<PAGE>

                                                                   Exhibit 10.28

          Confidential Materials omitted and filed separately with the
         Securities and Exchange Commission. Asterisks denote omissions.

                        MANUFACTURE AND SUPPLY AGREEMENT
                                     BETWEEN

                      DRAXIS SPECIALTY PHARMACEUTICALS INC.

                         AND PENWEST PHARMACEUTICALS CO.

                             AS OF NOVEMBER 6, 2006

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                              <C>
ARTICLE I - INTERPRETATION..................................................      2

ARTICLE II - FORMULATION....................................................      7

ARTICLE III - CONSIDERATION.................................................      9

ARTICLE V- DELIVERY, TITLE AND ACCEPTANCE...................................     15

ARTICLE VII - REGULATORY MATTERS............................................     20

ARTICLE VIII - REPRESENTATIONS AND WARRANTIES...............................     21

ARTICLE IX - INTELLECTUAL PROPERTY..........................................     25

ARTICLE X - INDEMNITIES AND LIMITATION OF LIABILITIES.......................     29

ARTICLE XI - TERM AND TERMINATION...........................................     31

ARTICLE XII - MISCELLANEOUS.................................................     33
</TABLE>

                                      - i -

<PAGE>

                        MANUFACTURE AND SUPPLY AGREEMENT

THIS AGREEMENT is effective from the 6th day of November 2006 (the "EFFECTIVE
DATE")

BETWEEN:                      PENWEST PHARMACEUTICALS CO. a corporation
                              incorporated under the laws of Washington, having
                              offices at 39 Old Ridgebury Road, Suite #11,
                              Danbury, Connecticut, U.S.A. 06810 and at 2981
                              Route 22, Patterson, New York, U.S.A. 12563;

                              ("PURCHASER")

AND:                          DRAXIS SPECIALTY PHARMACEUTICALS INC., a
                              corporation amalgamated under the laws of Canada
                              having its principal office at 16751 Trans Canada
                              Highway, Kirkland, Quebec H9H 4J4;

                              ("SUPPLIER")

WHEREAS Purchaser and DRAXIS Pharma Inc. are parties to a Custom Manufacturing
Agreement dated as of September 27, 1999 (the "Prior Agreement");

AND WHEREAS Supplier is the successor in interest to DRAXIS Pharma, Inc.;

AND WHEREAS the Parties are willing to amend and restate the Prior Agreement as
provided herein;

AND WHEREAS Purchaser desires to have Supplier manufacture and supply certain
ingredients for Purchaser's tablet products;

AND WHEREAS Supplier desires to manufacture and supply Purchaser with certain
ingredients for the manufacture of Purchaser's tablet products;

AND WHEREAS the Parties are willing to carry out the foregoing pursuant to the
terms and conditions set forth in this Agreement.

NOW THEREFORE in consideration of the mutual covenants and agreements in this
Agreement, Purchaser and Supplier agree with each other as follows:

                                     - 1 -
<PAGE>

                           ARTICLE I - INTERPRETATION

1.1   DEFINED TERMS.

As used in this Agreement and in the Quality Agreement (as defined below), the
following terms have the following meanings unless the context clearly requires
otherwise:

"ACCEPTED PURCHASE ORDER(s)" shall have the meaning ascribed hereto in Section
4.3(b) of this Agreement.

"AFFILIATE" means, with respect to a Party, any legal entity (such as a
corporation, partnership or limited liability company) that controls, is
controlled by or under common control with such Party. For the purposes of this
definition, the term "control" means (i) beneficial ownership of at least fifty
percent (50%) of the voting securities of a corporation or other business
organization with voting securities or (ii) a fifty percent (50%) or greater
interest in the net assets or profits of a partnership or other business
organization without voting securities.

"AGREEMENT" means this Manufacture and Supply Agreement and all schedules listed
in Section 1.2 supplemental thereto and any amendments to the foregoing.

"BATCH" means a production batch of Products as specified in Schedule C attached
hereto.

"BUSINESS DAY" or "BUSINESS DAYS" means any day other than Saturday, Sunday or a
holiday generally recognized in Canada or the United States.

"CALENDAR YEAR(s)" means January 1 to December 31 of any given year or years, as
the case may be.

"CFR" means the U.S. Code of Federal Regulations.

"CONSUMER PRICE INDEX" means the Consumer Price Index for Canada (P119500) as
published by Statistics Canada, or a successor agency. In the event that
Statistics Canada stops publishing the Consumer Price Index or substantially
changes its content or format, the Parties will substitute another comparable
index published monthly by a mutually agreeable source. If Statistics Canada
redefines the base year for the Consumer Price Index from 1986 to another year,
the Parties will continue to use the Consumer Price Index but will convert to
the new base year using an appropriate, mutually agreeable conversion formula.

                                     - 2 -
<PAGE>

"CURRENT GOOD MANUFACTURING PRACTICES" or "CGMP" or "GMP" means, as applicable
in accordance with the country(ies) in which the Products will be manufactured
or distributed, the practices set out in the guidelines (i) published as the
Good Manufacturing Practices for Drug Manufacturers and Importers by the HPFBI,
as amended from time to time, with respect to the Products manufactured or
distributed in Canada, (ii) for the manufacture of pharmaceutical products and
the Current Good Manufacturing Practices as defined in United States 21 CFR 210,
et seq., as amended from time to time, with respect to the Products manufactured
or distributed in the United States, and (iii) the EU Guidelines to Good
Manufacturing Practice for Medical Products for Human and Veterinary Use, as
amended from time to time, with respect to the Products manufactured or
distributed in the European Union, and, in any event, (iv) such other relevant
good manufacturing practices as required by applicable Law.

"DESIGNATED SUPPLIER" shall have the meaning ascribed to it in the Quality
Agreement.

"DESIGNATED SUPPLIER'S AUDIT" shall have the meaning ascribed to it in the
Quality Agreement.

"FACILITY" means those sections of Supplier's facility located at 16751 Trans
Canada Highway, Kirkland, Quebec, Canada used in the Formulation of the Products
hereunder and, subject to Purchaser's prior written approval, such other
facilities used by Supplier in the Formulation of Products hereunder.

"FDA" means the United States Food and Drug Administration, or any successor to
it.

"FORMULATE" or "FORMULATED" means to effect the operation required in the
manufacture, processing, filling, testing, packaging, labelling or storage, as
the case may be, of the Products by Supplier.

"FORMULATION" means any operation required in the manufacture, processing,
filling, testing, packaging, labelling or storage, as the case may be, of the
Products by Supplier.

"FORMULATION RECORDS" shall have the meaning ascribed to it in Section 6.5.

"GOVERNMENTAL AUTHORITY" or "REGULATORY AUTHORITY" means any court, tribunal,
arbitrator, agency, commission, official or other instrumentality of Canada, any
relevant foreign country or territory, or any domestic or foreign state,
province, country, city or other political subdivision thereof.

"HPFBI" means the Health Products and Food Branch Inspectorate of Health Canada,
or any successor to it.

"INCOTERMS 2000" means the International Commercial Terms published by the
International Chamber of Commerce, as amended from time to time, codifying the
contractual rules for the interpretation of standardized commercial terms for
transactions. Where referenced, the relevant provisions of Incoterms 2000 shall
be deemed to have

                                     - 3 -
<PAGE>

been incorporated by reference in this Agreement except in so far as they may
conflict with any other provision of this Agreement, in which case the Agreement
provision shall prevail.

"INDEMNITEES" means a Party seeking indemnification hereunder, and that Party's
shareholders, directors, officers, employees, agents and representatives.

"INDEMNITOR" means a Party providing indemnification hereunder.

"INTELLECTUAL PROPERTY" means all domestic or foreign (i) trademarks, service
marks, trade names, trade dress, logos and slogans and all goodwill associated
therewith; (ii) patent, patent rights, industrial and other designs, including
any and all applications, applications for registration, registrations,
divisions, continuations, continuations-in-part, extensions, substitutions,
renewals, revalidations, re-examinations, reissues or additions, including
supplementary certificates of protection, or of to any of the foregoing items;
(iii) copyright, any original work or authorship fixed in any tangible medium of
expression, including literary works, all forms and types of computer software,
all source code, object code, firmware, development tools, files, records and
data, and all documentation related to any of the foregoing, all musical,
dramatic, pictorial, graphic and artistic works; (iv) trade secrets, technology,
discoveries and improvements, know-how, proprietary rights, formulae,
confidential and proprietary information, technical information, techniques,
inventions, designs, drawings, procedures, processes, models, formulations,
manuals and systems, whether or not patentable or copyrightable, including all
biological, chemical, biochemical, toxicological, pharmacological and metabolic
material and information and data relating thereto and formulation, clinical,
analytical and stability information and data which have actual or potential
commercial value and are not available in the public domain; and (v) all other
intellectual property or proprietary rights, in each case whether or not subject
to statutory registration or protection.

"INVENTORY CARRYING FEE(s)" shall have the meaning ascribed thereto in Section
4.2(f).

"LAW(s)" means any law, statute, rule, regulation, guideline (including Current
Good Manufacturing Practices), ordinance or other pronouncement of any
Governmental Authority having the effect of law in Canada, any relevant foreign
country or any territory or any domestic or foreign state, province, county,
city or other political subdivision.

"LICENSED TECHNOLOGY" shall have the meaning ascribed thereto in Section
8.2(a)(iii).

"LICENCES" means the licences, permits, certificates, authorizations or
approvals issued to Supplier by the relevant Governmental Authorities in respect
of its Facility, the conducting of Supplier's business and Supplier's
Formulation activities.

"LONG LEAD TIME MATERIALS" means those Materials listed in Schedule E hereto
held by Supplier beyond requirements necessary for (a) the supply of the
Products required under

                                     - 4 -
<PAGE>

Firm Orders and (b) any pre-approved safety stock, including the safety stock
described in Section 4.2(e).

"LOSSES" mean any and all damages, fines, fees, settlements, payments,
obligations, penalties, deficiencies, losses, costs and expenses (including
without limitation, interest, court costs, reasonable fees of attorneys,
accountants and other experts and other reasonable expenses of litigation or
other Proceedings or of any claim, default or assessment) but shall exclude any
and all indirect, incidental, special or consequential damages or losses,
including loss of profits or revenue.

"MATERIALS" mean all materials and ingredients used in the Formulation of
Products by Supplier, including the raw materials and packaging, shipping or
labelling materials, as well as freight and duty services, if applicable;
Materials shall include the raw materials listed in the Specifications.

"ONGOING FORECAST" has the meaning ascribed thereto in Section 4.1(a) of this
Agreement.

"PARTY" means either Purchaser or Supplier, individually; "PARTIES" means
Purchaser and Supplier collectively.

"PERSON" means any natural person, entity, corporation, general partnership,
limited partnership, proprietorship, other business organization, trust, union,
association or Governmental Authority.

"PRICES" or "PRICE" means the total aggregate cost of each Product, as set out
in Schedule "C" for 2006 and as adjusted in subsequent years of the Term of the
Agreement in accordance with the provisions of Section 3.1.

"PROCEEDING" means applicable action, claim, suit, proceeding, arbitration or
Governmental Authority action, notification, investigation or audit.

"PRODUCT(s)" means the product(s) to be Formulated by Supplier for Purchaser, as
set out in Schedule C and such other product(s) as may be mutually agreed
between the Parties in the form of a Product Amendment and in accordance with
this Agreement.

"PRODUCT DEVELOPMENTS" shall have the meaning ascribed hereto in Section 9.1(c)
of this Agreement.

"PURCHASE ORDER(s)" shall have the meaning ascribed hereto in Section 4.3(a) of
this Agreement.

"PURCHASER INTELLECTUAL PROPERTY" means any and all Intellectual Property
relating to the Products or their Formulation by Supplier that is (i) owned by
Purchaser at the Effective Date or (ii) developed or acquired by Purchaser after
the Effective Date provided that such Intellectual Property does not utilize nor
is based on any Supplier Intellectual Property. "Purchaser Intellectual
Property" excludes Product Developments.

