LOAN AGREEMENT

LOAN AGREEMENT

THIS LOAN AGREEMENT (the “ Loan Agreement ”), dated as of February 27, 2009, is made by and among CARACO PHARMACEUTICAL LABORATORIES, LTD. , a Michigan corporation, with an address at 1150 Elijah McCoy Drive, Detroit, Michigan 48202 (“ Borrower ”), and RBS CITIZENS , N.A. , a national association, d/b/a Charter One, with an address of 27777 Franklin Road, Suite 1900, Southfield, Michigan 48034 (together with its successors and assigns, “ Bank ”).

W I T N E S S E T H :

WHEREAS, Borrower desires to obtain certain loans in the amounts and purposes set forth herein; and

WHEREAS, Bank is willing to make such loans available to Borrower upon the terms and conditions set forth herein.

NOW, THEREFORE, IN CONSIDERATION of the promises of both parties and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

SECTION 1.

DEFINITIONS

               1.1     Definitions . As used in this Loan Agreement, the following terms shall have the meanings specified below unless the context otherwise requires:

“Affiliate” when used with respect to any person shall mean any other person which, directly or indirectly, controls or is controlled by or is under common control with such person. For purposes of this definition, “control” (including the correlative meanings of the terms “controlled by” and “under common control with”), with respect to any person, shall mean possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such person, whether through the ownership of voting securities or by contract or otherwise.

“Business Day” means any day which is neither a Saturday or Sunday nor a legal holiday on which commercial banks are authorized or required to be closed in Detroit, Michigan and, in the case of a Business Day which relates to Obligations accruing interest by reference to the LIBOR Rate, on which dealings are carried on in the London interbank market.

“Capital Lease” means any lease of property, real or personal, the obligations with respect to which are required to be capitalized on a balance sheet of the lessee in accordance with GAAP.

“ Change In Control ” means a reduction in the number of (a) seats on the board of directors nominated by Sun Pharmaceutical Industries Limited, a corporation organized under the laws of India (“Sun”) or any Affiliate of Sun, or (b) shares of stock in Borrower held by Sun or an Affiliate of Sun, in either event below a majority of the total outstanding seats or shares, as the case may be.

“Closing Date” means the date on which the Loan Agreement is executed by Borrower and Bank as first above stated.

“Default” means any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default.

“Distributions” means all cash dividends to shareholders, and all cash distributions to shareholders of Subchapter S corporations, to partners of partnerships, to members of limited liability companies or to beneficiaries of trusts.

“EBITDA” means Borrower’s net income before interest, taxes, depreciation and amortization, during such testing period.

“Funding Date” means the date on which all of the conditions set forth in Section 4.1 have been satisfied and funds are disbursed to Borrower, but in no event prior to March 2, 2009.

“GAAP” means generally accepted accounting principles in effect from time to time in the United States.

“Governmental Authority” means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government.

“Hedging Contract” means any agreement, device or arrangement providing for payments which are related to fluctuations of interest rates, exchange rates, forward rates, or equity prices, including, but not limited to, dollar-denominated or cross-currency interest rate exchange agreements, forward currency exchange agreements, interest rate cap or collar protection agreements, forward rate currency or interest rate options, puts and warrants, and any agreement pertaining to equity derivative transactions (e.g., equity or equity index swaps, options, caps, floors, collars and forwards), including without limitation any ISDA Master Agreement between Borrower and Bank, and any schedules, confirmations and documents and other confirming evidence between the parties confirming transactions thereunder, all whether now existing or hereafter arising, and in each case as amended, modified or supplemented from time to time.

“Hedging Obligations” means any and all obligations of Borrower to Bank or any affiliate of Bank, whether absolute, contingent or otherwise and howsoever and whensoever (whether now or hereafter) created, arising, evidenced or acquired (including all renewals, extensions or modifications thereof and substitutions therefore), under or in connection with (i) any and all Hedging Contracts, and (ii) any and all cancellations, buy backs, reversals, terminations or assignments of any Hedging Contract.

