<PAGE>

                                                                     EXHIBIT 4.6

                            SUBSCRIPTION AGREEMENT

THIS AGREEMENT is made in the City of Montreal, Province of Quebec, as of
February 18, 2000;
<TABLE>
<CAPTION>
<S>                                <C>
AMONG:                             SGF SANTE INC., a company duly
                                   incorporated pursuant to the laws of
                                   Quebec, having its head office at
                                   600 de La Gauchetiere Street West,
                                   Suite 1700, Montreal, Quebec, H3B 4L8,
                                   acting and represented herein by Francis
                                   Bellido, its president, and by Michel
                                   Beland, its secretary, duly authorized as
                                   they so declare;

                                   (hereinafter referred to as "SGF SANTE")

AND:                               DRAXIS PHARMA INC., a corporation duly
                                   incorporated under the laws of Canada,
                                   having its head office at 1170 Peel Street,
                                   5th Floor, Montreal, Quebec, H3B 4S8, acting
                                   and represented herein by Dwight Gorham, its
                                   president, duly authorized as he so declares;

                                   (hereinafter referred to as the
                                   "CORPORATION")
</TABLE>

WHEREAS, subject to the terms hereof, SGF Sante wishes to subscribe for
6,302,521 Common Shares in the capital of the Corporation, representing
32.05% of the outstanding Common Shares of the Corporation on a non-diluted
basis after such subscription and after the subscription by Dwight Gorham and
Mohammed Barkat respectively, pursuant to their employment agreement,
referred to hereinafter;

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
covenants, agreements, warranties and payments herein set out and provided
for, the parties hereto hereby respectively, covenant and agree as follows:


                                    ARTICLE 1

                         DEFINITIONS AND INTERPRETATION

1.1  DEFINITIONS. In addition to the terms defined elsewhere in this
     Agreement, where used in this Agreement, unless there is something in the
     context or the subject matter inconsistent therewith, the following terms
     shall have the following meanings respectively:

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                                      -2-

     "ACCOUNTS PAYABLE" means all amounts due and owing by the Corporation to
     traders, suppliers and other Persons in the ordinary course of Business;

     "ACCOUNTS RECEIVABLE" means any and all accounts receivable, bills,
     receivables, trade accounts, book debts and insurance claims recorded as
     receivables in the Books and Records of the Corporation and any other
     amount due to the Corporation, including any refunds and rebates, and the
     benefit of all security (including cash deposits), guarantees and other
     collateral held by the Corporation;

     "AGREEMENT" means this subscription agreement including all attached
     Schedules, as the same may be supplemented, amended, restated or replaced
     from time to time;

     "APPLICABLE FISCAL LAW" means the INCOME TAX ACT (Canada);

     "APPLICABLE LAW" means any domestic or foreign statute, law, ordinance,
     regulation, by-law (zoning or otherwise), or order that applies to the
     Corporation;

     "ARTICLES" means the documents of incorporation of a corporation, as
     amended from time to time or the equivalent in any applicable jurisdiction
     or with respect to any other entity;

     "ASSETS" means all of the assets and properties, moveable and
     immoveable, tangible and intangible of a Person;

     "BENEFIT PLANS" means all bonus, deferred compensation, incentive
     compensation, share purchase, share appreciation and share option,
     severance or termination pay, hospitalization or other medical benefits,
     life or other insurance, dental, disability, salary continuation,
     vacation, supplemental unemployment benefits, profit-sharing, hypothec
     assistance, pension, retirement or supplemental retirement plan, program,
     agreement or arrangement, and each other employee benefit plan, program,
     agreement or arrangement sponsored, maintained or contributed to or
     required to be contributed to by the employer, whether or not insured or
     funded, whether formal or informal and whether sponsored by the Corporation
     or a Related Party to the Corporation and including the Equity
     Participation Plan;

     "BOOKS AND RECORDS" means the books of account, accounting records and
     other financial data and information, including copies of Tax Returns and
     tax assessment notices for each fiscal year, and all books, records, sales
     and purchase records, lists of suppliers and customers, formulae, business
     reports and research and development information including, without
     limitation, all data and information stored electronically or on computer
     related media;

     "BUSINESS" means the business carried on by the Corporation which
     consists, INTER ALIA, of contract manufacturing of pharmaceutical products;

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                                      -3-

     "BUSINESS DAY" means a day other than a Saturday or Sunday, on which
     Canadian chartered banks are open for the transaction of domestic business
     in the City of Montreal, Province of Quebec;

     "BUSINESS PLAN" means the business plan of the Corporation attached
     hereto as Schedule 1.1(a) as it may be amended from time to time in
     accordance with the Shareholders' Agreement;

     "BY-LAWS" has the meaning set forth in subsection 3.1.4;

     "CLAIMS" has the meaning set forth in section 7.2;

     "CLOSING" means the completion of the subscription by SGF Sante for the
     Subscribed Shares and the completion of all other transactions contemplated
     by this Agreement which are to occur contemporaneously with the
     subscription for the Subscribed Shares;

     "CLOSING DATE" has the meaning set forth in section 6.1;

     "CLOSING DOCUMENT" means any document delivered at or subsequent to the
     Closing Date as provided in or pursuant to this Agreement;

     "COLLECTIVE AGREEMENT" means any collective agreement, contract, letter
     of understanding, letter of intent or other written communication with any
     labour union or association which may qualify as a labor union, which would
     cover any employees;

     "COMMON SHARES" means the common shares of the share capital of the
     Corporation;

     "CONTRACT" has the meaning set forth in subsection 3.1.11;

     "CONTROL" (and "CONTROLLING") for a legal person means the holding, or
     exercise of control or direction over, by a Person, directly or indirectly,
     other than as a creditor only, of securities which grant it more than 50%
     of the votes that may be cast for the election of the directors of the
     legal person in question (irrespective of whether or not, at the time,
     stock of any other class or classes of such Person shall have or might have
     voting power by reason of the happening of any contingency);

     "CONVERTIBLE SECURITY" means a security of a body corporate, including a
     debt obligation, which is convertible into, exchangeable for or which
     carries a right or obligation to purchase, one or more shares, voting
     securities or participating securities of such body corporate, including
     for greater certainty, options and warrants;

     "CORPORATION" has the meaning ascribed thereto in the preamble;


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                                      -4-

     "CORPORATION INDEMNIFIED PERSONS" has the meaning set forth in section 7.3;

     "DISPUTE" has the meaning set forth in section 8.2;

     "DRAXIS HEALTH" means Draxis Health Inc., a corporation incorporated
     pursuant to the laws of Canada, the shares of which are traded on the
     Toronto Stock Exchange and NASDAQ;

     "EFFECTIVE DATE" means the close of business on January 31, 2000;

     "ENCUMBRANCE" means any security interest, mortgage, lien, hypothec,
     pledge, servitude, assignment, charge, call, commitment, right of first
     refusal, prior claim, demand, restriction, deemed trust, voting trust or
     pooling agreement with respect to securities, an adverse claim or any
     other right or option affecting any Assets or shares;

     "ENVIRONMENTAL LAWS" means all applicable federal, provincial or municipal
     (including the Montreal Urban Community) statutes, regulation, by-laws,
     permits, policies and orders of any Governmental Authority, relating in
     whole or in part to the environment or public or occupational health and
     safety (including the ATOMIC ENERGY CONTROL ACT (Canada));