                                     - 5 -
<PAGE>

"QUALITY AGREEMENT" means the agreement executed by the Parties as of the
Effective Date which sets out the details of the allocation of certain tasks
between the Parties as related to the Formulation of the Product needed to
satisfy quality control considerations, including responsibilities for quality
assurance and control of Materials, packaging components, and bulk Product, a
copy of which is attached hereto as Schedule "B".

"SPECIFICATIONS" means, with respect to any Products, all specifications for
Materials, manufacturing procedures, sampling plans for the Products as well as
the procedures, requirements (regulatory or otherwise), standards and other
items necessary to Formulate the Products, as approved by the Parties and
attached as Schedule "A".

"SUPPLIER INTELLECTUAL PROPERTY" means (i) all Intellectual Property owned by
Supplier as of the Effective Date; (ii) all Intellectual Property developed or
acquired by Supplier after the Effective Date independent of the performance of
its obligations under this Agreement, provided that such Intellectual Property
does not utilize nor is based on any Purchaser Intellectual Property or Product
Developments; or (iii) all Intellectual Property conceived, reduced to practice,
authored or otherwise generated or developed in the performance of its
obligations under this Agreement, provided that such Intellectual Property has
general applicability to the manufacture of pharmaceutical products other than
the Products (unless such Intellectual Property relates to and/or is an
improvement, modification, alteration or enhancement to any of Purchaser
Intellectual Property, in which case it shall be a Product Development).

"TERM" means, collectively, the Initial Term (as defined in Section 11.1(a)) and
any Renewal Term (as defined in Section 11.1(b)), as the case may be.

"THIRD PARTY" means any Person other than the Parties or their Affiliates.

1.2   INCORPORATION OF SCHEDULES.

The terms of the Schedules attached or referred to herein are an integral part
of this Agreement. The following Schedules are attached hereto:

      -     Schedule "A" - Product Specifications

      -     Schedule "B" - Quality Agreement

      -     Schedule "C" - Product Prices

      -     Schedule "D" - Confidential Disclosure Agreement

      -     Schedule "E" - Long Lead Time Materials

1.3   CURRENCY.

Except as otherwise expressly stated, all dollar amounts referred to in this
Agreement are in CANADIAN dollars.

1.4   GENERAL.

                                     - 6 -
<PAGE>

Article headings in this Agreement are for convenience only and shall not be
used in interpreting this Agreement. The Agreement shall be read with such
changes in gender or number as the context requires. The definitions in Article
1 shall apply equally to both the singular and plural forms of the terms
defined. The words "include", "includes" and "including" shall be deemed to be
followed by the phrase "without limitation". All references herein to Articles,
Sections, paragraphs, clauses and Schedules shall be deemed references to
Articles, Sections, paragraphs and clauses of this Agreement and Schedules to
this Agreement unless the context shall otherwise require.

                            ARTICLE II - FORMULATION

2.1   AGREEMENT TO FORMULATE PRODUCTS.

For the Term of this Agreement, Supplier agrees to Formulate the Products for
Purchaser in the Facility in accordance with the terms set out in this Agreement
and Supplier shall exclusively Formulate the Products for Purchaser subject to
Supplier being the principal supplier for the Formulation of the Products,
Formulating at a minimum 50% of the aggregate volume Product in kilograms
purchased by Purchaser in each Calendar Year of the Term or any renewal thereof.
The Parties agree that, in the event that Supplier fails to supply a Product
within sixty (60) days after the delivery date described in Section 4.1 for the
Firm Zone for any reason (including Force Majeure) not caused by Purchaser or a
Designated Supplier, Purchaser shall be relieved of this annual minimum purchase
requirement for the longer of the remainder of the relevant Calendar Year or
three (3) months after Supplier is again able to supply such Products (in the
latter case the annual minimum purchase requirement for any other periods in the
relevant Calendar Year(s) shall be measured as 50% of the aggregate volume
Product in kilograms purchased by Purchaser during such periods).

2.2   CONFORMANCE WITH SPECIFICATIONS.

Supplier shall Formulate the Products in accordance with the Specifications.
Either of the Parties shall have the right to request changes to any of the
Specifications in accordance with this Agreement and Section 13 of the Quality
Agreement. Recommendations to change any of the Specifications shall be in
writing. Supplier shall not implement any change to the Specifications unless
and until both Parties have agreed to such changes in writing. Supplier shall
not unreasonably withhold its consent to any change to the Specifications (a)
requested by Purchaser, (b) required by any Governmental Authority or (c)
necessary to ensure that the Products are Formulated in accordance with
applicable cGMP. A change in the Specifications by Purchaser shall be validated
by Supplier through the performance of [**] consecutive successful validation
batches of Product. Such validation shall be performed at Purchaser's costs and
expenses.

                                     - 7 -
<PAGE>

2.3   CONFORMANCE WITH CGMP.

Supplier shall Formulate the Products in accordance with applicable Current Good
Manufacturing Practices. Each Party shall promptly notify the other of knowledge
of any new instructions or specifications required in order to comply with
Current Good Manufacturing Practices, and shall reasonably cooperate in agreeing
on the best means to comply with any new requirements.

2.4   SUPPLY OF MATERIALS.

Supplier shall supply all Materials necessary for the Formulation of the Product
as indicated in the Specifications.

2.5   QUALITY AGREEMENT.

The Parties will, on the Effective Date, execute the Quality Agreement. The
Parties agree that, if any provisions of the Quality Agreement are inconsistent
with this Agreement, the provisions of this Agreement shall govern to the extent
of such inconsistency.

2.6   THIRD PARTY SUPPLIERS AND DESIGNATED SUPPLIERS.

Third Party suppliers and Designated Suppliers of Materials must be agreed upon
between the Parties, including any changes thereto during the Term of this
Agreement.

2.7   COSTS AND EXPENSES.

Supplier shall bear all of its own costs and expenses incurred in Formulating
the Product unless otherwise specifically provided herein. Notwithstanding the
above, all artwork expenses will be charged back to Purchaser and payable in
accordance with Sections 3.3 and 4.2(h).

2.8   ADDITION OF PRODUCTS.

The Parties may add a Product to this Agreement from time to time by entering
into an amendment to this Agreement (individually referred to as a "Product
Amendment"). Each Product Amendment shall form a part of this Agreement and
shall contain a description of the Product to be Formulated pursuant to the
terms of that Product Amendment and of this Agreement, the Specifications for
such Product, the Price payable by Purchaser to Supplier for the Product,
territory(ies) in which Purchaser proposes to distribute same and any additional
provisions relating to such Product as the Parties may agree to. For greater
certainty, neither Party shall have an obligation to add a Product to the
Agreement. Each Party shall have the sole discretion as to whether or not it
agrees to add a Product to this Agreement.

                                     - 8 -
<PAGE>

2.9   ASSISTANCE FROM PURCHASER.

Purchaser shall use commercially reasonable efforts to provide all information
necessary for Supplier to Formulate the Products in accordance with the
Specifications and all applicable Laws, including cGMP, and shall make its
employees reasonably available on a timely basis to respond to questions
concerning such information.

                          ARTICLE III - CONSIDERATION

3.1   PRICE OF PRODUCTS AND ADJUSTMENT.

On January 1st of 2007 and each subsequent year of the Term, the Price shall be
subject to an adjustment, which adjustment shall be equal to [**]. Supplier
shall provide Purchaser with a written notice no later than December 15th of
each year of the Term setting forth the Price for the Products for the following
Calendar Year. [**]. In the event there is a significant increase or decrease in
Material costs either party may initiate discussions in order to address such
impact on the Price.

The Price shall also be payable for all samples of Products required to be
maintained by Supplier under the terms of this Agreement or any applicable Law
as well as any additional samples which the Purchaser requires.

3.2   MINIMUM BATCH SIZE.

Minimum Batch sizes shall be based on the minimum Formulation Batch size as
agreed by the Parties and set forth in Schedule "C" or the relevant Product
Amendment, as applicable.

3.3   PAYMENT.

Purchaser shall pay Supplier for all Products Formulated under the terms of this
Agreement, within thirty (30) days of the date of the invoice. Supplier shall
send the corresponding Product with the relevant Formulation Records and the
applicable release documents in accordance with Section 6.3 hereof. Supplier
shall issue invoices in respect of the Products upon shipment of such Products,
with interest at the rate of one percent (1%) per month (twelve percent (12%)
per annum) or the highest rate permitted by applicable Law (if lower) payable on
all overdue accounts.

3.4   TAXES.

In addition to the amounts paid by Purchaser pursuant to Section 3.1, Purchaser
shall pay to Supplier all applicable use, consumption, sales or excise taxes of
any taxing authority with respect to the purchase of the Products (but in no
event any tax on the net income of

                                     - 9 -
<PAGE>

Supplier). The amount of such taxes will be added to the Price in effect at the
time of shipment thereof and will be reflected in the invoices submitted to
Purchaser by Supplier pursuant to Section 3.3 hereof. Purchaser shall pay the
amount of such taxes to Supplier in accordance with the payment provisions set
forth in Section 3.3 hereof. Supplier hereby agrees to indemnify Purchaser
against, and shall reimburse Purchaser for, any expenditures, including taxes
and penalties levied by the applicable Governmental Authority in connection
therewith, that Purchaser is required to make on account of Supplier's failure
to pay such taxes or other related governmental charges to the relevant taxing
authorities.

3.5   CAPITAL EXPENDITURES.

Any capital expenditures that Purchaser requests Supplier to purchase in order
to Formulate the Products will be payable by Purchaser upon the terms and
conditions agreed upon between the Parties and are not included in the Price. To
be reimbursable, all arrangements for capital expenditures must be in writing
and signed by both Parties.

3.6   ADDITIONAL COSTS.

In addition to the Price, Purchaser shall pay any fees for additional services,
including stability testing fees, which may be performed by Supplier for
Purchaser in accordance with the provisions of this Agreement to the extent
mutually agreed by the Parties in writing. Such fees will be payable by
Purchaser within thirty (30) days of receipt of invoice and are not included in
the Price. Invoices for such additional fees will be issued upon completion of
the relevant service. Supplier shall perform stability testing on the Product in
accordance with the terms and Price set forth in Schedule "C" hereto.

3.7   COST OF CHANGES TO SPECIFICATIONS.

(a)   CHANGES REQUESTED BY PURCHASER. Purchaser shall be responsible for all
      costs related to Materials purchased or ordered by Supplier for the
      Formulation of the Products which are unusable as a result of changes made
      in the Specifications, including without limitation, changes to the
      graphics used on packaging, films, dies, proofs, provided that such
      changes were made at Purchaser's request. Supplier agrees to use
      reasonable efforts to minimize these costs to Purchaser.

(b)   CHANGES TO COMPLY WITH cGMP. Purchaser shall be responsible for all costs,
      except direct Facility costs, associated with changes required in the
      Specifications of the Products in order to comply with changes to cGMP
      occurring after the date of this Agreement; provided that Purchaser
      pre-approves such costs in writing. Such approval shall not be
      unreasonably withheld or delayed.

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                           ARTICLE IV - PRODUCT SUPPLY

4.1   FORECASTS.

(a)   ONGOING FORECASTS. On or before the Friday of the third (3rd) week of each
      month of every year of the Agreement, Purchaser shall provide Supplier
      with a copy of its forecast of its anticipated Product Formulation
      requirements for the [**] month period commencing the following month (the
      "Ongoing Forecast"). Each Ongoing Forecast shall provide delivery dates
      for each Firm Zone (as defined in Section 4.2(a) hereof), in addition to
      quantity and purchase order specifics for the Firm Zone, the Material Zone
      and the Open Zone. In the event that an Ongoing Forecast is not delivered
      on the Friday of the third (3rd) week of a given calendar month in
      accordance with this provision, the prior month's Ongoing Forecast will
      constitute that month's Ongoing Forecast.