“Indebtedness” of any person shall mean, as of any date, (a) all obligations of such person for borrowed money, (b) the principal component of the obligations of such person as lessee under any Capital Lease, (c) all obligations which are secured by any Lien existing on any asset or property of such person whether or not the obligation secured thereby shall have been assumed by such person, (to the extent of such Lien if such obligation is not assumed), (d) all obligations of such person for the unpaid purchase price for goods, property or services acquired by such person, including notes payable, except for payroll accounts payable that are not past due, and operating leases, (e) all obligations of such person in respect of any interest rate or currency swap, rate cap or other similar transaction (valued in an amount equal to the highest termination payment, if any, that would be payable by such person upon termination for any reason on the date of determination), and (f) all obligations of others similar in character to those described in clauses (a) through (h) of this definition for which such person has contingent liability, as obligor, guarantor, surety, accommodation party, partner or in any other capacity, or in respect of which

obligations such person assures a creditor against loss or agrees to take any action to prevent any such loss (other than endorsements of negotiable instruments for collection in the ordinary course of business), including without limitation all reimbursement obligations of such person in respect of letters of credit, surety bonds or similar obligations and all obligations of such person to advance funds to, or to purchase assets, property or services from, any other person in order to maintain the financial condition of such other person.

“Lien” shall mean any security interest in or lien on or against any property arising from any pledge, assignment, hypothecation, mortgage, security interest, deposit arrangement, option, conditional sale or title retaining contract, sale and leaseback transaction, financing statement filing, lessor's or lessee's interest under any lease, subordination of any claim or right, or any other type of lien, charge, encumbrance, preferential arrangement or other claim or right.

“Loan Documents” means this Loan Agreement, the Note, the Security Agreement and all other related agreements and documents issued or delivered hereunder or thereunder or pursuant hereto or thereto.

“Material Adverse Effect” means a material adverse effect on (a) the business, operations, property or condition (financial or otherwise) of Borrower, (b) the ability of Borrower to perform its obligations, when such obligations are required to be performed, under this Loan Agreement or the other Loan Documents or (c) the validity or enforceability of this Loan Agreement, any Note or any of the other Loan Documents or the rights or remedies of Bank hereunder or thereunder.

“Materials of Environmental Concern” means any gasoline or petroleum (including crude oil or any fraction thereof) or petroleum products or any hazardous or toxic substances, materials or wastes, defined or regulated as such in or under any Environmental Law, including, without limitation, asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.

“Net Income” shall mean, for any period, net income (or net loss, expressed as a negative number) after all taxes actually paid in cash or accrued and all expenses and other charges for such period, determined in accordance with GAAP.

“Net Proceeds” means the gross cash proceeds including cash by way of deferred payment pursuant to a promissory note, receivable or otherwise, (but only as and when received) received from the sale, lease, conveyance, disposition or other transfer of assets, or from a Recovery Event or from the sale, issuance or placement of equity securities, Indebtedness for borrowed money or Subordinated Debt, net of (i) transaction costs payable to third parties, (ii) the estimated taxes payable with respect to such proceeds (including, without duplication, withholding taxes, property taxes, transfer taxes and taxes), (iii) Indebtedness (other than Indebtedness of Bank pursuant to the Loan Documents) which is secured by the assets which are the subject of such event to the extent such Indebtedness is paid with a portion of the proceeds therefrom, and (iv) any and all costs which may occur as a result of discontinuing operations, shutdowns or otherwise resulting from, the disposition of such assets.