     "EQUIPMENT" means all fixed assets and tangible personal property;

     "EQUITY PARTICIPATION PLAN" means the equity participation plan adopted by
     the Corporation, a copy of which is attached hereto as Schedule 1.1(c);

     "FINANCIAL STATEMENTS" means the audited financial statements for the
     Corporation for the year ended December 31, 1998 and unaudited financial
     statements for the year ended December 31, 1999;

     "GAAP" means generally accepted accounting principles from time to time
     approved by the Canadian Institute of Chartered Accountants, or any
     successor institute, applicable as at the date on which any calculation or
     determination is required to be made in accordance with generally accepted
     accounting principles, and where the Canadian Institute of Chartered
     Accountants includes a recommendation in its Handbook concerning the
     treatment of any accounting matter, such recommendation shall be regarded
     as the only generally accepted accounting principle applicable to the
     circumstances that it covers;

     "GOVERNMENTAL AUTHORITY" means any domestic or foreign government whether
     federal, provincial, state or municipal and any governmental agency,
     governmental authority, governmental tribunal, governmental body or
     governmental commission of any kind whatever;

     "HAZARDOUS SUBSTANCES" has the meaning set forth in subsection 3.1.27;

<PAGE>

                                      -5-

     "IMMOVEABLE PROPERTY" has the meaning set forth in subsection 3.1.20;

     "INCLUDING" means "including without limitation" and the term "including"
     shall not be construed to limit any general statement which it follows to
     the specific or similar items or matters immediately following it;

     "INDEBTEDNESS" of any Person means all obligations of such Person (i) for
     borrowed money (including any negative cash balance or intercompany
     advance), (ii) evidenced by notes, bonds, debentures or similar
     instruments, (iii) for which interest charges are customarily paid, (iv)
     under conditional sale or other title retention agreements relating to
     property or assets purchased by such Person, (v) issued or assumed as the
     deferred purchase price of property or services (other than trade accounts
     payable and accrued obligations incurred in the ordinary course of
     business), (vi) under capital leases, (vii) in respect of interest rate
     protection agreements, foreign currency exchange agreements or other
     interest or exchange rate hedging arrangements, (viii) as an account party
     in respect of letters of credit and bankers' acceptances, (ix) with respect
     to Indebtedness of others, secured by (or for which the holder of such
     Indebtedness has an existing right, contingent or otherwise, to be secured
     by) any Encumbrance on property owned or acquired by such Person, or (x) in
     the nature of guarantees of Indebtedness of others;

     "INDEMNITEE" has the meaning set forth in subsection 7.4.1;

     "INDEMNITOR" has the meaning set forth in subsection 7.4.1;

     "INTELLECTUAL PROPERTY RIGHTS" has the meaning set forth in subsection
     3.1.19;

     "INTER-COMPANY AGREEMENTS" has the meaning set forth in subsection 3.1.11;

     "INVENTORY" means all inventories of raw materials, work-in-progress,
     stock-in-trade, finished goods, supplies, packaging and advertising and
     publicity materials, wherever located;

     "KNOWLEDGE","TO THE BEST OF THE KNOWLEDGE" and similar expressions mean,
     with respect to any particular fact or other matter, in the case of an
     individual:

     (a)    that such individual is actually aware of such fact or other matter,
            or

     (b)    that a prudent individual could be expected to discover or otherwise
            become aware of such fact or other matter in the course of
            conducting a reasonably comprehensive investigation concerning the
            existence of such fact or other matter;

<PAGE>

                                      -6-

     and, in the case of a Person other than an individual, that any individual
     who is serving, as an officer or director of such Person (or in any similar
     capacity) has, or at any time had, or would be considered to have knowledge
     of such fact or other matter in accordance with the above;

     "LICENCE" means any licence, permit, approval, right, privilege, concession
     or franchise issued, granted, conferred or otherwise created by a
     Governmental Authority;

     "MANAGEMENT SHAREHOLDERS" means each of Dwight Gorham and Mohammed Barkat;

     "MANAGEMENT SUBSCRIPTION" means the subscription letter for shares of the
     Corporation executed by each Management Shareholder on the Closing Date;

     "MATERIAL ADVERSE EFFECT" means any change or effect that is materially
     adverse or would reasonably be expected to be material to the Business,
     operations, Assets or condition, financial or otherwise, of the
     Corporation, in each case or in the aggregate;

     "MERCK FROSST AGREEMENT" means the agreement entered into as of June 12,
     1998 among Merck Frosst Canada Inc., the Corporation, Draxis Health and
     Draximage Inc.;

     "NOTICE TO ARBITRATE" has the meaning set forth in section 8.2;

     "PERSON" shall be broadly interpreted and includes an individual, body
     corporate, partnership, joint venture, trust, association, unincorporated
     organization, the Crown, any Governmental Authority or any other entity
     recognized by law;

     "RELATED PARTY" with respect to another Person means (i) a Person who/which
     does not deal at arm's length with this other Person or with any of the
     Persons described in subparagraphs (ii) to (vi) inclusively of this
     definition, within the meaning of the Applicable Fiscal Law; (ii) a Person
     who/which is an "associate" in relation to this other Person under the
     CANADA BUSINESS CORPORATIONS ACT; (iii) a Person in relation to whom/which
     this other Person is an "associate" under the CANADA BUSINESS CORPORATIONS
     ACT; (iv) a Subsidiary of this other Person; (v) a Person in relation to
     whom/which this other Person is a Subsidiary or (vi) a Person who/which is
     an "affiliate" of this other Person under the CANADA BUSINESS CORPORATIONS
     ACT;

     "RIGHTS" means any options, rights, warrants or subscription privileges
     issued or granted by any Person (whether or not currently exercisable or
     exercisable on conditions) to purchase securities or shares or other
     interests of such Person;

     "SGF SANTE INDEMNIFIED PERSONS" has the meaning set forth in section 7.2;


<PAGE>

                                      -7-

     "SGF SHARE OF THE UNDERLYING LOSS" has the meaning set forth in section
     7.6;

     "SHAREHOLDERS' AGREEMENT" means the unanimous shareholders' agreement
     entered into on the Closing Date among Draxis Health, SGF Sante, the
     Corporation, Dwight Gorham and Mohammed Barkat;

     "SUBSCRIBED SHARES" means the 6,302,521 Common Shares of the share
     capital of the Corporation hereby subscribed by SGF Sante;

     "SUBSCRIPTION PRICE" has the meaning set forth in section 2.1;

     "SUBSIDIARY" means, with respect to any Person, any other Person of
     which more than 50% of the outstanding shares having ordinary voting power
     of such other Person (irrespective of whether or not at the time shares of
     any other class or classes of such other Person shall have or might have
     voting power by reason of the happening of any contingency) is at the time
     directly or indirectly owned by the first mentioned Person, or by one or
     more of its subsidiaries;

     "TAXES" means all taxes (including income, corporation, capital, value
     added, sales, withholding, franchise, customs duties, profits, gross
     receipts, excise, property, stamp, transfer, water, business, and good and
     services taxes), imposts, duties, levies, deductions, withholdings,
     charges, assessments, reassessments or fees of any nature (including
     interest, penalties and additions) that are imposed by any relevant taxing
     authority; and "Tax" shall mean any one of them;

     "TAX RETURNS" means all reports, returns and other documents filed or
     required to be filed in respect of Taxes or in respect of or pursuant to
     any domestic or foreign, federal, provincial, state, municipal,
     territorial or other taxing statute;

     "THIRD-PARTY CLAIM" has the meaning set forth in subsection 7.4.1;

     "UNDERLYING LOSS" has the meaning set forth in section 7.6;

     "YEAR 2000 COMPLIANT" means, with respect to computer software, source
     code, software programs or hardware, that such software or hardware uses
     methods of sorting, interpreting, manipulating, calculating, processing and
     reporting dates based on the full four digits for each year, such that all
     arithmetic operations, comparisons, sorts and reporting involving dates
     yield correct results for the year 2000 and all years before and after the
     year 2000, including the correct recognition of February 29th during any
     leap year.