4.2   ORDER PROCEDURES.

(a)   FIRM ZONE. Product quantities forecasted for the first [**] months of an
      Ongoing Forecast (the "Firm Zone"), are deemed to be firm orders, and as
      such Purchaser is committed to same. The Parties shall use reasonable best
      efforts to negotiate any change in the delivery date of any firm order;
      provided, however, that:

            (i) if Purchaser reduces its requirements for Products to be
            Formulated in the Firm Zone of an Ongoing Forecast, Purchaser shall
            [**]; and

            (ii) if Supplier agrees to Formulate additional quantities of the
            Products in the Firm Zone of an Ongoing Forecast, Purchaser, in
            addition to the Price, shall [**]. Supplier shall [**].

(b)   MATERIAL ZONE. Product quantities forecasted for the next [**] months of
      an Ongoing Forecast following the Firm Zone (the "Material Zone") are
      deemed to be firm as they relate to the quantities of Products to be
      ordered. Changes of timing for delivery of Products within the Material
      Zone may be made by Purchaser, at Purchaser's reasonable discretion;
      provided, however, that if any order made by Purchaser for Products to be
      delivered during the Material Zone of an Ongoing Forecast is cancelled,
      deferred or reduced, so as to result in lesser quantity Products ordered
      by Purchaser than indicated in the corresponding month of such Material
      Zone, Purchaser shall be responsible for the cost of obsolete or unused
      Materials reasonably procured by Supplier for the purpose of meeting the
      requirements specified in the Firm Zone (if applicable) and in the
      corresponding months of the Material Zone of that Ongoing Forecast and in
      accordance with any minimum order quantities of Materials by Third Party
      suppliers.

                                     - 11 -
<PAGE>

(c)   OPEN ZONE. Product quantities forecasted for the last [**] months of an
      Ongoing Forecast (the "Open Zone") are deemed to be open as they relate to
      the quantities of Products to be ordered and Purchaser is not committed to
      same. The Parties acknowledge and agree that the requirements specified in
      the Open Zone of an Ongoing Forecast are for the purposes of Supplier's
      internal scheduling and planning only and Purchaser shall not be
      responsible for any costs of Materials procured or other expenses incurred
      by Supplier for the purpose of meeting the requirements specified in the
      Open Zone, unless related to Long Lead Time Materials as referenced in
      Section 4.2(d) or agreed to by both Parties in writing.

(d)   LONG LEAD TIME MATERIALS. The Parties shall agree on the purchase or
      entering into of commitments to purchase any Long Lead Time Materials
      described in Schedule E hereto as amended from time to time by the Parties
      in writing based on the Ongoing Forecast for a specified month. Purchaser
      shall pay Supplier for those Long Lead Time Materials that cannot be used
      by Supplier for the Formulation of the Products within [**] months of the
      specified months for which those Long Lead Time Materials were purchased.
      The Long Lead Time Materials paid for by the Purchaser shall be the sole
      property of the Purchaser.

(e)   SAFETY STOCK. Supplier will carry the necessary safety stock of Materials
      to support [**] Batches of Product to ensure timely delivery of orders of
      Products (the "Safety Stock"). Any safety stock of Materials with
      unusually long re-order lead times may be carried by Supplier, but only if
      approved in writing by Purchaser. Purchaser shall be invoiced on a monthly
      basis for the storage fees for such Safety Stock. The rate to be charged
      in 2006 is $[**] (USD) per skid per month. The fee is in addition to the
      Price. The Supplier shall advise Purchaser on a yearly basis by January
      30th if there is an increase in Supplier's standard monthly inventory
      carrying fee for each skid. Purchaser shall be liable to purchase said
      Safety Stock in the event of termination or expiration of this Agreement
      and/or in the event of the expiration of the shelf-life of such Safety
      Stock. Supplier shall use the Materials for the Formulation of the
      Products, including the Safety Stock, on a first-in/first-out basis.
      Supplier shall promptly replenish the Safety Stock upon the use thereof in
      accordance with the Terms of this Agreement.

(f)   DELAYS IN DELIVERY OF MATERIALS BY THIRD PARTY SUPPLIER. Delivery dates
      specified in Purchase Orders are subject to Supplier's receipt of
      Materials from the Third-Party supplier thereof (as the case may be) not
      less than [**] weeks prior to the specified delivery date; provided,
      however, that Supplier shall use all commercially reasonable efforts to
      obtain Materials from said Third Party supplier. Supplier agrees to use
      commercial reasonable efforts to Formulate the Product as soon as possible
      in the event that the supplier of the Materials fails to deliver the
      Materials in accordance with this schedule.

(g)   GRAPHIC CHANGES. If there is to be change to any artwork for any Product,
      at least [**] weeks prior to the intended first delivery date of such
      Product

                                     - 12 -
<PAGE>

      with such changed artwork, Purchaser shall provide to Supplier, at no
      cost, digital artwork in a format acceptable to Supplier and in compliance
      with the packaging specifications (if any) for such Product. All one time
      costs and expenses associated with any such artwork changes shall be the
      responsibility of Purchaser and shall be charged directly to the Purchaser
      and are not included in the Price.

(h)   DELIVERY PERFORMANCE. Subject to Sections 4.2(g) and 4.3(a) hereof,
      Supplier will use all commercially reasonable efforts to deliver (A) [**]
      percent [**] of all Purchase Orders included in the volumes in each Firm
      Zone on, or within [**] Business Days of, the delivery dates specified in
      the Accepted Purchase Orders corresponding to such Purchase Orders, and
      (B) [**] percent [**] of the [**] for the quantity of Product ordered by
      Purchaser pursuant to such Accepted Purchase Orders; provided that
      Purchaser's payment obligations pursuant to Section 3 of the Agreement
      shall apply only to those quantities of Product actually delivered to
      Purchaser. For purposes of this Section 4.2(i), subject to Section 5.2 of
      the Agreement, Supplier shall be deemed to have delivered Product to
      Purchaser when such Product has been accepted by Purchaser's carrier in
      accordance with Section 5.1 of the Agreement.

4.3   PURCHASE ORDERS

(a)   GENERAL. Purchaser shall deliver to Supplier purchase orders (each a
      "Purchase Order") for the aggregate Product volumes in each Firm Zone.
      Supplier shall receive Purchaser's Purchase Orders at least [**] months
      before the delivery date of each Product. Each Purchase Order shall
      specify the volumes of Products ordered, the Price, the delivery date, the
      destination of delivery of the Products and Purchaser's instructions for
      such delivery, in accordance with the provisions of Section 5.1(b) of this
      Agreement.

(b)   DELIVERY. The Purchase Orders may be delivered electronically or by other
      means in such location as Supplier shall designate from time to time.
      Supplier shall promptly acknowledge acceptance of each Purchase Order by
      sending to Purchaser electronic (email and/or fax) written notice of
      acknowledgement and acceptance for each Purchase Order promptly after its
      receipt (an "Accepted Purchase Order"). Failure by Supplier to deliver to
      Purchaser a written notice of acceptance of a Purchase Order within [**]
      Business Days after receipt of said Purchase Order shall constitute
      Supplier's deemed acceptance of said Purchase Order.

(c)   REJECTION AND DEEMED ACCEPTANCE. Notwithstanding anything in this
      Agreement to the contrary, Supplier reserves the right at its sole
      discretion to reject without liability any Purchase Order solely to the
      extent that the Purchase Orders request Products greater than the volumes
      in each Firm Zone or Material Zone, as applicable; provided, however, that
      failure by Supplier to deliver to Purchaser a written notice so objecting
      to a Purchase Order within [**]

                                     - 13 -
<PAGE>

      Business Days after receipt of the Purchase Order shall constitute
      Supplier's deemed acceptance of said Purchase Order and such Purchase
      Order shall be deemed an Accepted Purchase Order.

(d)   FAILURE TO SUPPLY.

            (i)   Save in the event of a Force Majeure in accordance with
                  Section 12.2 hereof, Supplier shall be obliged to Formulate
                  and deliver Products which are subject to an Accepted Purchase
                  Order within [**] Business Days of the specified delivery
                  date referenced therein. In the event that Supplier is not
                  able to fulfil an Accepted Purchase Order by the specified
                  delivery date:

                  A.    [**]; and

                  B.    [**].

            (ii)  In the event that Supplier fails to supply a Product within
                  [**] days after the delivery date specified in an Accepted
                  Purchase Order within a Firm Zone as described in Section 4.1
                  for any reason (including Force Majeure) not caused by
                  Purchaser or a Designated Supplier, Purchaser may, at its sole
                  discretion, purchase or have manufactured from any other
                  source the quantity of Products necessary to meet its
                  requirements for such Firm Zone and the annual minimum
                  purchase requirements set forth in Section 2.1 hereof shall
                  not apply for the longer of the remainder of the relevant
                  Calendar Year or [**] months after Supplier is again able to
                  supply such Products (in the latter case the annual minimum
                  purchase requirement for any other periods in the relevant
                  Calendar Year(s) shall be measured as 50% of the aggregate
                  volume Product in kilograms purchased by Purchaser during such
                  periods).

(e)   CONFLICT. In the event of any conflict between the terms and conditions of
      this Agreement and the terms and conditions of any Purchase Order or any
      other related document, the terms and conditions of this Agreement shall
      prevail to the extent of such conflict.

4.4   STANDARD FORMS.

                                     - 14 -
<PAGE>

In ordering and delivering the Products pursuant hereto, Supplier and Purchaser
may employ their standard forms, but nothing in those forms shall be construed
to modify, amend or supplement the terms of this Agreement and, in the case of
any conflict herewith, the terms of this Agreement shall prevail.

                   ARTICLE V - DELIVERY, TITLE AND ACCEPTANCE

5.1   PRODUCT STORAGE AND SHIPMENT.

(a)   STORAGE CONDITIONS. The Materials and Products manufactured by Supplier
      are to be stored and packaged by Supplier in accordance with the
      conditions agreed between Purchaser and Supplier and in accordance with
      the Specifications and applicable Law.

(b)   SHIPPING RESPONSIBILITIES. The Products ordered by Purchaser pursuant to
      this Agreement shall be deemed delivered by Supplier to Purchaser once
      delivered onto the Purchaser's carrier truck, FCA (Incoterms 2000) the
      Facility's loading dock. Shipment of the Products shall be at Purchaser's
      sole cost and expenses. Purchaser shall be liable for any and all
      transportation charges, including without limitation freight, duties and
      taxes levied in connection with the supply of Products and shipment of
      same. Supplier shall arrange for the shipment of the Products in
      accordance with Purchaser's instructions. Purchaser shall retain the
      carrier and insurance company for shipping of the Products in accordance
      with the terms of this Agreement. Purchaser shall provide Supplier with a
      listing of carriers and Purchaser's account number and its insurance
      company contact information. Supplier will schedule freight pick up with
      one of such specified carriers and complete the documentation on behalf of
      Purchaser for each shipment of Product by using Purchaser's account
      number. All costs and invoices related to the shipment of the Products
      shall be charged by Purchaser's selected carrier directly to Purchaser for
      all Third Party costs related to same. If Purchaser wishes the delivery of
      the Products to be on any unique pallets, Purchaser shall, at its own cost
      and expense, make such pallets available to Supplier. Supplier shall be
      responsible for the packaging of the Products in accordance with the
      Product packaging Specifications, if provided by Purchaser to Supplier,
      or, if no such Product packaging Specifications are provided by Purchaser
      to Supplier, in a commercially reasonable manner. Such packaging
      Specifications, if provided, shall include packaging and carrier
      instructions.

(c)   TRANSFER OF TITLE. Notwithstanding anything to the contrary contained
      herein, title to and risk of loss for the Products supplied to Purchaser
      under this Agreement shall pass to Purchaser at the time the Products are
      delivered onto the Purchaser's carrier truck at the Facility's loading
      dock, not cleared for export. Except as otherwise provided herein,
      Supplier shall not be liable to Purchaser for the costs of loss of any
      kind arising out of or in relation to damage to or loss of the Products
      which occurs after title to and risk for the Products passes to

                                     - 15 -
<PAGE>

      Purchaser. For greater certainty, Purchaser shall be liable for all costs
      and risks of loss while Products are in transit.

