draft required in order to make a drawing under any Letter of Credit; or (f) for
any consequences arising from causes beyond the direct control of Lender.

                               Schedule C: Page 2

<PAGE>

                          SCHEDULE D - CASH MANAGEMENT

Borrower agrees to establish,  and to maintain,  until the Termination Date, the
cash management system described below:

1. No  Corporate  Credit  Party:  (i)  shall  (nor  shall it  permit  any of its
Subsidiaries to) open or maintain any deposit, checking, operating or other bank
account,  or similar money handling  account,  with any bank or other  financial
institution  except for those  accounts  identified  in  Attachment I hereto (to
include a petty cash account not to exceed $5,000 during any Fiscal Month, and a
payroll  account  not to exceed an amount  equal to one  regular  payroll at any
time); and (ii) shall close or permit to be closed any of the accounts listed in
Attachment I hereto,  in each case without Lender's prior written  consent,  and
-------------------
then only after such Credit Party has  implemented  agreements with such bank or
financial institution and Lender acceptable to Lender.

2. Commencing on the Closing Date and until the Termination Date, each Corporate
Credit  Party shall cause to be  deposited  directly  all cash,  checks,  notes,
drafts  or other  similar  items  relating  to or  constituting  proceeds  of or
payments made in respect of any and all  Collateral  into lock boxes or lock box
accounts in such Credit  Party's or Lender's name  (collectively,  the "Lock Box
                                                                        --------
Accounts") set forth in paragraph 1 of Attachment I hereto.
---------                              -------------------
3. On or before the Closing  Date,  each bank at which the Lock Box Accounts are
held  shall have  entered  into  tri-party  lock box  agreements  (the "Lock Box
                                                                        --------
Account  Agreements")  with Lender and the applicable  Credit Party, in form and
--------------------
substance  substantially  similar to Exhibit K to this Agreement or as otherwise
acceptable to Lender. Each such Lock Box Account Agreement shall provide,  among
other  things,  that (a) such bank  executing  such  agreement  has no rights of
setoff or  recoupment  or any other claim  against such Lock Box Account,  other
than for payment of its service fees and other charges  directly  related to the
administration  of such  account,  and (b) such bank  agrees to sweep on a daily
basis all amounts in the Lock Box Account to the Collection Account.

4. On the Closing Date, (a) the lock box and blocked account  arrangements shall
immediately  become  operative  at the banks at which the Lock Box  Accounts are
maintained,  and (b) amounts  outstanding  under the  Revolving  Credit Loan for
purposes of the Borrowing  Availability)  shall be reduced through daily sweeps,
by wire transfer, of the Lock Box Accounts into the Collection Account. Borrower
acknowledges  that it shall have no right to gain access to any of the moneys in
the Lock Box Accounts until after the Termination Date.

5. Borrower may maintain, in its name, accounts (the "Disbursement Accounts") at
                                                      ----------------------
a bank or banks acceptable to Lender into which Lender shall, from time to time,
deposit  proceeds of Revolving  Credit Advances made pursuant to Section 1.1 for
use  solely  in  accordance  with the  provisions  of  Section  1.3.  All of the
Disbursement  Accounts  as of the  Closing  Date are  listed in  paragraph  2 of
Attachment I hereto.
------------
6. Upon the request of Lender,  each  Corporate  Credit  Party shall  forward to
Lender,  on a daily  basis,  evidence  of the  deposit  of all items of  payment
received by such Credit  Party into the Lock Box Accounts and copies of all such
checks and other items,  together with a statement  showing the  application  of
those items  relating to payments  on  Accounts to  outstanding  Accounts  and a
collection  report with regard  thereto in form and  substance  satisfactory  to
Lender.

                               Schedule D: Page 1

<PAGE>

                           ATTACHMENT I TO SCHEDULE D
                           --------------------------

LIST OF BANK ACCOUNTS

         1.      Lock Box Accounts.         Centura Bank Account No.  0700147687

         2.      Disbursement Accounts.     Centura Bank Account No.  0700147492

         3.      Petty Cash Account         (not to exceed $5,000).   None
                 ------------------

         4.      Payroll Account (not to exceed one regular payroll). None
                 ---------------

                               Schedule D: Page 2

<PAGE>

                                SCHEDULE E - FEES

1. RESERVED

2.  LETTER OF CREDIT  FEE:  For each day for which  Lender  maintains  Letter of
Credit Obligations  outstanding,  an amount equal to the amount of the Letter of
Credit Obligations  outstanding on such day,  multiplied by [n/a] %, the product
of which is then  divided by 360.  `Me Letter of Credit  Fee  incurred  for each
month is payable on the first day of each calendar  month  following the Closing
Date;  the final monthly  installment  of the Letter of Credit Fee is payable on
the Termination Date Notwithstanding the foregoing,  any unpaid Letter of Credit
Fee is immediately due and payable on the Commitment Termination Date.

3. CLOSING FEE; COLLATERAL MONITORING FEE: A closing fee of $17,500, payable and
fully earned at closing (the "Closing  Fee"),  but subject to refund pursuant to
the  terms  of the  Post-Closing  Letter.  A  fully  earned  and  non-refundable
collateral  monitoring fee of $12,000 per annum,  payable in advance on the date
that Borrower satisfies the conditions described in Section 2.1 of the Agreement
or  Lender  waives  satisfaction  of  such  conditions  in  writing  and on each
anniversary thereof.

4. PREPAYMENT FEE: For the Revolving Credit Loan, an amount equal to the Maximum
Amount multiplied by:
        3% if Lender's,  obligation to make further Revolving Credit Advances or
incur  additional  Letter of Credit  Obligations is terminated  (voluntarily  by
Borrower,  upon  Default or  otherwise)  on or after the Closing  Date and on or
before the first  anniversary  of the Closing  Date,  payable on the  Commitment
Termination Date; or
        2% if Lender's  obligation to make further  Revolving Credit Advances or
incur  additional  Letter of Credit  Obligations is terminated  (voluntarily  by
Borrower,  upon Default or otherwise) after the first anniversary of the Closing
Date and on or before the second anniversary of the Closing Date, payable on the
Commitment Termination Date.