1.2  GAAP. All accounting and financial terms used herein, unless
     specifically provided to the contrary, shall be interpreted and applied in
     accordance with GAAP consistently applied.

<PAGE>

                                      -8-

1.3  INTERPRETATION NOT AFFECTED BY HEADINGS. The division of this Agreement
     into articles and the insertion of headings are for convenience and
     reference only and shall not affect the construction or interpretation of
     this Agreement.

1.4  EXTENDED MEANINGS. Words importing the singular number include the
     plural and vice versa and words importing the masculine gender include the
     feminine and neuter genders.

1.5  ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
     between the parties pertaining to the subject matter hereof and supersedes
     all prior agreements, negotiations, discussions and understandings, written
     or oral, between the parties and, in particular, the offer addressed by SGF
     Sante to Draxis Health on December 23, 1999 and accepted on December 24,
     1999.

1.6  AMENDMENT. This Agreement may be amended, modified or supplemented only
     by a written agreement signed by each party.

1.7  WAIVER OF RIGHTS. Any waiver of, or consent to depart from, the
     requirements of any provision of this Agreement shall be effective only if
     it is in writing and signed by the party giving it, and only in the
     specific instance and for the specific purpose for which it has been
     given. No failure on the part of any party to exercise, and no delay in
     exercising, any right under this Agreement shall operate as a waiver of
     such right. No single or partial exercise of any such right shall
     preclude any other or further exercise of such right or the exercise of
     any other right.

1.8  SCHEDULES. The following Schedules form part of this Agreement:

     SCHEDULE         DESCRIPTION OF SCHEDULE
     --------         -----------------------
     1.1(a)           Business Plan
     1.1(b)           [INTENTIONALLY DELETED]
     1.1(c)           Equity Participation Plan
     3.1.1            List of officers and directors
     3.1.3            Authorized and Issued Capital of the Corporation
     3.1.5            Consents and Approvals
     3.1.7            Transactions with Related Parties
     3.1.8            Financial Statements
     3.1.11           Existing Contracts
     3.1.13           Employees
     3.1.14           Collective Agreements
     3.1.15           Benefit Plans
     3.1.17           Insurance
     3.1.18           Title to Assets

<PAGE>

                                      -9-

     3.1.19           Intellectual Property Rights
     3.1.20           Immoveable Property
     3.1.21           Suppliers and Customers
     3.1.24           Bank Accounts
     3.1.27           Environmental Studies and Disclosure
     3.1.29           Encumbrances on Inventory
     3.1.30           Accounts Payable and Accounts Receivable
     3.1.31           Draxis Advances
     5.2.8            Employee Agreement

1.9  APPLICABLE LAW. This Agreement shall be deemed to have been made in the
     Province of Quebec and shall be interpreted in accordance with and
     governed by the laws of Quebec and the laws of Canada applicable therein.

1.10 FUNDS. All dollar amounts referred to in this Agreement are in lawful
     money of Canada.

1.11 BUSINESS DAY. In the event that any action to be taken hereunder falls
     on a day which is not a Business Day, then such action shall be taken on
     the next succeeding Business Day.

1.12 THIRD PARTY BENEFICIARIES. Nothing in this Agreement or in any Closing
     Document is intended expressly or by implication to, or shall, confer upon
     any Person other than the parties, any Rights or remedies of any kind.


                                  ARTICLE 2

          SUBSCRIPTION, ALLOTMENT AND ISSUE OF SUBSCRIBED SHARES

2.1  SUBSCRIPTION. Subject to the terms and conditions hereof, SGF Sante
     hereby subscribes for and agrees to purchase and take up, and the
     Corporation hereby agrees to allot and issue from treasury to SGF Sante,
     as at the Closing Date, an aggregate of 6,302,521 Common Shares, for an
     aggregate subscription price of $7,500,000 (the "Subscription Price"). The
     Subscribed Shares shall represent, after the Closing, 32.05% of the
     outstanding Common Shares of the Corporation on a non-diluted basis.

2.2  SUBSCRIPTION PRICE. The Subscription Price of the Subscribed Shares
     shall be payable by wire transfer, cheque or banker's draft to the order
     of the Corporation at the Closing Date, against delivery by the Corporation
     of a certificate representing the Subscribed Shares, duly registered in the
     name of SGF Sante, as fully paid and non-assessable.

<PAGE>
                                     -10-


 2.3   USE OF PROCEEDS. The Corporation hereby agrees to use the Subscription
       Price as well as the proceeds from the subscription by the Management
       Shareholders in accordance with the Business Plan.



                                  ARTICLE 3

                        REPRESENTATIONS AND WARRANTIES
                          REGARDING THE CORPORATION

 3.1   REPRESENTATIONS AND WARRANTIES REGARDING THE CORPORATION. As of the
       Closing Date, each of the Corporation and Draxis Health, solidarily,
       represents and warrants to SGF Sante as follows and acknowledges that SGF
       Sante is relying upon such representations and warranties in entering
       into this Agreement.

       3.1.1  CORPORATE MATTERS

              (a)  The Corporation (i) is a corporation duly incorporated,
                   organized and validly existing and in good standing under
                   the laws of its jurisdiction of incorporation; (ii) is
                   licensed, authorized and qualified to carry on business in
                   all jurisdictions where, by virtue of the nature of its
                   Business or the vocation or character of its Assets, such
                   licensing, authorization or qualification is necessary; and
                   (iii) the only jurisdiction in which the Corporation has a
                   permanent establishment or owns Assets is the province of
                   Quebec.

              (b)  The Corporation, to the extent necessary, has all necessary
                   power and authority, and has taken all actions required
                   (i) to execute, deliver and perform this Agreement and
                   (ii) to issue, sell and deliver the Subscribed Shares and
                   to register them in the name of SGF Sante. This Agreement,
                   the Shareholders' Agreement and all other documents and
                   instruments executed by the Corporation pursuant hereto when
                   delivered, are and will be duly authorized, valid and
                   binding obligations of the Corporation, enforceable against
                   the Corporation in accordance with their respective terms,
                   subject to laws of general application relating to
                   bankruptcy, insolvency and the relief of debtors, equitable
                   principles limiting rights to specific performance or other
                   equitable remedies. Upon the issue, sale, delivery and
                   registration of the Subscribed Shares in the name of SGF
                   Sante in accordance with the terms hereof, the Subscribed
                   Shares will be validly issued and fully paid and
                   non-assessable, and will be free and clear of all
                   Encumbrances, subject only to restrictions on transfer under
                   the Shareholders' Agreement.