5.2   PURCHASER ACCEPTANCE.

(a)   QUANTITATIVE DEFECTS. Purchaser shall inform Supplier in writing of any
      claim relating to quantitative defects in shipments of Products within
      [**] days from the receipt of such shipment by Purchaser or within [**]
      days from the receipt of such shipment of Products by Purchaser's designee
      in the event that the Products are shipped by Supplier to Purchaser's
      designee and Purchaser shall provide to Supplier copies of any appropriate
      documents relating to such defects. Supplier shall [**] provide Purchaser
      with any missing quantities of such Products as soon as reasonably
      possible after receipt of notice from Purchaser. Any claim for a
      quantitative defect which is not made within such [**] day or [**] day
      period, as applicable, shall be deemed to have been waived by Purchaser.

(b)   QUALITATIVE DEFECTS. Purchaser shall have [**] days from the receipt of
      each shipment of Products or within [**] days from the receipt of the
      Products by Purchaser's Third Party designee in the event that the
      Products are shipped by Supplier to Purchaser's Third Party designee, in
      which to determine by appropriate validated tests and assays whether or
      not each Batch delivered conforms to the Specifications. To assist such
      testing, Supplier shall deliver to Purchaser, with respect to each Batch
      Formulated and delivered to Purchaser or Purchaser's Third Party designee,
      at least [**] kilograms of Product samples from such Batch, which samples
      shall be delivered to Purchaser at the same time as such Batch is shipped
      to Purchaser or its Third Party designee. Such samples shall be charged to
      Purchaser in accordance with the Price set forth in this Agreement. If
      Purchaser deems that a Batch does not conform to the Specifications
      ("Rejected Batch"), unless such non-conformance with the Specifications is
      the result of or arises from a defect in any of the Materials or services
      supplied by Purchaser or by a Designated Supplier, the result of a defect
      in Purchaser's formula for the Formulation of the Products or a defect in
      the Specifications, Purchaser may reject such Batch by giving written
      notice to Supplier within such [**] day or [**] day period, as applicable,
      after receipt of such Batch by Purchaser or its authorized Affiliate or
      Third Party ("Rejection Notice"). Purchaser must specify in reasonable
      detail the manner in which such Batch fails to meet the Specifications.
      Save and except that Purchaser shall be liable for any Rejected Batch
      resulting from or arising from defects in any of the Materials or services
      supplied by Purchaser or by a Designated Supplier (unless such Designated
      Supplier has been audited by Supplier at Purchaser's expense as set forth
      in the Quality Agreement) or as a result of a defect in Purchaser's
      formula for the Formulation of the Products. Notwithstanding the above,
      Purchaser shall be deemed to have accepted any Batch with respect to which
      it fails to notify Supplier as provided above.

                                     - 16 -
<PAGE>

(c)   DISPOSITION OF REJECTED BATCH. Supplier shall have [**] days from the
      receipt of the Rejection Notice to accept or reject Purchaser's claims and
      submit a report on the Rejected Batch indicating the investigation and
      testing done and the recommended disposition to Purchaser, as the case may
      be. Purchaser shall review such report and notify Supplier that Purchaser
      either requests additional data, approves the recommended disposition of
      the Rejected Batch or will otherwise direct Supplier as to how Purchaser
      wishes the Rejected Batch to be disposed of.

(d)   DISPUTE OF TEST RESULTS. If the Parties fail to agree on whether a Batch
      of Products fails in whole or part to meet the Specifications and on the
      disposition of such Rejected Batch, such dispute shall be resolved
      promptly by an independent testing organization of recognized repute
      within the pharmaceutical industry of the United States or the country in
      which such Batch is to be distributed, mutually agreed upon by the
      Parties. The appointment of such organization shall not be unreasonably
      delayed by either Party. The decision of such testing organization shall
      be binding on both Parties. The fees and costs of the testing
      organization, and storage and handling of the Products during the resolve
      of the dispute shall be borne by the Party whose position is not sustained
      by the testing organization.

(e)   REWORK AND REPLACEMENT OF REJECTED BATCH.

            (i) If the Parties agree that a Rejected Batch fails in whole or in
            part to conform to the Specifications, or if a dispute between the
            Parties in this regard has been resolved pursuant to Section 5.2(d)
            in favour of Purchaser, Supplier shall [**] (1) accept return of the
            Rejected Batch (which shall be returned to Supplier forthwith) or
            otherwise dispose of the Rejected Batch, as so agreed, and (2) :

                  A. if possible, rework or reclaim the Rejected Batch, or
                  destroy the Rejected Batch;

                  B. and deliver a replacement shipment for the Rejected Batch
                  ("Replacement Batch") which shall conform with the
                  Specifications

               as promptly as possible, but in no event later than [**] days
               after the date Supplier accepts Purchaser's written Rejection
               Notice or the date of the final resolution of the dispute,
               whichever is earlier provided that Purchaser has not prevented
               Supplier from maintaining the Safety Stock. The Parties agree
               that Supplier shall be entitled to use the Materials contained in
               the Safety Stock to fulfill its obligations under this Section
               5.2 (e).

            (ii) Notwithstanding the existence of a dispute concerning Products
            rejected by Purchaser, pending resolution of such dispute, Supplier
            shall, as

                                     - 17 -
<PAGE>
            promptly as possible, but in no event later than [**] days after
            issue by Purchaser of a Purchase Order for additional Products of
            the type and quantity claimed to be rejected as contemplated by
            Section 5.2(b) hereof, deliver such additional Products, and
            Purchaser shall be obligated to pay for such Products in accordance
            with Section 3.3 hereof even if such Replacement Batch fails to meet
            the Specifications, provided that such failure is not the result of
            Supplier's performance of the Material qualifications in accordance
            with this Agreement, equipment failure or Supplier not following the
            Purchaser's formula for the Formulation of the Products. In the
            event that it is ultimately determined that the Rejected Batch was
            properly rejected by Purchaser, then Purchaser shall not be liable
            for the payment of the Rejected Batch and shall be credited
            accordingly for the payment of same. If it is ultimately determined
            that the Rejected Batch was not properly rejected by Purchaser, then
            Purchaser shall promptly pay Supplier for such Rejected Batch.

5.3   RECALLS.

As between Supplier and Purchaser, Purchaser shall be responsible for recalls of
the Products. Supplier shall cooperate with Purchaser in the event of any recall
and provide such reasonable assistance in connection therewith as Purchaser may
reasonably request. Subject to the limitations set forth in Section 10 hereof,
the costs of any recall shall be borne by the Party responsible; provided,
however, that Supplier shall be responsible only if the recall directly results
from its negligence, wilful misconduct or breach of this Agreement. For greater
certainty and notwithstanding the above, Supplier shall not be responsible if it
Formulated the Products in accordance with the Specifications and the formula
provided by Purchaser for the Formulation of the Product and applicable cGMP.

                   ARTICLE VI - QUALITY ASSURANCE AND CONTROL

6.1   FORM OF QUALITY AGREEMENT.

On the Effective Date, the Parties are executing the Quality Agreement. The
Parties agree that to the extent of an inconsistency with the terms of the
Quality Agreement and the Agreement, the terms of this Agreement shall prevail
to the extent of such conflict.

6.2   TESTING.

Supplier shall perform, with respect to the Materials and the Products, the
quality control tests and assays identified in (a) the Specifications and (b)
the Quality Agreement and in accordance therewith. Supplier shall provide
Purchaser with the Certificate of Analysis for the Materials used in the
Formulation of the Product. Purchaser agrees to pay Supplier an additional
charge for such service. Such Certificates of Analysis shall be delivered by
Supplier to Purchaser with the delivery of each Batch of Product.

6.3   PRODUCT BATCH RELEASE.

                                     - 18 -
<PAGE>

Supplier shall be responsible for the release of each production Batch of
Products, except to the extent that applicable Law requires that Purchaser be so
responsible, in which event (and to such extent), Purchaser shall assume such
responsibility. To the extent necessary in relation to the release of any
Product by Purchaser or otherwise requested by Purchaser, each Batch of Product
delivered by Supplier to Purchaser shall be accompanied by a copy of the
relevant Formulation Record for such Batch of Product, a "Certificate of
Compliance" which certifies the date of Formulation, expiration date of the
Product and that the Batch was Formulated in conformance with the Specifications
and cGMP, and a "Certificate of Analysis" for in-process testing which lists the
in-process tests performed by Supplier and sets forth the results of those
tests. Supplier shall not ship any Batch of a Product that based on Supplier's
tests fails to meet the Specifications for the Products, contains any Materials
that failed to meet the Specifications for the Materials, or for which the
packaging failed to meet the Specifications for the packaging, unless directed
to so ship by Purchaser in writing. Purchaser agrees that an additional fee will
be charged to Purchaser for the supply of the Formulation Records with each
shipment of Product.

6.4   RETENTION SAMPLES.

Sampling details and schedules must be agreed to by the Parties prior to
implementation and incorporated into the Quality Agreement (and shall include
the requirements provided in Section 8.2 thereof). For greater certainty, and
without limitation, samples of Product and raw materials must be retained in
sufficient quantities and must be stored under controlled conditions and
retained by Supplier or, if agreed to by the Parties, by Purchaser, for a period
equal to [**], or longer if required by applicable Law. The costs of the samples
requested by Purchaser shall be [**]. Supplier shall have the right to use the
retained samples to conduct testing either for investigation purposes in
accordance with applicable Laws or following a claim or potential claim by
Purchaser or any Third Party regarding the raw materials and/or Formulation and
in-process testing of the Products and/or for audit purposes.

6.5   FORMULATION RECORDS.

Supplier shall maintain true, accurate and complete records regarding the
Formulation of the Products as required by applicable Law ("Formulation
Records") including, without limitation, the information required to be
maintained pursuant to the Quality Agreement.

6.6   DESIGNATED SUPPLIERS AUDIT.

If Purchaser and Supplier agree that Supplier shall be responsible for the
performance of a Designated Supplier's Audit, Purchaser agrees that such
Designated Supplier's Audit shall be performed at Purchaser's sole cost and
expense and Purchaser shall reimburse Supplier within [**] days of receipt of
the invoice for any such costs and expenses incurred as a result of such
Designated Supplier's Audit. The rate to be charged to

                                     - 19 -
<PAGE>

Purchaser for the performance of such Designated Supplier's Audit shall be
Supplier's applicable standard rate. Such standard rate is established at
CDN$[**] per hour for Calendar Year 2006.

                        ARTICLE VII - REGULATORY MATTERS

7.1   AUDIT AND INSPECTION.

(a)   PURCHASER AUDIT. Supplier grants Purchaser the right to audit or to
      appoint Third Parties to audit once per Calendar Year (or as provided
      below), at any reasonable time during normal business hours, (i) the
      Formulation processes and work practices relating to the Product and
      inventory of Materials and Products, (ii) all Licenses necessary to
      conduct Supplier's business and Formulate each of the Products, (iii) the
      Facility, and (iv) the documentation demonstrating Supplier's satisfactory
      performance of its obligations under this Agreement and the Quality
      Agreement. Purchaser will notify Supplier at least [**] Business Days in
      advance of such an audit. Purchaser may exercise such right once annually
      in any Calendar Year save and except for situations where a single audit
      reveals significant concerns from the perspective of Purchaser, acting
      reasonably, that require appropriate additional audit follow-up. Any such
      audit shall not exceed a [**] Business Day period. Purchaser shall have
      the right to perform [**] audits in any Calendar Year (or additional
      audits if Purchaser, acting reasonably, determines there are significant
      concerns that require appropriate additional audits) subject to (i) a [**]
      Business Days prior written notice, (ii) [**]. Any Third Party appointed
      by Purchaser to perform such an audit and any Third Party accompanying or
      assisting Purchaser in the performance of any such audit performed herein
      shall at all times be bound by the obligations of confidentiality and
      non-disclosure of Supplier's confidential information consistent with
      those provided herein and agree to disclose to Purchaser only such
      information as is necessary to determine if Supplier is performing its
      obligations under this Agreement and the Quality Agreement. Such Third
      Party shall also agree to disclose to Supplier the results of its review.
      It is furthermore agreed that the on-site availability of Purchaser or
      such Third Party shall have no bearing on Supplier's production schedule
      as Supplier shall be authorized and entitled to proceed with same in the
      absence of Purchaser's representative.