Borrower  acknowledges  and agrees that (i) it would be difficult or impractical
to  calculate  Lender's  actual  damages  from  early  termination  of  Lender's
obligation to make further Revolving Credit Advances and incur additional Letter
of Credit  Obligations for any reason pursuant to Section 1.2(c) or Section 7.2,
(ii) the Prepayment  Fees provided above are intended to be fair-and  reasonable
approximations  of such damages,  and (iii) the Prepayment Fees are not intended
to be penalties.

5. AUDIT FEES: Borrower will reimburse Lender at the rate of $750 per person per
day, plus out of pocket expenses,  for the audit reviews, field examinations and
collateral  examinations conducted by Lender;  provided,  however, so long as no
                                               --------   -------
Event of Default  exists,  the fees and expenses  payable by Borrower under this
paragraph  5 shall not  exceed the sum of  $15,000  in the  twelve-month  period
commencing  on  the  Closing  Date  and  any  successive   twelve-month   period
thereafter.

                               Schedule E: Page 1

<PAGE>

                                   Schedule F
                              SCHEDULE OF DOCUMENTS

The  obligation  of Lender to make the initial  Revolving  Credit  Advances  and
extended other credit is subject to satisfaction of the condition precedent that
Lender shall have received the following, each, unless otherwise specified below
or the context otherwise requires, dated the Closing Date, in form and substance
satisfactory to Lender and its counsel:

PRINCIPAL LOAN DOCUMENTS

1. Agreement. The Loan and Security Agreement duly executed by Borrower(s).
   ---------
2. Note(s). Duly executed Note(s) to the order of Lender evidencing the Loan(s).
   ------
3. Borrowing Base  Certificate.  An original  Borrowing  Base  Certificate  duly
   ---------------------------
executed by a responsible officer of Borrower(s).
4. Notice of Revolving  Credit  Advance.  An origial Notice of Revolving  Credit
   ------------------------------------
Advance duly executed by a responsible officer of Borrower(s).
COLLATERAL DOCUMENTS.
1.  Acknowledgment  Copies of  Financing  Statements.  Acknowledgment  copies of
    ------------------------------------------------
proper Financing Statements (Form UCC-1) (the "Financing Statements") duly filed
under the Code in all  jurisdictions  as may be necessary  or, in the opinion of
Lender, desirable to perfect Lender's Lien on the Collateral.
2.  UCC  Searches.   Certified  copies  of  UCC  Searches,   or  other  evidence
    -------------
satisfactory to Lender,  listing all effective  financing  statements which name
Borrower(s)  (under  present  name,  any  previous  name or any  trade  or doing
business name) as debtor and covering all jurisdictions referred to in paragraph
(1) immediately above, together with copies of such other financing statements.
3.  Intellectual  Property  Documents.  Agreements  relating to the  granting to
    ---------------------------------
Lender of a security  interest in  Intellectual  Property of  Borrower(s) to the
extent  applicable  in a form suitable for filing with the  appropriate  Federal
filing office.
4.  Other  Recordings  and  Filings.  Evidence  of the  completion  of all other
    -------------------------------
recordings and filings  (including UCC-3  termination  statements and other Lien
release  documentation)  as may be  necessary  or, in the  opinion of and at the
request of Lender,  desirable to perfect  Lender's  Lien on the  Collateral  and
ensure such Collateral is free and clear of other Liens
5. Power of  Attorney.  Powers of Attorney  duly  executed by each Credit  Party
   ------------------
executing the Agreement.
THIRD PARTY AGREEMENTS.
1. Landlord, Warehouseman/Bailee and Mortgagee Consents. Unless otherwise agreed
   ----------------------------------------------------
to in  writing  by  Lender,  duly  executed  landlord,  warehouseman/bailee  and
mortgagee  waivers and consents  from the  landlords  and  mortgagees  of all of
(each)  Borrower's  leased or owned locations where  Collateral is held, in each
case, in form and substance satisfactory to Lender.
2. Cash  Management  System.  Duly executed Lock Box Account  Agreements and, if
   ----------------
required by Lender,  pledged account  agreements in respect of the  Disbursement
Accounts as contemplated by Schedule D.
3. Salix Ltd. Subordination  Agreement.  The Salix Ltd. Subordination  Agreement
   -----------------------------------
duly executed by Salix Ltd. and Lender and acknowledged by Borrower.
OTHER DOCUMENTS.
1. Secretary  Certificate.  A Secretary  Certificate in the form of Exhibit H to
   ----------------------
the Agreement  duly completed and executed by the Secretary of each Credit Party
executing the Agreement, together with all attachments thereto.
2. Environmental Audit. Copies of all existing  environmental reviews and audits
   -------------------
and other  information  pertaining to actual or potential  environmental  claims
relating to the Collateral and Borrower(s), as Lender may require.
3. Financial Statements and Projections.  Copies of the Financial Statements and
   ------------------------------------
Projections,  which Projections shall include a capital  expenditures budget for
Borrower(s) in form and substance satisfactory to Lender.
4.  Insurance  Policies.  Certified  copies of insurance  policies  described in
    -------------------
Section 3.16,  together with evidence showing loss payable or additional insured
clauses or endorsements in favor of Lender.
5. Existing Lease  Agreements.  Copies of any existing real property  leases and
   --------------------------
equipment  leases to which (each)  Borrower is a party and any other document or
instrument  evidencing  or  relating to existing  Indebtedness  of  Borrower(s),
together with all certificates,  opinions,  instruments,  security documents and
other documents relating thereto, all of which shall be satisfactory in form and
substance to Lender,  certified by an authorized officer of Borrower(s) as true,
correct and complete copies thereof

                               Schedule F: Page 1

<PAGE>

                                   Schedule G

                               FINANCIAL COVENANTS

1. Fixed Charge Coverage Ratio. Salix Ltd.,  Borrower and the other Subsidiaries
   ---------------------------
of Salix Ltd.  shall  maintain a Fixed Charge  Coverage  Ratio on a consolidated
basis of not less than 1.5:1 for each Fiscal Quarter  commencing with the Fiscal
Quarter ending December 31, 2001.