<PAGE>
                                     -11-


              (c)  The Corporation has the corporate power, authority and
                   capacity to own its Assets and to carry on its Business in
                   the manner and to the extent currently carried on in all
                   jurisdictions in which it presently carries on business and
                   to perform its obligations hereunder and consummate the
                   transactions contemplated hereby.

              (d)  The Corporation is in compliance with the terms and
                   provisions of its Articles and By-laws, each as amended and
                   in effect on the Closing Date.

              (e)  The list of officers and directors in Schedule 3.1.1
                   constitutes a complete and accurate list of all officers and
                   directors of the Corporation as of the Closing Date.


       3.1.2  SUBSIDIARIES

              The Corporation has no Subsidiary nor any other interest of any
              kind in any corporate body, partnership, joint venture,
              association or other entity of any nature.


       3.1.3  AUTHORIZED AND ISSUED CAPITAL OF THE CORPORATION

              The authorized and issued share capital of the Corporation is
              as described in Schedule 3.1.3 and is held by the Persons set out
              therein. Upon the subscription by SGF Sante pursuant to this
              Agreement and the subscription by the Management Shareholders as
              stated in the Management Subscription, the issued share capital of
              the Corporation will be as set forth in Schedule 3.1.3 hereto and
              held by the Persons set out therein in the percentages indicated
              opposite their names. Except as described in Schedule 3.1.3 or as
              otherwise contemplated by this Agreement, the Shareholders'
              Agreement or any Schedules attached to this Agreement or the
              Shareholders' Agreement, the Merck Frosst Agreement or the Equity
              Participation Plan: (a) there are no Rights to purchase shares of
              the share capital of the Corporation, or Convertible Security,
              authorized, issued or outstanding, and the Corporation is not
              obligated in any manner to issue any shares of its share capital
              or Convertible Securities or any Right to acquire shares of
              its share capital, or to distribute to holders of any of its share
              capital any evidence of Indebtedness or Assets; (b) no Person has
              any preemptive right, right of first refusal or similar Right to
              acquire additional shares of share capital in connection with the
              sale and purchase of the Subscribed Shares pursuant to this
              Agreement or otherwise; (c) there are no restrictions on the
              transfer of the shares of share capital of the Corporation other
              than as set forth in its Articles; (d) no Person has any right to
              cause the Corporation to effect the registration under the
              relevant securities laws of any shares of share capital or any
              other securities (including debt securities) of the Corporation;
              (e) the Corporation has no obligation to purchase, redeem or


<PAGE>
                                     -12-


              otherwise acquire any of its equity securities or any interests
              therein, or to pay any dividend or make any other distribution in
              respect thereof other than pursuant to its Articles; and (f) there
              are no voting trusts, shareholders' agreements, or proxies
              relating to any securities of the Corporation.


       3.1.4  NO VIOLATION

              The execution, delivery and performance of this Agreement, the
              Shareholders' Agreement and any documents or instruments
              delivered, executed and performed in connection herewith or
              therewith, the consummation of the transactions contemplated
              hereby or thereby (including the issuance, sale and delivery of
              the Subscribed Shares) and compliance with the provisions hereof
              and thereof (a) will not violate to the best of the knowledge of
              the Corporation and of Draxis Health any provision of any
              Applicable Law, (b) violate any provision of the Corporation's
              Articles, By-laws, as amended (the "By-laws") or directors' or
              shareholders' resolutions, (c) violate or constitute a default
              under, or cause or permit the acceleration of the maturity of, any
              debt, obligation or contract, commitment or other agreement,
              written or oral, to which the Corporation is bound, (d) result in
              the creation or imposition of any Encumbrance (i) on the
              Subscribed Shares, (ii) the Corporation, (iii) any of its Assets
              or (iv) under any agreement or commitment to which the Corporation
              is a party or by which the Corporation or any of its Assets may be
              bound, or conflict with, result in the breach of or constitute
              (with due notice or lapse of time or both) a default under any
              such agreement or commitment or (e) violate any judgment, decree,
              order, regulation, or rule of any Governmental Authority
              applicable to the Corporation or any of its Assets.


       3.1.5  CONSENTS, APPROVALS

              Except as disclosed in Schedule 3.1.5, no consent, approval,
              permit or authorization of, or declaration, filing, qualification,
              designation or registration with, any third party or Governmental
              Authority is required in connection with the execution, delivery
              and performance of this Agreement, the Shareholders' Agreement and
              any documents or instructions delivered, executed and performed in
              connection herewith or therewith, by the Corporation and the
              consummation of the transactions contemplated hereby or thereby
              (including the subscription, issuance and delivery of the
              Subscribed Shares).


       3.1.6  OTHER AGREEMENTS OF OFFICERS

              To the best of the knowledge of the Corporation and Draxis
              Health, no Management Shareholder, officer or director of the
              Corporation has any present

<PAGE>
                                     -13-


              intention of terminating his or her employment with the
              Corporation, and the Corporation has no present intention of
              terminating any such employment.

       3.1.7  TRANSACTIONS WITH RELATED PARTIES

              Except as disclosed in Schedule 3.1.7, in Section 3.1.30 or
              in Schedule 3.1.31, the Corporation has no outstanding
              Indebtedness, claim, liability or obligation for amounts owing to
              (including for cash advances or negative cash balances) or
              receivable from, or leases, contracts or other commitments or
              arrangements with or for the benefit of the Corporation or its
              Related Parties, directors, officers or employees or any Related
              Party of such directors, officers or employees.

       3.1.8  FINANCIAL STATEMENTS

              A copy of the Financial Statements is attached as Schedule
              3.1.8 hereto. Each balance sheet included in the Financial
              Statements is true, complete and correct and presents fairly the
              financial position of the Corporation, as of the date of such
              balance sheet and each of the statements of operations and
              retained earnings and cash flows included in the Financial
              Statements is true, complete and correct and presents fairly the
              results of operations and cash flows of the Corporation, for the
              periods set forth therein, in each case in accordance with GAAP
              consistently applied, except as otherwise noted therein, and in
              each case were compiled from the Books and Records regularly
              maintained by management and used to prepare the Financial
              Statements of the Corporation in accordance with the principles
              stated therein. The Corporation has maintained its Books and
              Records in a manner sufficient to permit the preparation of the
              Financial Statements in accordance with GAAP consistently applied.
              Such Books and Records fairly reflect the income, expenses, Assets
              and liabilities of the Corporation and provide a fair and accurate
              basis for the preparation of the Financial Statements.