(i)        All indebtedness and liabilities of whatsoever kind, nature and description owed to Bank by Borrower, whether direct or indirect, absolute or contingent, due or to become due or whether now existing or hereafter arising, and howsoever evidenced or acquired, except any such indebtedness or liabilities acquired by Bank from any third party, and whether joint or several, and including, without limitation, the Loan;

(ii)       All future advances which Bank at any time may, but shall not be required to, make for the protection or preservation of Bank's rights and interests arising hereunder, including, without limitation, advances for taxes, levies, assessments, insurance, and reasonable attorneys' fees;

(iii)      Any and all obligations and liabilities of any kind, now existing or later incurred, of Borrower to any affiliate of Bank, whether absolute or contingent, whether now existing or hereafter created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor) under (a) any Hedging Contracts and (b) any and all cancellations, buybacks, reversals, terminations or assignments of the foregoing.

(i)        Liens for taxes not delinquent or for taxes being contested in good faith by appropriate proceedings and as to which adequate financial reserves have been established on its books and records;

(ii)       Liens created and maintained in the ordinary course of business which constitute (A) pledges or deposits under worker's compensation laws, unemployment insurance laws or similar legislation, (B) good faith deposits in connection with bids, tenders, contracts or leases to which Borrower is a party for a purpose other than borrowing money or obtaining credit, including rent security deposits, (C) liens imposed by law, such as those of carriers, warehousemen and mechanics, if payment of the obligation secured thereby is not yet due, (D) liens securing taxes, assessments or other governmental charges or levies not yet subject to penalties for nonpayment, and (E) pledges or deposits to secure public or statutory obligations of Borrower, or surety, customs or appeal bonds to which Borrower is a party;

(iii)      Liens created pursuant to the Security Agreement and liens expressly permitted by the Security Agreement, including that existing security interest of JP Morgan Chase Bank, N.A.; and

(iv)      Liens created in favor of Bank or any parent, subsidiary or affiliated company of Bank.

“Person” or “person” shall include an individual, a corporation, a limited liability company, an association, a partnership, a trust or estate, a joint stock company, an unincorporated organization, a joint venture, a trade or business (whether or not incorporated), a government (foreign or domestic) and any agency or political subdivision thereof, or any other entity.

“Permitted Acquisition” shall mean any acquisition by Borrower or any subsidiary of Borrower of all or substantially all of the assets of another Person, or of a division or line of business of another Person, or any equity interests of another Person which satisfies and/or is conducted in accordance with the following requirements:

(i)        Such acquisition is of a business or Person engaged in a line of business which is compatible with, or complementary to, the business of the Borrower or such subsidiary;

(ii)       If such acquisition is structured as an acquisition of the equity interests of any Person, then the Person so acquired shall become a direct or indirect subsidiary of Borrower;

(iv)      Both immediately before and after the consummation of such acquisition, no Default or Event of Default shall have occurred and be continuing;

(v)       The board of directors (or other Person(s) exercising similar functions) of the seller of the assets or issuer of the equity interests being acquired shall not have disapproved such transaction or recommended that such transaction be disapproved;

(vi)      All governmental, quasi-governmental, agency, regulatory or similar licenses, authorizations, exemptions, qualifications, consents and approvals necessary under any laws applicable to the Borrower or subsidiary that is making the acquisition, or the acquisition target (if applicable) for or in connection with the proposed acquisition and all necessary non-governmental and other third-party approvals which, in each case, are material to such acquisition shall have been obtained, and all necessary or appropriate declarations, registrations or other filings with any court, governmental or regulatory authority, securities exchange or any other Person, which in each case, are material to the consummation of such acquisition or to the acquisition target, if applicable, have been made, and evidence thereof reasonably satisfactory in form and substance to Bank shall have been delivered, or caused to have been delivered, by Borrower to Bank;

(vii)     There shall be no actions, suits or proceedings pending or, to the knowledge of Borrower threatened against or affecting the acquisition target in any court or before or by any governmental department, agency or instrumentality, which could reasonably be expected to be decided adversely to the acquisition target and which, if decided adversely, could reasonably be expected to have a material adverse effect on the business, operations, properties or financial condition of the acquisition target and its subsidiaries (taken as a whole) or would materially adversely affect the ability of the acquisition target to enter into or perform its obligations in connection with the proposed acquisition, nor shall there be any actions, suits, or proceedings pending, or to the knowledge of Borrower threatened against Borrower that is making the acquisition which would materially adversely affect the ability of Borrower to enter into or perform its obligations in connection with the proposed acquisition; and