(b)   INSPECTION BY GOVERNMENTAL AUTHORITIES. Supplier shall permit inspections
      of the Facility by Governmental Authorities of all relevant territories
      (such as the FDA, HPFBI or equivalent foreign regulatory authorities) with
      respect to the fulfillment of any requirement for any License during the
      Term of this Agreement and, if necessary, thereafter.

(c)   INSPECTION NOTIFICATION. Supplier agrees to promptly notify Purchaser of
      any inspection by any Governmental Authority pending as of the date hereof
      or as

                                     - 20 -
<PAGE>

      notice of same may arise, and of any communications to or from any
      Governmental Authority (including the reporting of adverse drug
      experiences or field alerts) which might adversely affect Supplier's
      ability to perform its obligations under this Agreement or which directly
      relates to the Products. Supplier shall keep Purchaser informed of the
      resolution of the matter with the relevant Governmental Authority.
      Supplier shall promptly provide to Purchaser a summary of findings with
      respect thereto; provided that Supplier shall have the right to redact all
      confidential information contained in any Facility inspection reports
      which are not related to Purchaser or the Products.

7.2   REGULATORY SUBMISSIONS AND ANNUAL PRODUCT REVIEWS.

Supplier shall provide reasonable support for any submissions required to the
HPFBI, FDA and other applicable Governmental Authority to support contract
manufacturing of Purchaser's Products by Supplier at the Facility. Supplier
shall not be responsible for any regulatory efforts required in respect of the
Formulation of the Products, other than regulatory efforts associated with
requests by Purchaser for changes to the Specifications. Annual Product Reviews
(APRs as defined in the Quality Agreement) shall be performed in accordance with
the terms and conditions set out in the Quality Agreement.

All regulatory support services set forth in this Section 7.2 above shall be
charged to Purchaser in accordance with the standard rates established by
Supplier for said services from time to time. Supplier's rate for regulatory
support services is established at CDN$[**] per hour for Calendar Year 2006.

                  ARTICLE VIII - REPRESENTATIONS AND WARRANTIES

8.1   SUPPLIER REPRESENTATIONS AND WARRANTIES.

(a)   REPRESENTATIONS AND WARRANTIES. Supplier represents, warrants and
      covenants, while acknowledging that Purchaser is relying on such
      representations and warranties in entering into this Agreement, that:

            (i) Supplier is the successor in interest to DRAXIS Pharma Inc.;

            (ii) in performing its services hereunder, Supplier shall comply
            with all applicable Laws and the cGMP applicable to such services
            and shall hold, and shall continue to hold during the Term of this
            Agreement, all material Licenses necessary or required for the
            Formulation of the Products and the performance of its obligations
            hereunder;

            (iii) the Facility, all equipment and tooling utilized in the
            Formulation of the Products hereunder, and the procedures and
            processes (including installation, operation and performance
            qualifications) instituted by Supplier in connection herewith are,
            and shall continue during the term of this

                                     - 21 -
<PAGE>

            Agreement, to be in material compliance with all applicable Laws and
            maintained in good operating condition;

            (iv) Supplier shall carry and keep in good force during the term of
            this Agreement insurance coverage in such form and amount as a
            reasonable party in similar circumstances would carry and keep to
            fulfil its obligations hereunder; but, without limitation to the
            foregoing, Supplier shall, throughout the Term and thereafter, for a
            period of not less than three (3) years carry and maintain in full
            force and effect, Commercial General Liability insurance written on
            the standard approval Policy Form, including Products Liability and
            Blanket Contractual Liability with limits of liability of not less
            than $5,000,000 Combined Single Limit, Bodily Injury and Property
            Damages, with such insurance policies obtained from an insurance
            company having a Best's rating of A-, Class VIII or higher, and
            Supplier shall furnish Purchaser with certificates of said
            commercial general liability and Product liability insurance;

            (v) Supplier has the lawful right to enter into and perform its
            obligations under this Agreement without breach of any other
            contractual obligations it may have;

            (vi) The warranties in Section 3.1 of the Quality Agreement apply to
            Supplier;

            (vii) The Products Formulated by Supplier under the terms of this
            Agreement:

                  A.    will comply with the Specifications, Purchaser's formula
                        for the Formulation of the Products and applicable Laws,
                        including cGMP;

                  B.    shall not contain any material that would cause the
                        Products to be adulterated within the meaning of the
                        Food and Drug Act (Canada) or, for United States:
                        adulterated or misbranded within the meaning of Section
                        404 or 505 of the Federal Food, Drug and Cosmetic Act as
                        amended (21 USC Sections 351 and 352), or the
                        regulations issued thereunder or within the meaning of
                        any national, international, provincial, state or local
                        law the adulteration and misbranding provisions of which
                        are similar to such Acts; and

                  C.    shall be free from material defects in Materials and
                        workmanship not otherwise caused by (i) Materials
                        supplied by Purchaser or Designated Suppliers or (ii)
                        defect

                                     - 22 -
<PAGE>

                        in Purchaser's Specifications and/or Purchaser's formula
                        for the Formulation of the Products.

            (viii) Supplier will not interpret cGMP in a manner inconsistent
            with general industry practice.

(b)   EXCLUSIONS. The warranties with respect to the Products shall not apply to
      any Product which, through no fault of Supplier (to the extent the
      following apply):

            (i) has been tampered with or otherwise altered after delivery to
            the carrier by Supplier;

            (ii) has been subject to misuse, negligence or accident after
            delivery to the carrier by Supplier;

            (iii) has been stored, handled or used in a manner contrary to FDA
            or other Governmental Authority's requirements after delivery to the
            carrier by Supplier;

            (iv) has expired its stated shelf life;

            (v) fails due to defects in the Specifications, in Purchaser's
            formula for the Formulation of the Products or as the result of
            problems with the Materials that could not be detected by the
            quality control tests specified herein.

            (vi) Fails or is non-conforming or deviating as a result of or
            arising from the Materials and/or services supplied by Purchaser or
            by a Designated Supplier.

8.2   PURCHASER REPRESENTATIONS AND WARRANTIES.

(a)   REPRESENTATIONS AND WARRANTIES. Purchaser represents and warrants, while
      acknowledging that Supplier is relying on such representations and
      warranties in entering into this Agreement, that:

            (i) Purchaser shall provide all information within its possession
            necessary for Supplier to Formulate the Products in accordance with
            the Specifications and all applicable Laws, including cGMP, and
            shall make its employees available on a timely basis to respond to
            questions concerning such information;

            (ii) to the extent that Purchaser supplies any Materials or other
            information to Supplier (including packaging and labelling
            requirements) or engages in Formulation with respect to any of the
            Products (either directly or indirectly through a Third Party), all
            such Materials or other information

                                     - 23 -
<PAGE>

            and Formulation will comply with the Specifications and applicable
            Laws, including cGMP;

            (iii) it shall comply with all applicable Laws in carrying out its
            obligations under this Agreement;

            (iv) Purchaser will not interpret cGMP in a manner inconsistent with
            general industry practice; and

            (v) Purchaser has not granted, as of the Effective Date, and will
            not grant to any Third Party during the Term of this Agreement any
            right, license or interest in or to the Purchaser Intellectual
            Property licensed to Supplier pursuant to Section 9.1(e) (the
            "Licensed Technology") or any portion thereof, inconsistent with the
            rights granted to Supplier herein;

            (vi) Formulation of the Products pursuant to this Agreement do not
            and shall not require a license under any Intellectual Property
            other than as provided to Supplier by Purchaser hereunder;

            (vii) Purchaser warrants as of the Effective Date of this Agreement
            that it has no knowledge of any Third Party patent rights or other
            Intellectual Property that would be infringed or any Third Party
            trade secrets that would be misappropriated by the Formulation of
            the Products by Supplier hereunder;

            (viii) Purchaser shall carry and keep in good force during the term
            of this Agreement and for three (3) years thereafter insurance
            coverage in such form and amount as a reasonable party in similar
            circumstances would carry and keep to fulfil its obligations
            hereunder. Purchaser shall submit a certificate of such insurance
            (which shall include such information) to Supplier for its approval
            within thirty (30) days of the date of signature of this Agreement.
            If such certificate is not furnished within thirty (30) days,
            Supplier shall notify Purchaser in writing and give Purchaser thirty
            (30) days to cure such breach. If Purchaser fails to provide the
            certificate during such thirty (30) day cure period, Supplier may,
            at its option, immediately terminate this Agreement or any amendment
            thereof;

            (viii) it has no knowledge as of the Effective Date of any Third
            Party Intellectual Property that would be infringed by Supplier's
            activities under this Agreement; and

            (ix) Purchaser has the lawful right to enter into this Agreement for
            the Formulation of the Product without breach of any other
            contractual obligations it may have.

                                     - 24 -
<PAGE>

8.3   MUTUAL REPRESENTATIONS AND WARRANTIES.

(a)   Each Party represents and warrants that neither it, nor any of its
      officers, directors or employees performing services under this Agreement,
      has been debarred or convicted of a crime which could lead to debarment,
      under the Generic Drug Enforcement Act of 1992, 21 United States Code
      Sections 306(a) and (b), or other applicable Law. Each Party shall notify
      the other immediately in the event that such Party or any of its officers,
      directors or employees performing services under this Agreement:

            (i) becomes debarred or receives notice of action or threat of
            action with respect to its debarment; or

            (ii) becomes the object of any investigation or subject of any
            report regarding such Party or any of its officers, directors or
            employees performing services under this Agreement, in connection
            with any activity that could result in debarment or suspension or
            refusal of approval.

8.4   DISCLAIMER OF WARRANTIES.

(A)   Subject to applicable Law, the foregoing representations and warranties in
      this Section 8 are limited and are in lieu of any other warranty, and
      except as set forth above, neither Party makes any warranty or
      representation, express or implied, with respect to the Products or
      otherwise under this Agreement, whether as to merchantability, quality,
      fitness for a particular purpose or otherwise.

                       ARTICLE IX - INTELLECTUAL PROPERTY

9.1   OWNERSHIP

(a)   PURCHASER RIGHTS. Supplier acknowledges that Purchaser is the sole owner
      of Purchaser Intellectual Property and of all data and information
      relating to the Products, including the Specifications and any other
      information relating thereto delivered by Purchaser to Supplier under this
      Agreement, except to the extent such information is in the public domain.

(b)   SUPPLIER RIGHTS. Purchaser acknowledges that Supplier is the sole owner of
      the Supplier Intellectual Property, except to the extent such information
      is in the public domain.

(c)   PRODUCT DEVELOPMENTS. All Intellectual Property relating to a Product
      conceived, reduced to practice, authored or otherwise generated or
      developed in the course of activities under this Agreement, either by or
      on behalf of Supplier,

                                     - 25 -
<PAGE>

      except if it has general applicability to the manufacture of
      pharmaceutical products other than the Products (unless such Intellectual
      Property relates to and/or is an improvement, modification, alteration or
      enhancement to any of Purchaser Intellectual Property, in which case it
      shall be a Product Development), shall be "Product Developments".
      Purchaser shall own all right, title and interest in and to all Product
      Developments, whether made, conceived, reduced to practice, authored or
      otherwise generated or developed solely by Supplier personnel, or jointly
      by Supplier and Purchaser personnel, and all rights to Intellectual
      Property arising therefrom. Supplier will, and hereby does, assign to
      Purchaser all of its rights, title and interest in and to Product
      Developments and rights to Intellectual Property arising therefrom.
      Supplier will provide reasonable assistance to Purchaser, at Purchaser's
      expense, in obtaining and enforcing Purchaser's ownership of the Product
      Developments, including as applicable the assignment to Purchaser of the
      right, title and interest of Supplier's employees or independent
      contractors in and to such Product Developments.