       3.1.9  CHANGES IN THE CORPORATION'S BUSINESS

              Other than as provided in this Agreement, the Shareholders'
              Agreement and the Management Subscription, since December 31, 1999
              to the Closing Date, the Business of the Corporation has been
              carried on in the ordinary course of business, in substantially
              the same manner as before and, in particular, the Corporation has
              not:

              (a)  purchased or redeemed, directly or indirectly, any of its
                   issued shares or paid any dividends or made any other
                   distributions in respect thereof;


<PAGE>
                                     -14-


              (b)  issued or sold (or agreed to issue or sell) any shares of
                   its capital of any class or any Rights to purchase any such
                   shares or any Convertible Securities;

              (c)  made any change in its Articles or By-laws;

              (d)  suffered any material adverse change in its Business or
                   financial condition or results of operations or experienced
                   any material loss (whether insured or not insured) nor has
                   knowledge of any present condition or contingency which could
                   reasonably result in a Material Adverse Effect;

              (e)  incurred any obligations or liabilities (whether absolute,
                   accrued, contingent or otherwise, whether due or to become
                   due and whether determined or determinable) having an
                   aggregate value in excess of $100,000 other than trade
                   accounts payable in the ordinary course which are listed on
                   Schedule 3.1.30;

              (f)  entered into any contract or agreement having, in each case,
                   a value in excess of $100,000;

              (g)  paid, discharged or satisfied any Encumbrance or liability
                   (whether absolute, accrued, contingent or otherwise, whether
                   due or to become due and whether determined or determinable),
                   other than claims, Encumbrances or liabilities which (i) are
                   reflected or reserved against in the Financial Statements and
                   which were paid, discharged or satisfied since December 31,
                   1999 in the ordinary course of business and consistent with
                   past practice, (ii) were incurred and paid, discharged or
                   satisfied since December 31, 1999 in the ordinary course of
                   business and consistent with past practice;

              (h)  sold, transferred, conveyed or assigned any Assets or created
                   an Encumbrance or agreed to sell, transfer, convey or assign
                   or create an Encumbrance on any of its Assets, in each case
                   with a value in excess of $100,000;

              (i)  granted or promised any increase in the compensation of any
                   employee (including without limitation, any increase pursuant
                   to any bonus or Benefit Plan) or instituted or adopted any
                   new employee Benefit Plan other than salary increases or
                   adjustments pursuant to annual performance review which
                   do not in the aggregate exceed 2% of such costs in the last
                   completed financial year;


<PAGE>
                                     -15-


              (j)  made any pension, retirement, profit sharing, bonus or other
                   employee welfare or benefit payment to any of its directors,
                   officers or employees;

              (k)  made any change in any method or principle of accounting or
                   accounting practice or procedure as compared to those used in
                   the preparation of the Financial Statements;

              (l)  conducted its Business other than in the ordinary course;

              (m)  made any loan or advance to any Person, other than advances
                   to employees for reasonable business expenses;

              (n)  suffered any extraordinary losses or waived any rights of
                   material value, whether or not in the ordinary course of
                   business or consistent with past practice;

              (o)  agreed, whether in writing or otherwise, to take any action
                   described in this subsection 3.1.9 other than actions
                   expressly permitted under this subsection 3.1.9.


       3.1.10 TAXES

              All Tax Returns required to be filed by or on behalf of the
              Corporation and any election forms in this connection have been
              accurately prepared, duly executed and filed within the prescribed
              period (save and except for the Tax Returns for the year ended
              December 31, 1998 which were filed on January 12, 2000). To the
              best of the knowledge of the Corporation and Draxis Health, all
              information provided in such Tax Returns pertaining to the
              Corporation is true, complete and accurate, all Taxes attributable
              to the Corporation that were due and payable have been paid and
              adequate provision has been made on the books of the Corporation
              for all Taxes payable for the current year for which Tax Returns
              are not yet required to be filed.

              The Corporation has never claimed any research and development tax
              credits.

              The Corporation has not received any notice of assessment of
              additional Taxes or any other claim or notice of any nature
              whatsoever that any Tax or additional Tax is due which has not
              been paid or otherwise finally settled or satisfied. There are no
              actions, suits, proceedings, investigations or Claims pending or,
              to the best of the knowledge of the Corporation or of Draxis
              Health, threatened in respect of any Taxes, nor are there any
              matters under discussion with any Governmental Authority relating
              to any Taxes asserted by any such authority. No waiver of any
              statute of limitations as to any Tax Return with respect to any
              taxation year, has









<PAGE>
                                       -16-



           been executed by the Corporation. There are no Encumbrances for
           Taxes on the Assets of the Corporation, except for Encumbrances
           for Taxes not yet due.

           The Corporation has withheld from its employees, officers,
           directors, customers and any other applicable payees (and timely
           paid to the appropriate Governmental Authority) proper and accurate
           amounts in compliance with all tax withholding and has remitted
           such withheld amounts within the prescribed periods to the
           appropriate Governmental Authority. The Corporation has remitted
           all pension plan contributions, unemployment insurance premiums,
           employee health taxes and the equivalent in applicable jurisdictions
           and other Taxes payable by it in respect of its employees and has
           or will have remitted such amounts to the proper Governmental
           Authority within the time required by Applicable Law. The
           Corporation has charged, collected and remitted on a timely basis
           all Taxes required by Applicable Law on any sale, supply or delivery
           whatsoever made by the Corporation.


3.1.11     EXISTING CONTRACTS

           Except for the contracts of the Corporation listed on Schedule
           3.1.11 attached hereto (collectively, the "Contracts"), the
           Corporation is not a party to or otherwise bound by any:

           (a)   agreements with respect to the acquisition of Intellectual
                 Property Rights and license agreements;

           (b)   contracts or series of contracts with the same Person for
                 the purchase or sale of goods or services, or the furnishing
                 of services, including manufacture and supply agreements,
                 which contracts have a value in excess of $100,000 per year
                 or which in the aggregate exceed $100,000 per year;

           (c)   contract or other commitment with any supplier (i)
                 containing any provision permitting any party other than the
                 Corporation to renegotiate the price or other terms, or (ii)
                 containing any pay-back or other similar provision, upon the
                 occurrence of a failure by the Corporation to meet its
                 obligations under the contract when due or the occurrence of
                 any other event, which contracts have a value in excess of
                 $100,000;

           (d)   contract for the future purchase of fixed Assets or for the
                 future purchase of materials, supplies or Equipment which
                 contracts have a value in excess of $100,000;


<PAGE>

                                       -17-

           (e)   agreement or indenture relating to the borrowing of money or
                 to the hypothecating, mortgaging or pledging of, or
                 otherwise placing a lien, security interest or Encumbrance
                 on, any Asset of the Corporation, or any agreement or
                 instrument evidencing any guarantee by the Corporation of
                 payment or performance by any other Person;

           (f)   voting trust or agreement, shareholders' agreement, pledge
                 agreement, buy-sell agreement or first refusal or preemptive
                 rights agreement relating to any securities of the
                 Corporation;

           (g)   immoveable property leases or Rights of occupancy, leases,
                 conditional sale contracts, hire purchase agreements,
                 security interest agreements or other title retention
                 agreements;

           (h)   grants and subsidies from which the Corporation benefits;

           (i)   agreement or obligation (contingent or otherwise) to issue,
                 sell or otherwise distribute or to repurchase or otherwise
                 acquire or cancel any shares of its share capital or any of
                 its other equity securities;

           (j)   agreement under which the Corporation has advanced or agreed
                 to advance money, or under which the Corporation has agreed
                 to lease any property as lessee or lessor;

           (k)   agreement under which the Corporation has granted any Person
                 any registration rights or Rights;

           (l)   agreement under which the Corporation has limited or
                 restricted its right to  compete with any Person in any
                 respect or which restricts or interferes with the conduct of
                 its Business or the use of its Assets;

           (m)   contract or other commitment involving more than $100,000;

           (n)   agreement providing for disposition of the Business, Assets
                 or shares of the Corporation by way of amalgamation or
                 consolidation to which the Corporation is a party or letter
                 of intent with respect to the foregoing; or

           (o)   agreement or letter of intent with respect to the
                 acquisition of the Business, Assets or shares of any other
                 Person.