(viii)    The purchase price of such proposed new acquisition, computed on the basis of total acquisition consideration paid or incurred, or required to be paid or incurred, with respect thereto, including the amount of Indebtedness (such Indebtedness being otherwise permitted under this Agreement) assumed or to which such assets, businesses or business or equity interests, or any Person so acquired is subject and including any portion of the purchase price allocated to any non-compete agreements, is less than Twenty-Five Million Dollars ($25,000,000) during the term of this agreement.

“Prime Rate” shall mean the per annum rate announced by Bank from time to time as its “prime rate” (it being acknowledged that such announced rate may not necessarily be the lowest rate charged by Bank to any of its customers), which Prime Rate shall change simultaneously with any change in such announced rate.

“Recovery Event” means the receipt by Borrower of any cash insurance proceeds or condemnation award payable by reason of theft, loss, physical destruction or damage, taking or similar event with respect to any of their respective property or assets.

“Requirement of Law” means, as to any Person, the certificate 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 applicable to or binding upon such Person or to which any of its material property is subject.

“Restricted Payment” means (i) any dividend or other distribution (whether in cash, securities or other property) with respect to any shareholder in Borrower (or owner in any subsidiary), or (ii) any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such shareholder in Borrower (or owner in any subsidiary) or any option, warrant or other right to acquire any such interest of shareholders in Borrower (or owners in any subsidiary).

“Security Agreement” shall mean the Security Agreement, UCC Financing Statements, and all other related agreements and documents delivered pursuant to this Loan Agreement or otherwise entered into by any person to secure the obligations of Borrower under this Loan Agreement made by Borrower in favor of Bank under which Borrower grants to Bank a first priority security interest in the Collateral.

“Solvent” means, with respect to Borrower as of a particular date, that on such date (i) such Borrower is able to realize upon its assets and pay its debts and other liabilities, contingent obligations and other commitments as they mature in the normal course of business, (ii) such Borrower does not intend to, and does not believe that it will, incur debts or liabilities beyond such Borrower's ability to pay as such debts and liabilities mature in their ordinary course, (iii) such Borrower is not engaged in a business or a transaction, and is not about to engage in a business or a transaction, for which such Borrower's property would constitute unreasonably small capital after giving due consideration to the prevailing practice in the industry in which such Borrower is engaged or is to engage, (vi) the fair value of the property of such Borrower is greater than the total amount of liabilities, including, without limitation, contingent liabilities, of such Borrower and (v) the present fair saleable value of the assets of such Borrower is not less than the amount that will be required to pay the probable liability of such Borrower on its debts as they become absolute and matured. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will be computed at the amount which, in light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

“ Subordinated Debt ” shall mean Indebtedness of a Borrower for borrowed money which is expressly subordinated in right and priority of payment to Borrowers’ Obligations to Bank on terms and conditions acceptable to Bank as of the date of this Loan Agreement.

“UCC Financing Statements” means all UCC Financing Statements required by Bank to perfect the security interests granted to Bank under the Security Agreement.

(a)        Unless otherwise specified therein, all capitalized definitional terms defined in this Loan Agreement shall have the defined meanings when used in the Note or other Loan Documents or any certificate or other document made or delivered pursuant hereto.

(b)       The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Loan Agreement shall refer to this Loan Agreement as a whole and not to any particular provision of this Loan Agreement, and Section, subsection, Schedule and Exhibit references are to this Loan Agreement unless otherwise specified.

(c)        The meanings given to terms defined herein shall be equally applicable to both the singular and plural forms of such terms.