(d)   PATENTS. As soon as practicable after creation, development, conception or
      reduction to practice by Supplier of any Product Development, Supplier
      shall inform Purchaser in writing of such Product Development. Upon
      Purchaser's reasonable request and at Purchaser's expense, Supplier shall
      take such reasonable actions as Purchaser deems necessary or appropriate
      to assist Purchaser in obtaining patent or other proprietary protection in
      Purchaser's name with respect to all Product Developments.

(e)   LICENSE. Under the terms and subject to the conditions of this Agreement,
      Purchaser hereby grants Supplier a non-exclusive, royalty-free license to
      use the Purchaser Intellectual Property and the Product Developments
      during the Term solely for the purposes of performing its obligations
      hereunder. Supplier shall have no right to make, use, manufacture, supply,
      distribute, offer to sell, import or sell the Products or use any
      Purchaser Intellectual Property or Product Developments for any other
      purpose.

9.2   REPRODUCTION OF AND RIGHT TO USE TRADEMARKS.

Solely in connection with Supplier's performance of this Agreement, Purchaser
hereby grants Supplier the right to reproduce and print on the Products and/or
Product packaging such trademarks, trade dress, brand names, and/or trade names
that Purchaser may designate in writing from time to time, strictly in
accordance with trademark usage and packaging guidelines set forth in the
Specifications or otherwise provided by Purchaser in writing. Samples of all
such uses of Purchaser's trademarks, trade dress, brand names and/or trade names
on the Products or Product packaging shall be submitted to Purchaser for its
written approval prior to production. The permission granted to Supplier herein
is restricted to usage of such trademarks, trade dress, brand names and/or trade
names on or in connection with the Products supplied under this Agreement, and
such permission extends only for the Term of this Agreement or such shorter
period as may be designated or required by Purchaser. Supplier shall not
establish, operate, sponsor or contribute

                                     - 26 -
<PAGE>

content to any site on the Internet which incorporates any of Purchaser's
trademarks trade dress, brand names and/or trade names as its URL address or any
part of such address.

9.3   SUPPLIER'S OWNERSHIP OF OTHER PROPERTY.

Except as otherwise specified herein, it is agreed that Supplier is the sole
owner of any and all machinery and equipment used by Supplier in connection with
the Formulation of the Products in accordance with this Agreement.

9.4   INFRINGEMENT.

(a)   NOTICE. In the event that either Party becomes aware of actual or
      threatened infringement of Intellectual Property related to any Product,
      that Party shall promptly so notify the other in writing. Purchaser shall
      have the right, but not the obligation, to bring at its own expense an
      infringement action or file any other appropriate action or claim related
      to infringement of such Intellectual Property against any Third Party.
      Supplier shall have the option to join in (but not control) such action to
      the extent Supplier believes it has been damaged by the actions of such
      Third Party.

(b)   SETTLEMENT. Each Party shall cooperate and provide reasonable assistance
      in any action as described in Section 9.4(a) above. No settlement or other
      voluntary final disposition of any suit defended or action brought by or
      against either Party may be entered into without the consent of the other
      Party if such settlement would require such other Party to be subject to
      an injunction or to make a monetary payment, or would adversely affect
      such other Party's rights under this Agreement.

(c)   DAMAGES. Purchaser shall retain any damages or other monetary awards that
      it recovers pursuant to any action under Section 9.4 hereto.

9.5   RIGHT TO NOT FORMULATE

(a)   SITUATIONS. Supplier shall not be required to Formulate or otherwise be
      involved in the distribution of any Product to which:

            (i) Any Third Party Person claims the Formulation or distribution
            infringes or otherwise violates any Law respecting patents or
            trademarks or a Third Party's Intellectual Property unless Purchaser
            agrees to indemnify Supplier against any such claim; or

            (ii) Any Governmental Authority notifies Supplier that such
            Formulation or distribution violates any Law. Purchaser shall
            provide immediate written notice of any claim of any Governmental
            Authority to Supplier in this regard; or

                                     - 27 -
<PAGE>

            (iii) The Formulation of same would violate any applicable Laws
            based on a written legal opinion from a reputable law firm; or

            (iv) Supplier has not received Purchaser's approval for a change in
            the Specifications to conform to the GMP or applicable Law within
            thirty (30) days or if any non-conformance or deviation, which
            Supplier reasonably believes could impair the Formulation or tests
            results of a Batch of Products, has not be resolved to the mutual
            satisfaction of the Parties within thirty (30) days, unless
            Purchaser agrees in writing to indemnify Supplier against any such
            failed or non-conforming Batch of Products, provided Supplier has
            performed Material qualifications properly, followed the formula for
            the Formulation of the Product and provided that the equipment used
            for the Formulation of the Product functioned properly, in
            accordance with applicable Law and GMP. This indemnification is
            added to any other rights for Supplier to be indemnified hereunder
            and is subject to Sections 10.1, 10.3 and 10.4; or

            (v) At any time, to the extent of any outstanding invoices, pending
            charges and fees due by Purchaser pursuant to this Agreement,
            providing that a default notice has been sent by the Supplier to the
            Purchaser, and there shall be prompt resumption of service upon
            receipt of payment by Supplier of the unpaid sums set forth in the
            default notice.

(b)            Each Party shall promptly notify the other of any claim received
               by it that the Formulation or distribution of the Product
               infringes or otherwise violates any Law respecting patents or
               trademarks or Third Party Intellectual Property. The Parties
               agree to consult with one another to arrive to a mutually
               acceptable procedure to contest any such claim and to set
               guidelines relating to the acceptable levels of costs and
               expenses and reimbursement of same; provided, however, that
               nothing contained herein shall prevent Supplier from ceasing to
               Formulate or supply Products as required by this Agreement until
               such time as the infringement claim is dealt with to its
               satisfaction unless and until Purchaser agrees to fully indemnify
               Supplier against such claim and an acceptable proposal for the
               reimbursement of Supplier's costs and expenses is made by
               Purchaser to Supplier, which indemnification shall be subject to
               the provisions of Sections 10.1, 10.3 and 10.4.

(C)            REIMBURSEMENT. Purchaser shall promptly reimburse Supplier for
               all of Supplier's costs and expenses (including without
               limitation reasonable attorney's fees and expenses) incurred as a
               result of the Formulation and or distribution of the Product by
               Supplier at Purchaser's request following any actions or
               allegations described in this Section 9.5 and shall defend,
               indemnify and hold Supplier, its Affiliates and the officers,
               directors, employees, agents, representatives and shareholders of
               each and hold Supplier harmless in connection therewith, to the
               extent not otherwise

                                     - 28 -
<PAGE>

               payable by Purchaser pursuant to this Agreement, subject to the
               provisions of Sections 10.1, 10.3 and 10.4.

              ARTICLE X - INDEMNITIES AND LIMITATION OF LIABILITIES

10.1  INDEMNITY OF SUPPLIER.

Subject to the limitations provided for in Section 10.4 hereof, Purchaser shall
defend, indemnify and hold Supplier, its Affiliates, and their officers,
directors, employees, agents, representatives and shareholders (the "Supplier
Indemnitees") harmless from and against any and all Losses suffered, incurred or
sustained by any of them or to which any of them becomes subject at any time
during the Term of this Agreement and for five (5) years thereafter, by reason
of any Proceeding to the extent arising out of or resulting from:

      (a)   the use, manufacture, processing, testing, packaging, labelling or
            storage of or any other dealing with any or all of the Products;

      (b)   subject to Section 5.3, any recall of any Product;

      (c)   any claim from a Third Party that the Formulation of a Product under
            this Agreement or its distribution infringes such party's
            Intellectual Property; or

      (d)   the breach by Purchaser of any of the terms of this Agreement
            including, without limitation, the Purchaser representations and
            warranties provided for in Section 8 hereof;

provided, however, that Supplier shall not be indemnified for any Losses to the
extent arising out of or from (i) any breach of this Agreement (including the
representations and warranties provided for in Section 8) by Supplier, or (ii)
the negligence or wilful misconduct of any Supplier Indemnitee in connection
with the performance of Supplier's obligations.

10.2  INDEMNITY OF PURCHASER.

Subject to the limitations provided for in Section 10.4 hereof, Supplier shall
defend, indemnify and hold Purchaser, its Affiliates, and the officers,
directors, employees, agents, representatives and shareholders of each, harmless
from and against any and all Losses suffered, incurred or sustained by any of
them or to which any of them becomes subject at any time during the Term of this
Agreement and for five (5) years thereafter, by reason of any Proceeding to the
extent arising out of or resulting from:

      (a)   the negligence or wilful misconduct of Supplier in performing its
            obligations under this Agreement; or

                                     - 29 -
<PAGE>

      (b)   a breach by Supplier of any of the terms of this Agreement
            including, without limitation, the Supplier representations and
            warranties provided for in Section 8 hereof.

10.3  INDEMNITY PROCEEDINGS.

      (a)   NOTICE OF CLAIM. If a claim by a Third Party is made against an
            Indemnitee, and if the Indemnitee intends to seek indemnity with
            respect thereto under this Agreement, the Indemnitee shall promptly
            (and in any case within [**] days of such claim being made) notify
            the Indemnitor of such claim with reasonable particulars. The
            Indemnitor shall have [**] days after receipt of such notice to
            undertake, conduct and control, through counsel of its own choosing
            (reasonably acceptable to Indemnitee) and at its own expense, the
            settlement or defense thereof, and the Indemnitee shall reasonably
            cooperate with them in connection therewith, except that with
            respect to settlements entered into by the Indemnitor: (i) the
            consent of the Indemnitee shall be required if the settlement
            provides for any payment from or equitable relief against the
            Indemnitee, which consent shall not be unreasonably withheld or
            delay; and (ii) the Indemnitor shall obtain the release of the
            Indemnitee.

      (b)   CONDUCT OF PROCEEDINGS. If the Indemnitor undertakes, conducts and
            controls the settlement or defense of such claim, (i) the Indemnitor
            shall permit the Indemnitee to participate in such settlement or
            defense through counsel chosen by the Indemnitee, provided that the
            fees and expenses of such counsel shall be borne by the Indemnitee;
            and (ii) the Indemnitor shall promptly reimburse the Indemnitee for
            the full amount of any Loss resulting from any claim and all related
            expenses (other than the fees and expenses of counsel as aforesaid)
            incurred by the Indemnitee. The Indemnitee shall not pay or settle
            any claim so long as the Indemnitor is reasonably contesting any
            such claim in good faith on a timely basis. Notwithstanding the two
            immediately preceding sentences, the Indemnitee shall have the right
            to pay or settle any such claim, provided that in such event it
            shall waive any right to indemnity therefor by the Indemnitor.

      (c)   INDEMNITEE RIGHTS. With respect to Third Party claims, if the
            Indemnitor does not notify the Indemnitee within [**] days after the
            receipt of the Indemnitee's notice of a claim of indemnity hereunder
            that it elects to undertake the defense thereof, the Indemnitee
            shall have the right, but not the obligation, to contest, settle or
            compromise the claim in the exercise of its reasonable judgement
            using counsel of its choice at the expense of the Indemnitor.

      (d)   EMPLOYEE ASSISTANCE. In the event of any claim by a Third Party
            against an Indemnitee, the defense of which is being undertaken and
            controlled by the Indemnitor, the Indemnitee will use all reasonable
            efforts to make available to the Indemnitor those employees whose
            assistance, testimony or presence is necessary to assist the
            Indemnitor in evaluation and in defending any such claim; provided
            that the Indemnitor shall be responsible for the expense associated
            with any

                                     - 30 -
<PAGE>
      employees made available by the Indemnitee to the Indemnitor hereunder,
      which expense shall be equal to an amount to be mutually agreed upon per
      person per hour for each hour or portion thereof that such employees are
      assisting, and which shall not exceed the actual cost to the Indemnitee
      associated with such employees.