           The Corporation has supplied copies of all Contracts, if any, to
           SGF Sante and made available for inspection all other contracts
           to which the Corporation is a


<PAGE>

                                       -18-

           party. The Corporation and all of the other parties to such
           Contracts have performed all materiel obligations required to be
           performed by such Persons to date under the Contracts, have
           received no notice of default and are not in default under any of
           the Contracts.

           The Corporation is not in default nor has it committed or
           permitted any event which with notice or the passage of time or
           both would constitute such a default, and no notice of alleged
           default has been received by it under any such Contracts. None of
           the other parties to such Contracts is in default and neither
           Draxis Health nor the Corporation has reason to believe that there
           will be any such default by any such party thereafter. There has
           been no cancellation, and the Corporation has not received any
           written threat to cancel or not to renew or extend any such
           Contract from any other party thereto. Each Contract is in full
           force and effect and is valid and binding upon the parties.

3.1.12     COMPLIANCE WITH APPLICABLE LAWS

           The Corporation has conducted and is conducting its Business in
           compliance with all Applicable Laws and is not in breach of any
           provision of any Applicable Laws.

3.1.13     EMPLOYEES

           Schedule 3.1.13 sets forth with respect to the Corporation:

           (a)   the names and titles of all employees of the Corporation
                 together with the location of their employment and whether
                 or not they are unionized;

           (b)   the date each such employee was hired;

           (c)   a list of all written employment contracts between the
                 Corporation and such employees; and

           (d)   the terms of remuneration (including all benefits) of all
                 such employees as at the Closing Date and any bonuses paid
                 since the end of the last completed financial year.

           No such employee is on long term or short term disability or
           presently receiving payments under any occupational health and
           safety legislation unless he has been identified as such in
           Schedule 3.1.13. The Corporation has complied with all Applicable
           Laws relating to the employment of labour, including, without
           limitation, provisions thereof relating to wages, hours,
           collective bargaining rights and worker health and safety. Except
           for current unpaid salaries and benefits, the

<PAGE>

                                      -19-

          Corporation has no Indebtedness to or from any of its Related
          Parties, directors, officers or employees, past or present, or to
          any Person or entity which is a Related Party to any of them. All
          non-unionized employees of the Corporation are bound by written
          agreements which provide confidentiality undertakings and
          assignment of intellectual property, discoveries, inventions and
          the like to the employer in the form set out in Schedule 5.2.8. To
          the best of the knowledge of the Corporation or of Draxis Health,
          none of the employees, past or present, of the Corporation has had
          a work-related accident or occupational disease which will likely
          give rise to a claim by a Governmental Authority under an
          Applicable Law, and there are no Claims or appeals pending
          thereunder concerning the Corporation and the Corporation has not
          received any assessments thereunder.

          No such employee is employed under a contract which cannot be
          terminated by the employer with or without notice, except for those
          employees who are employed on indefinite hirings requiring
          reasonable notice of termination by Applicable Law. The Corporation
          is in compliance with all pay equity legislation applicable to the
          Business and the employees of the Corporation.

3.1.14    COLLECTIVE AGREEMENTS

          All collective bargaining agreements and other union contracts by
          which the Corporation is bound are listed on Schedule 3.1.14. To
          the best of the knowledge of the Corporation and Draxis Health,
          there is no pending or threatened labour dispute, grievance,
          strike, or work stoppage.

3.1.15    BENEFIT PLANS

          Schedule 3.1.15 sets forth all Benefit Plans offered to employees
          of the Corporation as well as the funding status of each of them as
          at December 31, 1999. The funding status of the Benefit Plans, as
          set forth in Schedule 3.1.15, has not materially changed since
          December 31, 1999 and no fact, condition or circumstance exists
          which would materially affect said funding status. No contribution
          holiday has been taken in respect of the Benefit Plans by the
          Corporation. The Benefit Plans are duly registered when required
          by, and are in good standing under, any applicable legislation.
          Except as disclosed on Schedule 3.1.15, there are no outstanding
          defaults or violations by the Corporation of any obligation
          required to be performed by it in connection with any Benefit Plans.
          There are no claims or proceedings of any nature pending or
          threatened with respect to the Benefit Plans (other than for
          routine claims for benefits) against the Corporation. Except as
          disclosed on Schedule 3.1.15, all required contributions or
          premiums under the Benefit Plans have been duly made or remitted.
          No promises


<PAGE>

                                     -20-

          or commitments have been made by the Corporation to amend the
          Benefit Plans or to provide increased benefits to the employees of
          the Corporation.

3.1.16    LITIGATION

          There is no action, suit, proceeding or investigation pending or,
          to the best of the knowledge of the Corporation and Draxis Health,
          threatened against or affecting the Corporation; and, to the best of
          the knowledge of the Corporation, no event has occurred and no
          condition exists on the basis of which any such litigation,
          proceeding or investigation might properly be instituted. The
          Corporation is not in default with respect to any order, writ,
          injunction, decree, ruling or decision of any court, commission,
          board or other Governmental Authority. No proceedings have been
          taken or authorized by the Corporation or, to the best of the
          knowledge of the Corporation or Draxis Health, by any other Person,
          with respect to the bankruptcy, insolvency, liquidation,
          dissolution or winding-up of the Corporation.

3.1.17    INSURANCE

          The Corporation is insured by reputable insurers against liability,
          loss and damage in such amounts and against such risks as are
          customarily carried and insured against by owners of comparable
          businesses, properties and Assets. Schedule 3.1.17 is a true and
          complete description of the insurance policies (specifying the
          insured, the amount of coverage, the type of insurance, the police
          number and any pending claims thereunder) maintained by the
          Corporation in respect of its Assets and its Business as of the
          Closing Date. Such insurance policies are sufficient for compliance
          with all laws and contracts to which the Corporation, is a party or
          by which it is otherwise bound. The Corporation is not in default
          with respect to any of the provisions contained in such insurance
          policies. For any current claim that has not been settled or
          finally determined, the Corporation has not failed to give any
          notice or present any claim under any such insurance policies in a
          due and timely fashion such that the insurer would be entitled to
          terminate coverage or deny liability on any such claim. Such
          policies of insurance are in full force and effect and the
          Corporation is not in default, whether as to the payment of
          premiums or otherwise, under their terms. No claims have been made
          under such policies or any similar policy by or on behalf of the
          Corporation.

<PAGE>
                                      -21-


3.1.18    TITLE TO ASSETS

          Without restricting the generality of other representations and
          warranties made hereby with respect to the Assets of the
          Corporation, except as disclosed in the Financial Statements or in
          Schedule 3.1.18 hereto, the Corporation has good and marketable
          title to all of its Assets and without restricting the generality of
          the foregoing, to all the Assets required for the operation of its
          Business, free and clear of all Encumbrances, except for minor
          imperfections of title and Encumbrances, if any, which individually
          and in the aggregate do not have a Material Adverse Effect on the
          use or value of any such Assets or render title thereto
          unmarketable.