2. Net Income (Loss).  Salix Ltd.,  Borrower and the other Subsidiaries of Salix
   -----------------
Ltd. shall achieve Net Income (Loss) on a consolidated basis of no I t less than
the amount shown below for the period corresponding thereto:

                           Period                             Net Income (Loss)
                           ------                             -----------------
                           Each Fiscal Quarter                ($4,500,000)
                           ending March 31, 2001
                           and June 30, 2001

                           Fiscal Quarter                     ($500,000)
                           ending September 30, 2001

As used in this Agreement  (including  this Schedule G covenant),  the following
terms shall have the following meanings:

"EBITDA"  shall  mean,  for any  period,  the Net Income  (Loss) of Salix  Ltd.,
 ------
Borrower and the other  Subsidiaries  of Salix Ltd. on a consolidated  basis for
such period, plus interest expense,  income tax expense,  amortization  expense,
depreciation  expense and extraordinary losses and minus extraordinary gains, in
each case, of Salix Ltd., Borrower and the other Subsidiaries of Salix Ltd. on a
consolidated  basis for such period  determined in  accordance  with GAAP to the
extent included in the determination of such Net Income (Loss).

"Fixed  Charge  Coverage  Ratio"  shall mean,  for any period,  the ratio of the
 ------------------------------
following for Salix Ltd., Borrower and the other Subsidiaries of Salix Ltd. on a
consolidated  basis  determined  in accordance  with GAAP:  (a) EBIT7DA for such
period less Capital  Expenditures for such period which are not financed through
the incurrence of any Indebtedness  (excluding the Revolving Credit Loan) to (b)
the sum of (i) interest  expense paid or accrued in respect of any  Indebtedness
during such period,  plus (ii) taxes to the extent accrued or otherwise  payable
                     ----
with respect to such period plus (iii) regularly scheduled payments of principal
                            ----
paid or that were  required to be paid on Funded Debt  (excluding  the Revolving
Credit Loan) during such period.

"Funded  Debt" shall mean,  for any Person,  all of such  Person's  Indebtedness
 ------------
which by the terms of the  agreement  governing or  instrument  evidencing  such
Indebtedness  matures  more than one year from,  or is  directly  or  indirectly
renewable or extendible at the option of such Person under a revolving credit or
similar  agreement  obligating  the lender or lenders  to extend  credit  over a
period of more  than one year  from,  the date of  creation  thereof,  including
current  maturities of long-term  debt,  revolving  credit,  and short-term debt
extendible beyond one year at the option of such Person.

"Net Income  (Loss)" shall mean with  respect to any Person and for any period,
 ------------------
the  aggregate  net income (or loss) after taxes of such Person for such period,
determined in accordance with GAAP.

2. Minimum Tangible Net Worth.  Salix Ltd.,  Borrower and the other Subsidiaries
   --------------------
of Salix Ltd. shall maintain Tangible Net Worth of Borrower and its Subsidiaries
on a  consolidated  basis of not less than the amount  shown below at the end of
the period corresponding thereto:

                                                     Minimum Tangible
                           Period                      Net Worth
                           ------                      ---------

                   Fiscal Quarter ending             $7,000,000
                   March 31, 2001

                               Schedule G: Page 1

<PAGE>

                                                     Minimum Tangible
                           Period                      Net Worth
                           ------                      ---------

                   Fiscal Quarters ending            $5,000,000
                   June 30, 2001 and
                   September 30, 2001

                   Fiscal Quarter ending             $7,000,000
                   December 31, 2001 and
                   each Fiscal Quarter
                   thereafter

For purpose of this covenant,  in Schedule G the following  terms shall have the
meanings set forth below:

"Tangible Net Worth" shall mean,  with respect to any Person,  at any date,  the
 ------------------
total assets (excluding any assets  attributable to any issuances by such Person
of any Stock after the Closing Date and excluding any  intangible  assets) minus
the total  liabilities,  in each case, of such Person at such date determined in
accordance with GAAP.

3. Capital  Expenditures.  Salix Ltd.,  Borrower and the other  Subsidiaries  of
   ---------------------
Salix  Ltd.  on  a  consolidated   basis  shall  not  make   aggregate   Capital
Expenditures, other than Capital Expenditures financed through the incurrence of
Indebtedness (excluding the Revolving Credit Loan), in any Fiscal Year in excess
of the amount shown below for the period corresponding thereto:

                           Period                    Capital Expenditures
                           ------                    --------------------

                           Fiscal Year ending        $750,000
                           December 31, 2001

                           Fiscal Year ending        $600,000
                           December 31, 2002

                           Fiscal Year ending        $500,000
                           December 31, 2002

                               Schedule G: Page 2

<PAGE>

                               FIRST AMENDMENT TO
                           LOAN AND SECURITY AGREEMENT
                           --------------------------

        THIS FIRST AMENDMENT TO LOAN AND SECURITY  AGREEMENT (the  "Amendment"),
dated as of this 4th day of October, 2001, is made by and between

        SALIX PHARMACEUTICALS,  INC., a California corporation (the "Borrower");
and

        GENERAL  ELECTRIC  CAPITAL  CORPORATION,  a New  York  corporation  (the
"Lender"),

        to the Loan and  Security  Agreement,  dated  as of March  30,  2001 (as
amended,  modified,  restated  or  supplemented  from  time to time,  the  "Loan
Agreement"),  between the Lender and the Borrower.  All  capitalized  terms used
herein without  definition shall have the meanings ascribed to such terms in the
Loan Agreement.