10.4  LIMITATIONS OF LIABILITY.

(a)   INDIRECT DAMAGES. Notwithstanding the provisions of this Agreement
      which might otherwise be to the contrary, neither Party shall be
      liable to the other, or have any obligation to indemnify any
      Indemnitee, as the case may be, for any indirect, incidental,
      special or consequential damages or Losses, including any loss of
      profits or of expected revenue, suffered by either Party, however
      caused and on any theory of liability;

(b)   AGGREGATE LIABILITY. Each Party's total aggregate liability for
      damages sustained by the other Party pursuant to the terms of this
      Agreement shall be no greater than the Price paid or payable by
      Purchaser hereunder, or [**] Canadian dollars (Cdn$[**]), which ever
      is greater, save and except for (i) acts of wanton recklessness or
      indifference or negligence or intentional misconduct by the liable
      Party in performing its obligations hereunder, and (ii) such Party's
      indemnification obligations with respect to Third Party claims
      hereunder.

                        ARTICLE XI - TERM AND TERMINATION

11.1  TERM OF AGREEMENT.

(a)   INITIAL TERM. This Agreement is effective from the date of its
      execution and shall continue in effect for three (3) years from such
      date ("Initial Term") unless earlier terminated or extended in
      accordance with the terms of the Agreement.

(b)   RENEWAL TERM. This Agreement will be automatically renewed for
      successive periods no longer than ONE (1) year each ("Renewal
      Terms") following the expiration of the Initial term, unless
      otherwise indicated by either Party to the other with a prior one
      hundred eighty (180) day written notice.

11.2  TERMINATION OF AGREEMENT.

(a)   TERMINATION FOR BREACH. Either Party may terminate this Agreement
      with written notice to the other Party, if the other Party defaults
      in a material respect in the performance or observance of any of its
      obligations under this Agreement and such default continues,
      unremedied, for a period of sixty (60) days following written notice
      of such default to the defaulting Party. Such cure period shall be
      reduced to thirty (30) days in the event of a default of payment by
      Purchaser.

                                     - 31 -
<PAGE>

            Notwithstanding anything to the contrary contained herein, the
            Parties agree that Supplier shall have the right to suspend the
            Formulation and supply of any Products ordered pursuant to Accepted
            Purchase Orders in the event that Purchaser is in default under this
            Agreement until Purchaser cures such breach to Supplier's
            satisfaction, acting reasonably.

      (b)   BANKRUPTCY, ETC. To the extent permitted by applicable Law, either
            Party may terminate this Agreement upon notice to the other Party,
            if the other Party makes an assignment for the benefit of its
            creditors, is adjudged bankrupt, becomes insolvent, ceases or
            threatens to cease to carry on business, files or consents to the
            filing of a petition in bankruptcy, seeks to take advantage of any
            legislation relating to insolvency, arrangement or relief of
            debtors, winds-up or liquidates, or if any receiver, trustee,
            liquidator or similar official is appointed of such other Party or
            any of its property.

      (c)   TERMINATION FOR CONVENIENCE. Either Supplier or Purchaser may
            terminate this Agreement, without penalty, for any reason upon
            giving eighteen (18) months prior written notice to the other Party
            of such termination.

      (d)   EFFECT OF TERMINATION.

      Following termination or expiration of this Agreement for any reason:

                  (i) Purchaser shall purchase from Supplier all (i) remaining
                  Materials, which conforms to the Materials Specifications,
                  purchased by Supplier to conform to the Firm Zone and Material
                  Zone in accordance with Section 4.2 (a) and (b) hereof (unless
                  Supplier has terminated the Agreement for convenience pursuant
                  to Section 11.2 (c)), (ii) all Long Lead Time Materials
                  purchased by Supplier in accordance with Section 4.2 (d)
                  hereof, (iii) all finished Products Formulated by Supplier
                  hereunder in accordance with the Firm Zone and (iv) all of the
                  Safety Stock within thirty (30) days of the delivery of same
                  to Purchaser by Supplier;

                  (ii) Purchaser will have access to any Formulation Records and
                  Batch samples relating to the Formulation of the Products
                  under this Agreement for the period during which the
                  Formulation Records and Batch sample must be kept by Supplier
                  in accordance with this Agreement or the Quality Agreement;

                  (iii) Supplier shall provide to Purchaser the originals of all
                  Specifications; provided, however, that a copy of such
                  document may be retained by Supplier for archival purposes, as
                  means of determining any continuing obligation or
                  confidentiality, but for no other purpose; and

                  (iv) Purchaser shall, within the relevant payment period
                  specified in this Agreement, or, if no payment period is
                  specified in this Agreement,

                                     - 32 -
<PAGE>

                  within thirty (30) days of the date of termination of this
                  Agreement, pay to Supplier any outstanding payments to be made
                  pursuant to this Agreement with respect to the supply of
                  Materials, Products and services performed by Supplier
                  hereunder. Any other outstanding payments shall be made
                  pursuant to the applicable written agreement entered into
                  between the parties. In the event no such payment terms were
                  agreed to, Purchaser shall, within thirty (30) days of the
                  date of termination of this Agreement, make any such
                  outstanding payments.

                           ARTICLE XII - MISCELLANEOUS

12.1  RELATIONSHIP OF THE PARTIES.

The relationship between Supplier and Purchaser created pursuant to this
Agreement is intended to be and shall be solely that of independent contractors.
Neither Party, nor its employees, agents or representatives shall under any
circumstances be considered employees, agents, partners, joint venturers or
representatives of the other Party. Neither Party, nor its employees, agents or
representative shall act or attempt to act, or represent themselves, directly or
by implication, as an employee, agent, joint venturer, partner or representative
of the other Party or in any manner assume or create, or attempt to assume or
create, any obligation or liability of any kind, express or implied, on behalf
of or in the name of the other Party. No Person other than Supplier or Purchaser
may rely on or enforce any provision of this Agreement.

12.2  FORCE MAJEURE.

(a)   DEFINED. In this Agreement, "Force Majeure" means an event or occurrence
      beyond the reasonable control of a Party which by the exercise of
      reasonable diligence could not be overcome, which may include, but are not
      limited to, strikes, lock-outs, labour disruptions, acts of God, changes
      in the Law, restraints of governments, riots, arrests of people, acts of
      war, civil disturbances, terrorist actions, rebellion or sabotage, severe
      breakage of or accidents to machinery, plant or equipment, pipeline or
      pipe failure, failure of fuel or water supply or transportation, fire,
      flood, ice, lightning, epidemic, explosion, hydro electric power failures,
      defaults by Third Party suppliers, including Designated Suppliers, not
      caused by the act or omission of the Party, or any delay or failure by a
      Governmental Authority to issue any relevant permit or order not caused by
      the act or omission of the Party.

(b)   NON-DEFAULT. A Party shall be deemed not to be in default with respect to
      non-performance of any of its obligations under this Agreement, if and so
      long as such non-performance is due in whole or in some material way to an
      event of Force Majeure and that Party has used commercially reasonable
      efforts to remove the event of Force Majeure and to perform its
      obligations under the Agreement. If an

                                     - 33 -
<PAGE>

      event of Force Majeure occurs, the Party affected shall promptly notify
      the other Party of the occurrence of the event, its extent and probable
      duration.

(c)   CESSATION OF FORCE MAJEURE. Subject to Section 12.2(b) hereof, if Supplier
      is unable to supply Purchaser with its requirements of Products by reason
      of Force Majeure, Force Majeure shall excuse Supplier's performance until
      the Force Majeure has ceased and for a reasonable period of time
      thereafter, to allow Supplier to restore itself to the position it was in
      with respect to the Formulation of Products immediately prior to the Force
      Majeure. Within ninety (90) days of notification by Supplier that it is
      able to resume the necessary supply of the Products to Purchaser, or the
      period specified in Section 2.1, whichever is later, Purchaser shall
      resume obtaining its requirements of Products from Supplier pursuant to
      the terms of this Agreement. Purchaser shall be excused from its
      obligation set forth in Section 2.1 hereof during Supplier's inability to
      perform the Formulation of the Products as a result of a Force Majeure
      event (and the parties hereby agree that Supplier may use the Safety Stock
      to support the manufacturing of Purchaser's orders), until the cessation
      of such Force Majeure event in accordance with this Section 12.2 (c) and
      thereafter as specified in Section 2.1. Supplier shall suffer no penalty
      or incur any liability for its inability to perform hereunder by reason of
      Force Majeure.

(d)   TERMINATION. If a Party fails to perform any of its obligations under this
      Agreement by reason of Force Majeure and such non-performance continues
      for a period of [**] days from the first occurrence of the event of Force
      Majeure, the other Party may, if itself is not in default under the
      Agreement, terminate this Agreement by providing written notice to that
      effect to the non-performing Party. In the event of such termination, both
      Parties' respective rights and obligations under this Agreement shall
      terminate except for any amounts previously due and owing by one Party to
      the other and except for any other obligations which this Agreement
      expressly provides shall survive termination, including Sections 11.2(d)
      and 12.16.

12.3  FURTHER ASSURANCES.

Each Party will at any time and from time to time, upon the request of the other
Party, execute and deliver such further documents and do such further acts and
things as the other Party may reasonably request to evidence, carry out and give
full effect to the terms, conditions, intent and meaning of this Agreement.

12.4  CONFIDENTIALITY.

This Agreement is subject to the confidentiality provisions attached hereto as
Schedule "D".

12.5  NOTICES.

                                     - 34 -
<PAGE>

Any notice or other communication made under this Agreement (other than routine
business communication) shall be in writing and shall be properly given: (i)
when delivered if sent by personal delivery; (ii) when transmitted if sent by
facsimile with confirmation of transmission; or (iii) three (3) Business Days
after being posted if sent by registered mail return receipt requested,
addressed:

(a)   if to Supplier, to it at:

                            16751 Trans Canada Highway
                            Kirkland, Quebec, Canada  H9H 4J4
                            Attn: President of DRAXIS Pharma Division
                            Facsimile: (514) 694-3841

      with a copy to:       DRAXIS Health Inc.
                            16751 Trans Canada Highway
                            Kirkland, Quebec, Canada  H9H 4J4
                            Attn:  General Counsel and Secretary
                            Facsimile: (514) 630-7159

(b)   if to Purchaser, to it at:

                            Penwest Pharmaceuticals Co.
                            39 Old Ridgebury Road, Suite #11
                            Danbury, Connecticut, U.S.A. 06810
                            Attn.: Kevin Fitzmaurice,
                            Director, Technical Operations
                            Facsimile: (845) 878-3420

      with a copy to:       Penwest Pharmaceuticals Co.
                            39 Old Ridgebury Road, Suite #11
                            Danbury, Connecticut, U.S.A. 06810
                            Attn: Chief Financial Officer
                            Facsimile: (203) 794-1393

A Party may change its address for notice by notifying the other Party at any
time in accordance with the provisions of this Section 12.5.

12.6  ENTIRE AGREEMENT.

This Agreement and the Quality Agreement and all Schedules attached hereto, and
the letter dated [**] and accepted by Penwest on [**] with the subject "Proposal
for the Stability Fee for Timerx(R)-N granules", supersede any prior agreements
between the Parties as to the subject matter of the Agreement, whether oral or
in writing, including, without limitation, the Prior Agreement (other than those
provisions

                                     - 35 -
<PAGE>

which survive termination of such agreement, provided, that Section 3.4 therein
shall not apply) and contains the entire understanding between the Parties as to
the subject matter of the Agreement.

12.7  WAIVER.

No delay or failure on the part of a Party in exercising any rights under this
Agreement shall affect any of such Party's rights and any waiver of a Party's
rights under this Agreement shall be in writing and signed by such Party.

12.8  AMENDMENT.

This Agreement may not be modified or amended except by further written
statement signed by both Parties.

12.9  SEVERABILITY.

Any provision of this Agreement that is held to be inoperative, unenforceable or
invalid in any jurisdiction shall be inoperative, unenforceable or invalid in
that jurisdiction without affecting any other provision hereof in that
jurisdiction or the operation, enforceability or validity of that provision in
any other jurisdiction, and to this end the provisions hereof are declared to be
severable.