3.1.19    INTELLECTUAL PROPERTY RIGHTS

          Schedule 3.1.19 sets forth a true and complete list of all
          registered intellectual property rights of the Corporation. The
          Corporation owns or is licensed or otherwise has the right to use
          in the manner that the same are now being used all intellectual
          property rights necessary or useful to enable it to operate its
          Business, develop, manufacture or have manufactured, market and
          sell its products in conformity with the Applicable Laws and in
          total respect of the rights of third parties, if any, including
          patents, trade marks, industrial drawings, industrial designs,
          copyrights, trade names, know-how, trade secrets and secret
          processes (the "Intellectual Property Rights"), and the Corporation
          has not granted any license, permit or right to use its
          Intellectual Property Rights. The Intellectual Property Rights are
          held by the Corporation and all rights thereto have been assigned
          to the Corporation by all developers who had been involved in the
          creation or development of such Intellectual Property Rights. Any
          registrations or filings which are necessary in any jurisdiction to
          preserve the rights of the Corporation in and to the Intellectual
          Property Rights have been made and none have been made in favour of
          any other party in any jurisdiction. Neither Draxis Health nor the
          Corporation has knowledge of any material infringement of, material
          passing-off related to, or other material interference with the
          Intellectual Property Rights by third parties or any claim by any
          Person that any of the Intellectual Property Rights are, or may be,
          invalid or unenforceable. The Corporation is not a party to any
          claim, or subject to any liability, contingent or otherwise, for
          trademark, trade name, industrial design, patent or copyright
          infringements as to any product manufactured, produced, used or
          sold by the Corporation, either as plaintiff or as defendant or any
          other claim or liability relating to Intellectual Property Rights
          owned or licensed by the Corporation.

          The Corporation has not infringed or misappropriated the rights of
          third parties with respect to the Intellectual Property Rights. All
          rights or fees due and payable to maintain the validity or existence
          of the Intellectual Property Rights have been

<PAGE>

                                      -22-


        duly paid. There are no facts or circumstances (including past or
        current disclosure) that could affect or result in the cancellation of
        any rights in respect of such Intellectual Property Rights, including
        pending patents in any jurisdiction. Except as set forth in Schedule
        3.1.19, there has been continuous use of the trademarks which are
        included in the Intellectual Property Rights. Neither Draxis Health
        nor the Corporation has knowledge of any facts or circumstances,
        situation or problems, of a juridical, technical or commercial nature
        that could interfere with the development, the manufacture, the
        marketing or the sale of the products or services of the Corporation
        in the operation of its Business.

3.1.20  IMMOVEABLE PROPERTY

        (a)     Schedule 3.1.20 sets forth a list of all immoveable property
                owned, leased or sub-leased by the Corporation (collectively
                referred to herein as the "Immoveable Property"). The
                Corporation has not entered into any other lease or sub-lease
                or agreement granting to anyone any right to possession, use,
                occupancy or enjoyment of the Immoveable Property or any
                portion thereof. Except as set out in Schedule 3.1.20 or in
                the Business Plan, there are no works or improvements now
                underway in the Immoveable Property or ordered by any
                authority or by the landlord thereof and none is currently
                planned. The Immoveable Property is fit for the operations of
                the Corporation, as the case may be.

        (b)     The Corporation is the absolute and registered owner of the
                Immoveable Property, by good, valid and marketable title, free
                and clear of any Encumbrances except as set forth in Schedule
                3.1.20;

        (c)     The Immoveable Property complies with the requirements of all
                pertinent Governmental Authorities and Applicable Laws, and
                the Corporation has not received a written notice from any
                competent Governmental Authority having jurisdiction over the
                Immoveable Property notifying the Corporation or its
                predecessors in title or placing either of them in default to
                conform with any Applicable Law relating to fire, health,
                environment, zoning, police rules or otherwise, and the
                Corporation has no knowledge of any violation or infraction
                thereto;

        (d)     The Immoveable Property is not situated within a protected
                area pursuant to the ACT TO PRESERVE AGRICULTURAL LAND
                (R.S.Q., c. P-41.1);

        (e)     The Immoveable Property does not form part of a housing
                complex pursuant to AN ACT RESPECTING THE REGIE DU LOGEMENT
                (R.S.Q., c. R-8.1);

<PAGE>

                                      -23-


        (f)     The Immoveable Property is not a classified cultural
                property or recognized as such and is not situated within a
                historic or a natural area, within a classified historic site
                or in a protected area within the meaning of the CULTURAL
                PROPERTY ACT (R.S.Q., c. B-4);

        (g)     The Corporation has not received any written notice with
                respect to (i) any actual or contemplated expropriation
                proceedings, (ii) road widenings, or (iii) any reserves;

        (h)     All equipment owned or leased by the Corporation and forming
                part of the Immoveable Property including the water, gas,
                electrical, steam, compressed air, telecommunication,
                sanitary and storm sewage lines and systems or other similar
                systems serving the Immoveable Property, as well as all
                heating equipment and electrical and lighting fixtures are in
                good working order and condition;

        (i)     There are no contracts, agreements (including agreements for
                future commission payable), arrangements or understandings
                between the Corporation and its predecessors in title with
                any third parties affecting the Immoveable Property.

3.1.21  SUPPLIERS AND CUSTOMERS

        Schedule 3.1.21 sets forth a list of all of the customers of the
        Corporation for an amount of $100,000 per year and more (for the fiscal
        year ended December 31, 1999), and a list of all of the suppliers of
        the Corporation for an amount of $100,000 per year and more (for the
        six-month period ended December 31, 1999). Except as set out in
        Schedule 3.1.21, there has been no material interruption to or
        discontinuity in any customer or supplier arrangements or
        relationships referred to in this Schedule.

3.1.22  LICENCES

        (a)     The Corporation holds all necessary Licences required under
                Applicable Laws to own and operate its Assets as utilized in
                its Business presently and none of such Licences is adversely
                affected by the transactions contemplated by this Agreement
                or requires consent with respect thereto; and

        (b)     the Corporation has complied with each and all Licences used
                in connection with its Business or Assets including any
                required filings and

<PAGE>

                                      -24-


                renewals, and no default exists with respect thereto; and the
                Corporation has not received written notice of violation of
                any such Licences.

3.1.23  YEAR 2000 ISSUES

        All material software, source code and software programs of the
        Corporation developed, marketed, sold or used by the Corporation are
        Year 2000 Compliant.

        The Corporation has implemented a millennium compliance program such
        that it has verified and will continue to verify that its products,
        services, systems and processes are millennium compliant. The
        Corporation has put in place a program to contact all significant
        customers, suppliers and other third parties that can materially
        adversely affect its operations in order to determine whether or not
        these customers, suppliers and other third parties are millennium
        compliant and, if found to be non-compliant, how such non-compliance
        will affect the Corporation, its products and its operations.

3.1.24  BANK ACCOUNTS

        Schedule 3.1.24 sets forth a complete list of every financial
        institution in which the Corporation maintains accounts and the name
        of all persons exercising signing authority thereunder.