                                    RECITALS

        A. Pursuant to the Loan  Agreement,  the Lender has agreed to make loans
and extend credit to the Borrower in the amounts,  upon the terms and subject to
the conditions contained therein.

        B. The Lender and the Borrower  have agreed to amend the Loan  Agreement
as set forth in this Amendment.

                             STATEMENT OF AGREEMENT

        NOW, THEREFORE,  in consideration of the premises and for other good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
expressly acknowledged, the Borrower and the Lender hereby agree as follows:

                                    ARTICLE I

                          AMENDMENTS TO LOAN AGREEMENT

        The Loan Agreement is hereby amended as follows:

        1.1 Interest. Section 1.5(e) is amended by adding the following sentence
            --------
to the end thereof.

             "If  Borrowing  Availability  is not  sufficient  in any  month for
        Lender to make a Loan to Borrower for the purpose of paying  interest as
        required by this Section 1.5(e),  Lender shall so notify  Borrower,  and
        Borrower  shall pay  Lender the sum of $6,000 by wire  transfer  to such
        account as  directed  by Lender by no later than the next  Business  Day
        after receipt of such notification."

<PAGE>

                                   ARTICLE II

                         REPRESENTATIONS AND WARRANTIES

        The Borrower hereby represents and warrants to the Lender that:

        2.1  Compliance  With the Loan  Agreement.  As of the  execution of this
             ------------------------------------
Amendment,  the Borrower is in compliance  with all of the terms and  provisions
set forth in the Loan  Agreement and the other Loan  Documents to be observed or
performed by the Borrower.

        2.2   Representations  in  Loan  Agreement.   The   representations  and
              ------------------------------------
warranties  of the Borrower set forth in the Loan  Agreement  and the other Loan
Documents  are true and correct in all  material  respects  except to the extent
that such  representations  and warranties  relate solely to or are specifically
expressed as of a  particular  date or period which is past or expired as of the
date hereof.

        2.3   No Event of Default. No Default or Event of Default exists.
              -------------------

                                   ARTICLE III

                                     GENERAL

        3.1 Full  Force  and  Effect.  As  expressly  amended  hereby,  the Loan
            ------------------------
Agreement and the other Loan  Documents  shall continue in full force and effect
in accordance with the provisions thereof. As used in the Loan Agreement and the
other Loan Documents,  "hereinafter",  "hereto",  "hereof",  or words of similar
import, shall, unless the context otherwise requires, mean the Loan Agreement or
the other Loan Documents, as the case may be, as amended by this Amendment.

        3.2 Applicable Law. This Amendment shall be governed by and construed in
            --------------
accordance  with the internal laws and judicial  decisions of the State of North
Carolina.

        3.3  Counterparts.  This  Amendment  may be  executed  in  one  or  more
             ------------
counterparts,  each of which shall constitute an original, but all of which when
taken together shall constitute but one and the same instrument.

        3.4 Further  Assurances.  The Borrower  shall execute and deliver to the
            -------------------
Lender such  documents,  certificates  and opinions as the Lender may reasonably
request to effect the amendments contemplated by this Amendment.

        3.5  Headings.  The  headings of this  Amendment  are for the purpose of
             --------
reference only and shall not effect the construction of this Amendment.

        3.6 Expenses.  The Borrower shall  reimburse the Lender for the Lender's
            --------
legal fees and expenses  (whether  in-house or outside)  incurred in  connection
with the preparation,  negotiation, execution and delivery of this Amendment and
all other agreements and documents contemplated hereby.

                                       2

<PAGE>

        3.7 Waiver of Jury Trial. TO THE FULLEST EXTENT  PERMITTED BY APPLICABLE
            --------------------
LAW,  THE  BORROWER AND THE LENDER EACH WAIVES THE RIGHT TO TRIAL BY JURY IN ANY
ACTION,  SUIT,  PROCEEDING OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED
TO THIS  AMENDMENT,  THE LOAN  AGREEMENT  OR THE  OTHER  LOAN  DOCUMENTS  OR THE
TRANSACTIONS RELATED HERETO OR THERETO.

        IN WITNESS WHEREOF,  the parties hereto have caused this Amendment to be
executed and delivered by their duly authorized  officers to be effective on the
day and year first above written.

                             BORROWER:

                             SALIX PHARMACEUTICALS, INC.

                             By:      /s/ Adam C. Derbyshire
                                -----------------------------------------------
                             Title:   Vice President and Chief Financial Officer
                                   --------------------------------------------

                             LENDER:

                             GENERAL ELECTRIC CAPITAL

                             CORPORATION

                             By:      /s/ Malcolm Ferguson
                                -----------------------------------------------
                             Title:   Vice President
                                   --------------------------------------------

                                       3

<PAGE>

                 FIRST WAIVER TO THE LOAN AND SECURITY AGREEMENT
                 -----------------------------------------------

This First Waiver dated as of November 12, 2001 (this  "Waiver") to the Loan and
Security  Agreement,  between GENERAL ELECTRIC CAPITAL  CORPORATION,  a Delaware
corporation ("Lender") and SALIX PHARMACEUTICALS, INC., a California corporation
("Borrower").

                                   WITNESSETH:
                                   -----------

WHEREAS,  Borrower  and Lender are  parties to that  certain  Loan and  Security
Agreement, dated as of March 30, 2001 (as it may be amended, restated,  modified
or  supplemented  from time to time,  the "Loan  Agreement")  under which Lender
agreed to make certain loans and extensions of credit to Borrower; and

WHEREAS,  Borrower has requested  that Lender waive certain  Event(s) of Default
under Loan Agreement, as more fully set forth herein, and Lender is agreeable to
such request only on the terms and conditions set forth herein;

NOW, THEREFORE,  in consideration of the premises,  the covenants and agreements
contained herein, and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged,  the parties do hereby agree that all
capitalized  terms used herein shall have the meanings  ascribed  thereto in the
Loan Agreement and do hereby further agree as follows:

                               STATEMENT OF TERMS
                               ------------------

        1. Waiver of Default.  Lender hereby waives the Event of Default arising
           -----------------
solely out of  Borrower's  failure to meet the  maximum  loss  covenant  for the
quarter ending  September 2001, set at $500,000 vs. actual results of $5,056,000
in the period.