12.10 ENUREMENT.

This Agreement is binding on and enures to the benefit of each Party and its
successors and permitted assigns.

12.11 ASSIGNMENT.

Neither Purchaser nor Supplier shall assign or otherwise transfer any rights
under or interest in this Agreement without the other Party's prior written
consent, such consent not to be unreasonably withheld or delayed.
Notwithstanding the foregoing, (a) Supplier may assign this Agreement to an
Affiliate provided all Formulation remains at the Facility; (b) Purchaser may
assign this Agreement to an Affiliate, and (c) either Party may assign this
Agreement in the event of a sale or transfer of all or substantially all of its
business related to the Products by way of acquisition or merger.

12.12 COUNTERPARTS.

This Agreement may be executed in counterparts and by facsimile transmission,
each of which shall be deemed to be an original and which together shall
constitute one and the same agreement.

12.13 CONTRA PROFERENTUM.

                                     - 36 -
<PAGE>

This Agreement is the result of mutual negotiations between the Parties, and
each Party agrees that no part of this Agreement shall be interpreted against
the other Party on the grounds that particular language was drafted by such
Party.

12.14 SUBCONTRACTING.

Supplier may be permitted to subcontract in whole or in part its obligations
under this Agreement upon the consent of Purchaser, such consent not be to
unreasonably withheld or delayed.

12.15 GOVERNING LAW.

This Agreement shall be governed by and construed in accordance with the laws of
the Province of Quebec and the laws of Canada applicable therein. The Parties
expressly agree to exclude the application of the United Nations Convention on
Contracts for the International Sale of Goods. Any disputes arising between the
Parties relating to this Agreement shall be subject to the exclusive
jurisdiction and venue of the provincial and federal courts located in the
Province of Quebec, and the Parties hereby waive any objection which they may
have now or hereafter to the laying of venue of any proceedings in said courts
and to any claim that such proceedings have been brought in an inconvenient
forum, and further irrevocably agree that a judgment or order in any such
proceedings shall be conclusive and binding upon each of them and may be
enforced in the courts of any other jurisdiction.

12.16 SURVIVAL.

The following provisions shall survive the expiration or termination of this
Agreement: Sections 3.4 (last sentence only), 5.3, 6.4, 6.5, 8.1(a)(iv),
8.2(a)(viii), 8.4, 9.1(a) through (d), 9.4, 10, 11.2(d), 12.1, 12.2(d), 12.4,
12.5, 12.6, 12.7, 12.8, 12.9, 12.10, 12.12, 12.13, 12.15, 12.16 and 12.17, and
Schedule "D" (as provided in Section 9 thereof).

12.17 LANGUAGE CLAUSE.

The Parties have requested that this Agreement and all ancillary documents be
drawn up in the English language only. Les parties ont exige que cette entente
ainsi que tous les documents y afferent soient rediges en anglais seulement.

                  [Remainder of Page Intentionally Left Blank]

                                     - 37 -
<PAGE>

      IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date written above, by their authorized officers, who by signing confirm their
authority and intention to bind the Party they represent.

DRAXIS SPECIALTY PHARMACEUTICALS INC.

Per: /s/ John Durham
     -------------------------------------------
     John Durham
     President of DRAXIS Pharma Division

PENWEST PHARMACEUTICALS CO.

Per: /s/ Benjamin L. Palleiko
     -------------------------------------------
     Benjamin L. Palleiko
     Senior Vice President, Corporate Development
     and Chief Financial Officer

                                     - 38 -
<PAGE>

                                  SCHEDULE "A"

                             PRODUCT SPECIFICATIONS

The parties acknowledge that they received copies of the Specifications for the
Product and that said Specifications are now on file.

                                     - 39 -
<PAGE>

                                  SCHEDULE "B"

                                QUALITY AGREEMENT


                    Confidential Materials omitted and filed
            separately with the Securities and Exchange Commission.

                                      [**]


                                     - 40 -
<PAGE>

                                  SCHEDULE "C"

                                 PRODUCT PRICES

<TABLE>
<CAPTION>
PRODUCT :                                      YEAR 2006 PRICES/PER KG
---------                                      -----------------------
<S>                              <C>           <C>
607520 TIMERx(TM)-N :              (720 kg)           CDN $[**] kg
600420 TIMERx(TM)-A :              (480 kg)           CDN $[**] kg
600520 TIMERx(TM)-O:               (160 kg)           CDN $[**] kg
600450 TIMERx(TM)-M50A:            (480 kg)           CDN $[**] kg
600470 TIMERx(TM)-M70A:            (480 kg)           CDN $[**] kg
</TABLE>

                                     - 41 -
<PAGE>

                                  SCHEDULE "D"

                        CONFIDENTIAL DISCLOSURE AGREEMENT

Between PENWEST PHARMACEUTICALS CO. a corporation incorporated under the laws of
Washington, having offices at 39 Old Ridgebury Road, Suite #11, Danbury,
Connecticut, U.S.A. 06810 and at 2981 Route 22, Patterson, New York, U.S.A.
12563; ("PURCHASER") and DRAXIS SPECIALTY PHARMACEUTICALS INC., a corporation
amalgamated under the laws of Canada having its principal office at 16751
Trans-Canada Highway, Kirkland, Quebec H9H 4J4 ("SUPPLIER");

1. Supplier possesses certain information concerning its business and other
confidential information (along with such information disclosed pursuant to the
Prior Agreement, the "Supplier Information") which it wishes to disclose to
Purchaser for purposes of carrying out the Manufacture and Supply Agreement
between the parties (the "Agreement") (the "Purpose"). Purchaser possesses
certain information concerning its business and other confidential information
(along with such information disclosed pursuant to the Prior Agreement, the
"Purchaser Information") which it wishes to disclose to Supplier for the
Purpose. In addition to the terms defined above, unless something in the context
or subject matter is inconsistent therewith:

      (a) "Discloser" means Supplier with respect to the disclosure of the
Supplier Information and means Purchaser with respect to the disclosure of the
Purchaser Information;

      (b) "Information" means Supplier Information with respect to the
disclosure or receipt of Supplier Information and means Purchaser Information
with respect to the disclosure or receipt of Purchaser Information; and

      (c) "Recipient" means Supplier with respect to the receipt of Purchaser
Information and means Purchaser with respect to the receipt of Supplier
Information.

2. Discloser shall at its discretion provide such of the Information to
Recipient as is required for the Purpose. Nothing in this Agreement obligates
Discloser to make any particular disclosure of Information.

3. All right, title and interest in and to the Information shall remain the
exclusive property of Discloser and the Information shall be held in trust and
confidence by Recipient for Discloser. No interest, license or any right
respecting the Information, other than as expressly set out herein, is granted
to Recipient under this Agreement by implication or otherwise.

4. Recipient shall not use the Information in any manner except as reasonably
required for the Purpose.

                                     - 42 -
<PAGE>

5. Recipient shall use all reasonable efforts to protect Discloser's interest in
the Information and keep it confidential, using a standard of care no less than
the degree of care that Recipient would be reasonable expected to employ for its
own similar confidential information. In particular, Recipient shall not,
directly or indirectly, disclose, allow access to, transmit or transfer the
Information to a Third Party without the Discloser's prior written consent.
Recipient shall disclose the Information only to those of its or its Affiliates'
employees, or to those employees of any consultant of the Recipient, who have a
need to know the Information for the Purpose. Recipient shall, prior to
disclosing the Information to such employees and consultants, issue appropriate
instructions to them to satisfy its obligations herein and obtain their written
agreement to receive and use the Information on a confidential basis on the same
conditions as contained in this Schedule "D".

6. The Information shall not be copied, reproduced in any form or stored in a
retrieval system or database by Recipient without the prior written consent of
Discloser, except for such copies and storage as may reasonably be required
internally by Recipient for the Purpose.

7. The obligations of the Recipient under Sections 4, 5 and 6 of this Schedule
"D" shall not apply to Information:

      (a) which at the time of disclosure is or was readily available to the
trade or the public;

      (b) which after disclosure becomes readily available to the trade or the
public, other than through a breach of the Prior Agreement or this Agreement;

      (c) which is subsequently lawfully and in good faith obtained by Recipient
from an independent Third Party without breach of the Prior Agreement or this
Agreement, as shown by documentation sufficient to establish the Third Party as
a source of the Information, and not obtained by the Third Party from Discloser;

      (d) which Recipient can establish, by documented and competent evidence,
was in its possession prior to the date of disclosure of such Information by
Discloser, or

      (e) any Information which the Recipient is required to disclose pursuant
to Law, applicable court order or regulatory order, provided that Recipient
shall (to the extent permitted by Law) promptly notify Discloser in writing of
any such requirement for disclosure prior to the disclosure of the Information
in accordance with such applicable law, regulatory order or court order.

8. Recipient shall, upon request of Discloser, immediately return the
Information and all copies thereof in any form whatsoever under the power or
control of Recipient to

                                     - 43 -
<PAGE>

Discloser, and delete the Information from all retrieval systems and databases,
save for one copy which may be kept for legal archival purposes only.

9. Due to the valuable and proprietary nature of the Information to Discloser,
the obligations assumed by Recipient under this Schedule "D" shall continue for
ten (10) years after disclosure of such Information.

10. Each Party acknowledges that any breach of this Schedule "D" may cause
irreparable harm to the other Party, and agrees that the remedies for breach may
include, in addition to damages and other available remedies, injunctive relief
against such breach. The prevailing Party shall be entitled to the award of its
reasonable attorney fees in any action to enforce this Schedule "D".

11. Any notice or other communication made under this Schedule "D" (other than
routine business communication) shall be in writing and shall be properly given:
(i) when delivered if sent by personal delivery; (ii) when transmitted if sent
by facsimile with confirmation of transmission; or (iii) three (3) Business Days
after being posted if sent by registered mail return receipt requested,
addressed:

      if to Supplier, to it at:
                                  16751 Trans Canada Highway
                                  Kirkland, Quebec, Canada  H9H 4J4
                                  Attn: President of DRAXIS Pharma Division
                                  Facsimile: (514) 694-3841

      with a copy to:
                                  DRAXIS Health Inc.
                                  16751 Trans Canada Highway
                                  Kirkland, Quebec, Canada  H9H 4J4
                                  Attn:  General Counsel and Secretary
                                  Facsimile: (514) 630-7159

      if to Purchaser, to it at:

                                  Penwest Pharmaceuticals Co.
                                  39 Old Ridgebury Road, Suite #11
                                  Danbury, Connecticut, U.S.A. 06810
                                  Attn.: Kevin Fitzmaurice,
                                  Director, Technical Operations
                                  Facsimile: (845) 878-3420

                                     - 44 -
<PAGE>

      with a copy to:             Penwest Pharmaceuticals Co.
                                  39 Old Ridgebury Road, Suite #11
                                  Danbury, Connecticut, U.S.A. 06810
                                  Attn: Chief Financial Officer
                                  Facsimile: (203) 794-1393

A Party may change its address for notice by notifying the other Party at any
time in accordance with the provisions of this Section 11.

12. This Schedule "D" shall be governed by and construed in accordance with the
laws of the Province of Quebec and the laws of Canada applicable therein. Any
disputes arising between the Parties relating to this Schedule "D" shall be
subject to the exclusive jurisdiction and venue of the provincial and federal
courts located in the Province of Quebec, and the Parties hereby waive any
objection which they may have now or hereafter to the laying of venue of any
proceedings in said courts and to any claim that such proceedings have been
brought in an inconvenient forum, and further irrevocably agree that a judgment
or order in any such proceedings shall be conclusive and binding upon each of
them and may be enforced in the courts of any other jurisdiction.

13. This Schedule "D" is incorporated into and made a part of the Agreement.

                                     - 45 -
<PAGE>

                                  SCHEDULE "E"

                            LONG LEAD TIME MATERIALS

NONE.

                                     - 46 -