(d)       For purposes of computation of periods of time hereunder, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding.”

                1.3           Accounting Terms and Determinations . Unless otherwise specified herein, all terms of an accounting character used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared, in accordance with GAAP.

SECTION 2.

LOAN FACILITIES

                                (a)         Equipment Term Loan . Bank hereby grants an “ Equipment Term Loan ” pursuant to which Bank agrees to make on the Funding Date, a non-revolving advance to Borrower, for the purposes of financing new machinery and equipment and building improvements (the “ Assets ”), in the amount of Eighteen Million Dollars ($18,000,000). Funding of the loan shall be in accordance with the conditions set forth in Section 4 below.

                                (b)        Equipment Term Note . The advance of the Equipment Term Loan shall be evidenced by and be repayable to Bank in accordance with the terms of the Equipment Term Note, which Borrower shall execute and deliver to Bank simultaneously herewith. All provisions of the Equipment Term Note are incorporated herein by this reference as terms and conditions of this Loan Agreement.

(a)        Borrower hereby grants to Bank as security for the Note, a security interest in all fixed assets of Borrower, subject to the priority of all deposits in possession or control JP Morgan Chase Bank, N.A., and subject to the priority of the existing security interest in accounts receivable and inventory granted to JP Morgan Chase Bank, N.A., as described in the Security Agreement executed simultaneously hereto. Borrower shall also grant to Bank a mortgage on the real estate and improvements constituting real property located at 1150 Elijah McCoy Drive, Detroit, Michigan, as more particularly described in the Mortgage executed simultaneously hereto.

All of the specified property in subsection (a) above shall be collectively referred to as the “ Collateral ”.

(b)       Borrower shall execute and deliver to Bank such documents in addition to those documents specified in this Loan Agreement, on the Closing Date, Funding Date, and thereafter from time to time, as Bank shall request, for the purpose of perfecting and continuing the perfection of Bank’s security interest and mortgage in the Collateral.

(c)        It is further agreed that any security agreement, mortgage, or other document hereafter executed by Borrower in favor of Bank shall secure repayment of all of the Obligations, whether or not presently contemplated by the parties, including that created under the Loan Agreement of the same date relating to the Note; and, that an Event of Default under any note, security agreement, mortgage or other agreement from Borrower to Bank after any applicable grace period shall constitute an Event of Default under all notes, security agreements and other agreements, and that Bank may, at its

option, proceed in exercising its rights thereunder in any order or manner it may choose, the purpose of this Loan Agreement being to cross-collateralize and cross-default all of the Obligations.

SECTION 3.

OTHER PROVISIONS RELATING TO CREDIT FACILITIES

               3.1            Default Rate . Upon the occurrence, and during the continuance, of an Event of Default, the principal of and, to the extent permitted by law, interest on the Loan and any other amounts owing hereunder or under the other Loan Documents shall bear interest, payable on demand, at a per annum rate (the “Default Rate”) which is equal to the rate which would otherwise be applicable as defined in the Note, plus two percent (2.0%).