        2.  Representations and Warranties.  To induce Lender to enter into this
            ------------------------------
Waiver,  each Credit Party hereto hereby  warrants,  represents and covenants to
Lender that:  (a) each  representation  and  warranty of the Credit  Parties set
forth in the Loan  Agreement  is  hereby  restated  and  reaffirmed  as true and
correct on and as of the date hereof  after  giving  affect to this Waiver as if
such  representation  or warranty were made on and as of the date hereof (except
to the extent that any such  representation  or warranty  expressly relates to a
prior  specific  date or period in which case it is true and  correct as of such
prior date or period),  and no Default or Event of Default has  occurred  and is
continuing as of this date under the Loan Agreement  after giving effect to this
Waiver; and (b) each Credit Party hereto has the power and is duly authorized to
enter into, deliver and perform this Waiver, and this Waiver is the legal, valid
and binding obligation of such Credit Party enforceable against it in accordance
with its terms.

        3.  Conditions   Precedent  to   Effectiveness   of  this  Waiver.   The
            -------------------------------------------------------------
effectiveness  of this  Waiver is subject to the  fulfillment  of the  following
conditions precedent:

<PAGE>

        (a) Lender shall have received one or more  counterparts  of this Waiver
duly executed and delivered by the Credit Parties hereto;

        (b) Any and all  Guarantors of the  Obligations  shall have consented to
the  execution,  delivery  and  performance  of  this  Waiver  and  all  of  the
transactions  contemplated  hereby by signing one or more  counterparts  of this
Waiver in the  appropriate  space  indicated below and returning same to Lender;
and

        (c)  Lender   shall  have   received  a  Waiver  Fee  of  $2,500  and  a
Documentation Fee of $500.

        4.  Continuing  Effect of Loan Agreement.  Except as expressly  modified
            ------------------------------------
hereby, the provisions of the Loan Agreement,  and the Liens granted thereunder,
are and shall  remain in full force and effect and this Waiver  shall be limited
precisely  as drafted and shall not  constitute a waiver of any Event of Default
or a modification  of any terms and conditions of the Loan Agreement  other than
as expressly  set forth  herein.  The granting of the Waiver shall not impose or
imply  an  obligation  on  Lender  to  grant a  waiver  on any  future  occasion
(including without limitation any future waiver of the maximum loss covenant).

        5.  Counterparts.  This Waiver may be executed in multiple  counterparts
            ------------
each of which  shall be deemed to be an  original  and all of which  when  taken
together shall constitute one and the same instrument.

        6.  Governing  Law.  THIS WAIVER SHALL BE GOVERNED BY, AND  CONSTRUED IN
            --------------
ACCORDANCE  WITH,  THE  INTERNAL  LAWS OF THE  STATE OF NEW YORK  APPLICABLE  TO
CONTRACTS  MADE AND  PERFORMED IN SUCH STATE  WITHOUT  REGARD TO THE  PRINCIPLES
THEREOF REGARDING CONFLICT OF LAWS.

                                       2

<PAGE>

        IN WITNESS  WHEREOF,  the  parties  hereto have caused this Waiver to be
duly executed and delivered as of the day and year first specified above.

                             SALIX PHARMACEUTICALS, INC.

                             By:      /s/ Adam C. Derbyshire
                                -----------------------------------
                             Name:    Adam C. Derbyshire
                             Title:   Chief Financial Officer

                             GENERAL ELECTRIC CAPITAL CORP.

                             By:      /s/ Malcolm Ferguson
                                --------------------------------------------
                             Name:    Malcolm Ferguson
                             Title:   Duly Authorized Signatory

                                       3Exhibit 10.1

                               AMENDMENT NO. 2 TO
                                RIGHTS AGREEMENT

            This AMENDMENT NO. 2 RIGHTS AGREEMENT (the "Amendment") is made as
of December 12, 2001 between Alexion Pharmaceuticals, Inc., a Delaware
corporation (the "Company"), and Continental Stock Transfer & Trust Company, a
New York corporation (the "Rights Agent").

            WHEREAS, on February 14, 1997, the Board of Directors of the Company
declared a dividend of one preferred stock purchase right ("Right") for each
share of Common Stock, par value $.0001 per share, of the Company outstanding at
the close of business on March 6, 1997; and

            WHEREAS, each Right entitles the registered holder thereof to
purchase from the Company one one-hundreth (1/100 th) of a share of Junior
Participating Cumulative Preferred Stock, par value $1.00 per share, of the
Company or, in certain circumstances, either Common Stock of the Company or
common stock of an acquiring company at one-half the market price of the Common
Stock of the Company; and

            WHEREAS, the description and terms of the Rights are set forth in a
Rights Agreement (the "Rights Agreement") between the Company and the Rights
Agent; and

            WHEREAS, the expiration date of the exercise of the Rights is set
forth in the Rights Agreement; and

            WHEREAS, the Company desires to amend the Rights Agreement in order
to clarify, the actual date that is the Expiration Date; and

            WHEREAS, the Expiration Date referred to in the Rights Agreement has
not occurred;

            NOW, THEREFORE, in consideration of the premises and the agreements
set forth herein, the parties hereby agree as follows:
<PAGE>

      1. Expiration Date. Section 7(a) of the Agreement is hereby amended in its
entirety to read as follows:

      "(a) Subject to Section 7(e) hereof, the registered holder of any Right
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
and certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office of Rights Agent in New York, New York, together with
payment of the Purchase Price for each one one-hundredth of a share of Preferred
Stock as to which the Rights are exercised, at or prior to the earliest of (i)
Close of Business on March 6, 2007 (the "Final Expiration Date"), (ii) the time
at which the Rights are redeemed as provided in Section 23, (iii) the time at
which the Rights are exchanged as provided in Section 23A, or (iv) the time at
which the Rights expire pursuant to Section 13(d) (such earliest time being
herein referred to as the "Expiration Date")."

      2. Exhibit B. Exhibit B to the Rights Agreement is hereby amended and
restated in its entirety to read as set forth on Exhibit B attached hereto.

      3. Exhibit C. Exhibit C to the Rights Agreement is hereby amended and
restated in its entirety to read as set forth on Exhibit C attached hereto.

      4. No Further Amendment. Except as expressly amended by this Amendment No.
2, the Rights Agreement shall remain in full force and effect as the same was in
effect immediately prior to the date of this Amendment No. 2.

      5. Counterparts. This Amendment may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
<PAGE>

      IN WITNESS WHEREOF, the undersigned have duly executed this Amendment as
of the date first above written.

ATTEST:                                 ALEXION PHARMACEUTICALS, INC.

By: /s/ David Keiser                    By: /s/ Leonard Bell
   -----------------------------            ------------------------------------
  Name: David Keiser                        Name: Leonard Bell
  Title: Chief Financial Officer            Title: President

ATTEST:                                 CONTINENTAL STOCK TRANSFER &
                                        TRUST COMPANY

By: /s/ Thomas Jennings                 By:   /s/ William F. Seegraber
   -----------------------------            ------------------------------------
   Name: Thomas Jennings                    Name: William F. Seegraber
   Title: Asst. Secretary                   Title: Vice President
<PAGE>

                                                                       EXHIBIT B

                           [Form of Right Certificate]

Certificate No. R-                                              _________ Rights

            NOT EXERCISABLE AFTER MARCH 6, 2007 OR EARLIER IF NOTICE
            OF REDEMPTION IS GIVEN. THE RIGHTS ARE SUBJECT TO
            REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.01 PER
            RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
            [THE RIGHTS REPRESENTED BY THIS CERTIFICATE WERE ISSUED
            TO A PERSON WHO WAS AN ACQUIRING PERSON OR AN ASSOCIATE
            OR AFFILIATE THEREOF (AS SUCH TERMS ARE DEFINED IN THE
            RIGHTS AGREEMENT). THIS RIGHT CERTIFICATE AND THE RIGHTS
            REPRESENTED HEREBY MAY BECOME NULL AND VOID AS PROVIDED
            IN SECTION 7(e) OF THE RIGHTS AGREEMENT.]*

                                Right Certificate

                          ALEXION PHARMACEUTICALS, INC.

            This certifies that _________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement dated as of February 14, 1997 (the "Rights Agreement") between Alexion
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), and Continental
Stock Transfer & Trust Company, a New York corporation (the "Rights Agent"), to
purchase from the Company at any time after the Distribution Date (as such term
is defined in the Rights Agreement) and prior to 5:00 P.M. (New York City time)
on March 6, 2007, at the principal office of the Rights Agent, or its successors
as Rights Agent, in New York, New York, one

----------
      *The portion of the legend in brackets shall be inserted only if
applicable.
<PAGE>

one-hundredth of a share of Junior Participating Cumulative Preferred Stock, par
value $1.00 per share (the "Preferred Stock"), of the Company, at a purchase
price of $725.00 per share the "Purchase Price") in cash, or by certified bank
check or money order payable to the order of the Company, upon presentation and
surrender of this Right Certificate with the Form of Election to Purchase duly
executed. The number of Rights evidenced by this Right Certificate (and the
number of shares which may be purchased upon exercise thereof) set forth above,
and the Purchase Price per share set forth above, are the number and Purchase
Price as of March 6, 1997 based on the shares of Preferred Stock of the Company
as constituted at such date.

            As provided in the Rights Agreement, the Purchase Price and the
number of one one-hundredths of a share of Preferred Stock or other securities
which may be purchased upon the exercise of the Rights evidenced by this Right
Certificate are subject to modification and adjustment upon the happening of
certain events.

            This Right Certificate is subject to all of the terms, provisions
and conditions of the Rights Agreement, which terms, provisions and conditions
are hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of Alexion
Pharmaceuticals, Inc. and the above-mentioned office of the Rights Agent.

            This Right Certificate, with or without other Right Certificates,
upon surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Rights Certificates of like tenor and date
evidencing Rights entitling the holder to purchase a like aggregate number of
one one-hundredths of a share of Preferred Stock as the Rights evidenced by the
Right

                                       2
<PAGE>

Certificate or Right Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right Certificate or Right
Certificates for the number of whole Rights not exercised.

            Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may be redeemed by the company at its option at a
redemption price of $.01 per Right. Subject to the provisions of the Rights
Agreement, the Rights evidenced by this Rights Certificate may be exchanged by
the Company in whole or in part for Common Stock of the Company under certain
circumstances.

            No fractional shares of Common Stock will be issued upon the
exercise of any Right or Rights evidenced hereby, but in lieu thereof a cash
payment will be made, as provided in the Rights Agreement.

            No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of Common Stock or of
any other securities of the Company which may at the time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by this Right Certificate shall have been
exercised as provided in the Rights Agreement.

            This Right Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.

                                       3
<PAGE>

                   [Form of Reverse Side of Right Certificate]

                               FORM OF ASSIGNMENT

(To be executed by the registered holder if such holder desires to transfer the
Right Certificate.)

            FOR VALUE RECEIVED ________________ hereby sells, assigns and
transfers unto ________________________________

                  (Please print name and address of transferee)

this Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint ________________ Attorney, to
transfer the within Right Certificate on the books of the within named Company,
with full power of substitution.