               3.2            Taxes . Except as provided below in this subsection, all payments made by Borrower under this Loan Agreement and any Note shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority, excluding taxes measured by or imposed upon the overall net income of Bank or its applicable lending office, or any branch or affiliate thereof, and all franchise taxes, branch taxes, taxes on doing business or taxes on the overall capital or net worth of any Bank or its applicable lending office, or any branch or affiliate thereof, in each case imposed in lieu of net income taxes, imposed: (i) by the jurisdiction under the laws of which such Bank, applicable lending office, branch or affiliate is organized or is located, or in which its principal executive office is located, or any nation within which such jurisdiction is located or any political subdivision thereof; or (ii) by reason of any connection between the jurisdiction imposing such tax and such Bank, applicable lending office, branch or affiliate other than a connection arising solely from such Bank having executed, delivered or performed its obligations, or received payment under or enforced, this Loan Agreement or any Note. If any such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings (“ Non-Excluded Taxes ”) are required to be withheld from any amounts payable to Bank hereunder or under any Note, (A) the amounts so payable to Bank shall be increased to the extent necessary to yield to Bank (after payment of all Non-Excluded Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in this Loan Agreement and any Note, provided, however, that Borrower shall be entitled to deduct and withhold any Non-Excluded Taxes and shall not be required to increase any such amounts payable to any Bank that is not organized under the laws of the United States of America or a state thereof if such Bank fails to comply with the requirements of paragraph (ii) of this subsection whenever any Non-Excluded Taxes are payable by Borrower, and (B) as promptly as possible thereafter Borrower shall send to Bank, a certified copy of an original official receipt received by Borrower showing payment thereof. If Borrower fails to pay any Non-Excluded Taxes when due to the appropriate taxing authority or fails to remit to Bank the required receipts or other required documentary evidence, Borrower shall indemnify Bank for any incremental taxes, interest or penalties that may become payable by Bank as a result of any such failure. The agreements in this subsection shall survive the termination of this Loan Agreement and the payment of the Loan and all other amounts payable hereunder.

               3.3            Place and Manner of Payments . Except as otherwise specifically provided herein, all payments hereunder shall be made to Bank in United States Dollars in immediately available funds, without offset, deduction, counterclaim or withholding of any kind, at Bank's office specified herein not later than 11:00 A.M. (Eastern Standard Time) on the date when due. Payments received after such time shall be deemed to have been received on the next succeeding Business Day. Bank may, at Borrower's request, debit the amount of any such payment which is not made by such time to any account maintained by Borrower with Bank or any other account which may be maintained by Borrower with Bank and designated for such purpose by Borrower. Borrower shall, at the time it makes any payment under this Loan Agreement, specify to Bank the 

Loan, fees or other amounts payable by Borrower hereunder to which such payment is to be applied (and in the event that it fails so to specify, or if such application would be inconsistent with the terms hereof, Bank shall apply such payment to the Loan in such manner as Bank may determine to be appropriate in respect of obligations owing by Borrower hereunder. Whenever any payment hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day (subject to accrual of interest and fees for the period of such extension). Except as expressly provided otherwise herein, all computations of except that interest accruing by reference to the Prime Rate shall accrue on the basis of the actual number of days elapsed over a year of 365 or 366 days, as the case may be interest and fees shall be made on the basis of actual number of days elapsed over a year of 360 days. Interest shall accrue from and include the date of borrowing, but exclude the date of payment.

SECTION 4.

CONDITIONS

               4.1            Conditions to Closing Date; Funding Date . The Loan shall close and the proceeds advanced upon satisfaction of the following conditions precedent:

                                (a)        Execution of Loan Documents . Bank shall have received (i) this Loan Agreement, (ii) the Note, (iii) the Security Agreement, (iv) the Borrowing Resolution, (v) the Closing Certificate, (vi) the Mortgage, (vii) any Hedging Contracts and related documentation to hedge the interest rate fluctuations of the Equipment Term Note, and such other documents and certificates reasonably required by Bank, in each case conforming to the requirements of this Loan Agreement and executed by a duly authorized officer of Borrower. Notwithstanding the foregoing, and without waiving the condition in subsection (vii) above, Bank may advance funds at the request of Borrower with the continued obligation that Borrower enters into a Hedging Contract with Bank’s trading desk by March 16, 2009, otherwise such failure to fix the variable rate of interest through a Hedging Contract shall be deemed an Event of Default hereunder.

                                (b)        Insurance . At its own cost, Borrower shall obtain and maintain, and cause to be obtained and maintained by Borrower insurance against (i) loss, destruction or damage to its property and business of the kinds and in the amounts customarily insured against by businesses with established reputations engaged in the same or similar business as Borrower and, in any event, sufficient to fully protect Bank’s interest in the Co