 Dated: __________, __

                                        ________________________________________
                                        Signature

Signatures Guaranteed:

            The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).

                                        ________________________________________
                                        Signature

                                       4
<PAGE>

                                     NOTICE

            The signature to the foregoing Assignment must correspond to the
name as written upon the face of this Right Certificate in every particular,
without alteration or enlargement or any change whatsoever.

                                       5
<PAGE>

                          FORM OF ELECTION TO PURCHASE

                      (To be executed if holder desires to
                        exercise the Right Certificate.)

To Alexion Pharmaceuticals, Inc.:

            The undersigned hereby irrevocably elects to exercise
__________________ Rights represented by this Right Certificate to purchase the
shares of Preferred Stock issuable upon the exercise of such Rights and requests
that certificates for such shares be issued in the name of:

Please insert social security
or other identifying number

__________________________________
   (Please print name and address)

__________________________________

If such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:

Please insert social security
or other identifying number

__________________________________
   (Please print name and address)

__________________________________

Dated: ______________, __

                                       6
<PAGE>

                   [Form of Election to Purchase -- continued]

                                        ________________________________________
                                        Signature

                                        (Signature must conform in all respects
                                        to name of holder as specified on the
                                        face of this Right Certificate.)

Signature Guaranteed:

_________________________________
 (To be completed if applicable)

The undersigned hereby certifies that the Rights evidenced by this Right
Certificate are not beneficially owned by an Acquiring Person or an Affiliate or
Associate thereof (as defined in the Rights Agreement).

                                        ________________________________________
                                        Signature

_________________________________

                                     NOTICE

            In the event the certification set forth above in the Forms of
Assignment and Election is not completed, the Company will deem the beneficial
owner of the Rights evidenced by this Right Certificate to be an Acquiring
Person or an Affiliate or Associate thereof (as defined in the Rights Agreement)
and, in the case of an Assignment, will affix a legend to that effect on any
Right Certificates issued in exchange for this Rights Certificate.

                                       7
<PAGE>

                                                                       EXHIBIT C

                          ALEXION PHARMACEUTICALS, INC.
                          SUMMARY OF RIGHTS TO PURCHASE
                                 PREFERRED STOCK

            On February 14, 1997, the Board of Directors of Alexion
Pharmaceuticals, Inc. (the "Company") declared a dividend distribution of one
preferred stock purchase right (a "Right") for each outstanding share of Common
Stock, par value $.0001 per share (the "Common Stock"), of the Company. The
distribution is payable on March 6, 1997 to the stockholders of record on March
6, 1997. Each Right entitles the registered holder to purchase from the Company
one one-hundredth of a share of Junior Participating Cumulative Preferred Stock,
par value $1.00 per share ("Preferred Stock") at a price of $725.00 per one
one-hundredth of a share (the "Purchase Price"), subject to adjustment. The
description and terms of the Rights are set forth in a Rights Agreement (the
"Rights Agreement") between the Company and Continental Stock Transfer & Trust
Company, as Rights Agent (the "Rights Agent").

            Until the earlier to occur of (i) ten business days following the
time (the "Stock Acquisition Date") of a public announcement or notice to the
Company that a person or group of affiliated or associated persons has acquired
beneficial ownership (as defined in the Rights Agreement) of 20% or more of the
outstanding shares of Common Stock of the Company (such 20% beneficial owner, an
"Acquiring Person"), or (ii) ten business days, or such later date as may be
determined by the Board of Directors of the Company, after the date of the
commencement or announcement by a person of an intention to make a tender offer
or exchange offer for an amount of Common Stock which, together with the shares
of such stock already owned by such person, constitutes 20% or more of the
outstanding shares of such Common Stock (the earlier of such dates
<PAGE>

being called the "Distribution Date"), the Rights will be evidenced, with
respect to any of the Company's Common Stock certificates outstanding as of
March 6, 1997, by such Common Stock certificate with a copy of this Summary of
Rights attached thereto. The Rights Agreement provides that, until the
Distribution Date, the Rights will be transferred with and only with the
Company's Common Stock. Until the Distribution Date (or earlier redemption or
expiration of the Rights), new Common Stock certificates issued after March 6,
1997, upon transfer or new issuance of the Company's Common Stock, will contain
a notation incorporating the Rights Agreement by reference. Until the
Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any of the Company's Common Stock certificates
outstanding as of March 6, 1997, even without a copy of this Summary of Rights
attached thereto, will also constitute the transfer of the Rights associated
with the shares of Common Stock represented by such certificate. As soon as
practicable following the Distribution Date, separate certificates evidencing
the Rights ("Right Certificates") will be mailed to holders of record of the
Company's Common Stock as of the close of business on the Distribution Date and
such separate Right Certificates alone will evidence the Rights.

      The Rights are not exercisable until the Distribution Date. The Rights
will expire on March 6, 2007, unless earlier redeemed by the Company as
described below.

      The Purchase Price payable, and the number of shares of Preferred Stock or
other securities or property issuable upon exercise of the Rights, are subject
to adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of the Preferred
Stock, (ii) upon the fixing of a record date for the issuance to holders of
Preferred Stock of certain rights, options or warrants to subscribe for shares
of Preferred Stock

                                       2
<PAGE>

or convertible securities at less than the current market price of shares of
Preferred Stock or (iii) upon the fixing of a record date for the making of a
distribution to holders of shares of Preferred Stock of evidences of
indebtedness or assets (excluding regular periodic cash dividends not exceeding
125% of the last regular periodic cash dividend or dividends payable in shares
of Preferred Stock) or of subscription rights or warrants (other than those
referred to above). The number of Rights and number of shares of Preferred Stock
issuable upon the exercise of each Right are also subject to adjustment in the
event of a stock split, combination or stock dividend on the Common Stock prior
to the Distribution Date.

            In the event that after the Stock Acquisition Date the Company is
acquired in a merger or other business combination transaction or 50% or more of
its assets, cash flow or earning power are sold or otherwise transferred, proper
provision shall be made so that each holder of a Right shall thereafter have the
right to receive, upon the exercise thereof at the then current exercise price
of the Right, that number of shares of common stock of the acquiring company
which at the time of such transaction would have a market value (as defined in
the Rights Agreement) of two times the exercise price of the Right. In the event
that the Company were the surviving corporation of a merger and its Common Stock
were changed or exchanged, proper provision shall be made so that each holder of
a Right will thereafter have the right to receive upon exercise that number of
shares of common stock of the other party to the transaction having a market
value of two times the exercise price of the Right.

            In the event that a person or group becomes an Acquiring Person
(otherwise than pursuant to a tender offer or exchange offer for all outstanding
shares of Common Stock at a price and on terms which are determined to be fair
and in the best interests of the Company and its

                                       3
<PAGE>

stockholders by a majority of the members of the Board of Directors of the
Company who are not Acquiring Persons or representatives or nominees of or
affiliated or associated with an Acquiring Person), proper provision shall be
made so that each holder of a Right, other than Rights that were beneficially
owned by the Acquiring Person, which will thereafter be void, will thereafter
have the right to receive upon exercise that number of shares of Common Stock
having a market value (as defined in the Rights Agreement) of two times the
exercise price of the Right. A person or group will not be deemed to be an
Acquiring Person if the Board of Directors of the Company determines that such
person or group became an Acquiring Person inadvertently and such person or
group promptly divests itself of a sufficient number of shares of Common Stock
so that such person or group is no longer an Acquiring Person.

            With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional shares of Common Stock will be issued and, in
lieu thereof, an adjustment in cash will be made based on the market value of
shares of Common Stock on the last trading date prior to the date of exercise.

            At any time prior to the earlier of (i) ten business days after the
Stock Acquisition Date and (ii) March 6, 2007, the Company, by resolution of its
Board of Directors, may redeem the Rights in whole, but not in part, at a price
of $0.01 per Right (the "Redemption Price"). If such resolution is adopted
following the Stock Acquisition Date, it will be effective only with the
concurrence of a majority of the members (the "Continuing Directors") of the
Board of Directors of the Company who are not Acquiring Persons or
representatives or nominees of or affiliated or associated with an Acquiring
Person and who either were members of such Board of Directors prior

                                       4
<PAGE>

to the Stock Acquisition Date or subsequently became a member and whose election
thereto was approved by a majority of the directors who were not Acquiring
Persons or representatives or nominees of or affiliated or associated with an
Acquiring Person. The Company may, at any time prior to the Stock Acquisition
Date, extend the time in which the Rights may be redeemed. Immediately upon the
action of the Board of Directors of the Company electing to redeem the Rights,
the right to exercise the Rights will terminate and the only right of the
holders of Rights will be to receive the Redemption Price.

            At any time after a person becomes an Acquiring Person and prior to
the acquisition by such person of 50% or more of the outstanding Common Stock of
the Company, the Board of Directors of the Company, with the concurrence of a
majority of the Continuing Directors, may exchange the Rights (other than Rights
beneficially owned by such person which have become void), in whole or in part,
for Common Stock of the Company at an exchange ratio of one share of Common
Stock per Right (subject to adjustment).

            Each share of Preferred Stock purchasable upon exercise of the
Rights will have a minimum preferential dividend of $10.00 per year, but will be
entitled to receive, in the aggregate, a dividend of 100 times the dividend
declared on a share of Common Stock. In the event of liquidation, the holders of
the shares of Preferred Stock will be entitled to receive a minimum liquidation
payment of $100.00 per share, but will be entitled to receive an aggregate
liquidation payment equal to 100 times the payment to be made per share of
Common Stock. Each share of Preferred Stock will have 100 votes, voting together
with the shares of Common Stock. In addition, if dividends on the Preferred
Stock are in arrears for four consecutive quarterly payment periods, the holders
of the Preferred Stock will have the right, voting as a class, to elect two
members of the

                                       5
<PAGE>

Board of Directors. In the event of any merger, consolidation or other
transaction in which shares of Common Stock are exchanged, each share of
Preferred Stock will be entitle to receive 100 times the amount and type of
consideration received per share of Common Stock. The rights of the shares of
Preferred Stock as to dividends and liquidation and in the event of mergers and
consolidations, are protected by antidilution provisions.

      Until a Right is exercised, the holder thereof as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.

      The Rights and the Rights Agreement can be amended by the Board of
Directors of the Company in any respect (including, without limitation, any
extension of the period in which the Rights may be redeemed) at any time prior
to the Stock Acquisition Date. From and after such a time, without the approval
of the stockholders of the Company or the holders of the Rights, the Board of
Directors may only supplement or amend the Rights Agreement in order (i) to cure
any ambiguity, (ii) to correct or supplement any provision contained in the
Rights Agreement which may be defective or inconsistent with any other provision
in the Rights Agreement, (iii) to shorten or lengthen any time period under the
Rights Agreement, or (iv) to make any changes or supplements which the Company
and the Rights Agent may deem necessary or desirable which shall not adversely
affect the interests of the holders of Right Certificates (other than an
Acquiring Person or an affiliate or associate thereof). The Company may, at any
time prior to the Stock Acquisition Date, amend the Rights Agreement to lower
the threshold of Common Stock beneficial ownership at which a person will become
an Acquiring Person to not less than the greater of (i) a percentage larger than
the largest percentage of Common Stock then known by the Company to be
beneficially owned by a person and (ii) 10%.

                                       6
<PAGE>

            A copy of the Rights Agreement has been filed with the Securities
and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A
dated February 14, 1997. A copy of the Rights Agreement is available free charge
from the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
which is hereby incorporated herein by reference.

                                       7

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