3.1.25  LIABILITIES

        There are no material liabilities of the Corporation of any kind
        whatsoever, whether or not accrued and whether or not determined or
        determinable, absolute or contingent, other than (i) liabilities
        disclosed on, reflected in or identified in the Financial Statements,
        (ii) liabilities disclosed or referred to in this Agreement or in the
        Schedules attached hereto and (iii) commercial liabilities and
        obligations incurred since the date of the Financial Statements in
        the ordinary course of business and consistent with past practice.

3.1.26  CORPORATE RECORDS

        The minute books of the Corporation contain complete and accurate
        copies of the Articles and By-laws of the Corporation and minutes of
        all meetings of the directors and shareholders of the Corporation
        held since the incorporation of the Corporation. Such meetings were
        duly called and held, and the share certificate books, register of
        shareholders, register of transfers and register of directors of the
        Corporation are complete and accurate.
<PAGE>

                                     -25-


       3.1.27  ENVIRONMENTAL PROTECTION

               (a)   Except as disclosed on Schedule 3.1.27, the Assets
                     including the Immoveable Property and the operation of
                     the Business of the Corporation and the operation of the
                     businesses of all Related Parties of the Corporation
                     carried on in the Immoveable Property are and have been
                     during the past two years in compliance with all
                     Environmental Laws of each jurisdiction in which it
                     carries on business. The Corporation has obtained and is
                     in compliance with all permits, Licences, certificates,
                     authorizations, approvals, consents and registrations
                     issued or granted pursuant to Environmental Laws and
                     required for the Assets and the operation of its
                     Business.

               (b)   There is no claim, suit, action, written notice of
                     non-compliance, administrative order or other
                     proceeding, outstanding or pending or threatened against
                     the Corporation, nor is there, to the best of the
                     knowledge of the Corporation and of Draxis Health, any
                     pending investigation in respect of its Business or
                     Assets pursuant to any Environmental Laws. Except as
                     disclosed on Schedule 3.1.27, the Corporation is not
                     responsible for any clean-up, corrective or remedial
                     action in respect of the Business, including the
                     Immoveable Property, or the Assets pursuant to any
                     Environmental Law. Except as disclosed on Schedule
                     3.1.27, the operations of the Corporation and Related
                     Parties of the Corporation have not, in the past two years
                     caused, and the Corporation and Related Parties of the
                     Corporation have not permitted to occur, the release,
                     emission, deposit, issuance, disposal or discharge of
                     any contaminant, pollutant, waste, hazardous waste,
                     hazardous material, dangerous goods, toxic substances,
                     prescribed substances (as these terms are defined
                     pursuant to Environmental Laws) ("Hazardous Substances")
                     nor are any Hazardous Substances present, in, on, or
                     under the Assets or on any Immoveable Property owned by
                     the Corporation nor were any Hazardous Substances
                     present in, on or under the Assets or on the Immoveable
                     Property at the time of its acquisition by the
                     Corporation; all Hazardous Substances have at all times
                     been stored, handled, treated and eliminated in
                     compliance with Environmental Laws in the operation of
                     its Business by the Corporation. Except as set out in
                     Schedule 3.1.27, the Assets and Immoveable Properties
                     owned by the Corporation do not contain any
                     polychlorinated biphenyls, asbestos, or urea
                     formaldehyde foam insulation or any Hazardous
                     Substances, nor do they contain or have they contained
                     any underground storage tanks, nor have they been used
                     by the Corporation as a waste site.

<PAGE>

                                     -26-


                     Except as listed on Schedule 3.1.27, the Corporation has
                     not conducted and is not aware of any environmental or
                     occupational health and safety evaluations, assessments,
                     audits, studies or tests with respect to its Assets,
                     including the Immoveable Property, or Business.

       3.1.28  THE PLANT

               The Corporation's plant and operations, practices and
               procedures meet current Canadian Good Manufacturing Practices
               (GMP) guidelines and standards and have been certified by U.S.
               Food and Drug Administration with respect to Sterile and
               Ointment productions as described on page 37 of the KPMG
               confidential financing memorandum of April 1998. The
               Corporation's plant is also expected to meet U.S. Food and
               Drug Administration standards for the production of its
               sterile products (liquid and lyophilization) and non sterile
               Solid Dosages, Ointments, Creams and Liquids.

       3.1.29  INVENTORY

               The Inventories in the Financial Statements are valued at
               weighted average of historical cost (raw materials and bulk)
               and at standard cost, as revised at least once a year
               (semi-finished and finished products), in accordance with GAAP
               consistently applied. The Inventories are of quality and
               quantity which are usable in the ordinary course of Business
               consistent with past practice (subject to reserve as reflected
               on the Financial Statements), conform to customer
               specifications and are owned by the Corporation free and clear
               from all Encumbrances, except as set out in Schedule 3.1.29.
               Such reserves have been reflected on the Financial Statements
               in accordance with GAAP and the historical practices of the
               Corporation and are adequate.

       3.1.30  ACCOUNTS PAYABLE AND ACCOUNTS RECEIVABLE

               Schedule 3.1.30 contains a true and complete aged list of all
               Accounts Payable and a true and complete aged list of all
               Accounts Receivable of the Corporation, in each case as of the
               month-end prior to the Closing Date and, in both cases,
               categorized depending on whether they are owed to or
               receivable from a Related Party to the Corporation. The
               Accounts Receivable shown on the Financial Statements (subject
               to reserve for non collectability as reflected therein) and
               all receivables acquired or generated by the Corporation since
               December 31, 1999 are BONA FIDE receivables and represent
               amounts due with respect to actual transactions entered into
               in the ordinary course of Business consistent with past
               practice and are collectable at their recorded amounts. Such
               reserves for non collectibility have been reflected on the
               Financial Statements in accordance with GAAP and are adequate.
               No such

<PAGE>

                                     -27-

               receivable has been assigned or pledged to any other Person
               and no defense of set-off or similar right to any such
               receivable has been asserted by the account obligor.

       3.1.31  ADVANCES FROM DRAXIS HEALTH

               As set forth in Schedule 3.1.31, there are outstanding
               advances in the amount of $9,097,516 owing to Draxis Health by
               the Corporation, otherwise than as trade payables, which
               advances have been used by the Corporation in accordance with
               the Business Plan.

       3.1.32  DISCLOSURE

               The Corporation and Draxis Health are unaware of any fact,
               other than as disclosed herein, which might adversely affect
               the property, activities, results, operations or business
               prospects of the Corporation or which, if known to SGF Sante,
               might reasonably have affected its decision to subscribe for
               the Shares and pay the Subscription Price.


                                    ARTICLE 4

                    REPRESENTATIONS AND WARRANTIES OF SGF SANTE

4.1    REPRESENTATIONS AND WARRANTIES OF SGF SANTE. As of the Closing Date, SGF
       Sante represents and warrants to the Corporation as follows and
       acknowledges that the Corporation is relying upon such representations
       and warranties in entering into this Agreement.

       4.1.1  CORPORATE MATTERS

              (a)    SGF Sante (i) is a corporation duly incorporated,
                     organized and validly existing and in good standing
                     under the laws of its jurisdiction of incorporation; and
                     (ii) has full corporate power and authority to own and
                     hold its Assets and to carry on its business as
                     presently conducted.

              (b)    SGF Sante, to the extent necessary, has all necessary
                     power and authority, and has taken all actions required
                     (i) to execute, deliver and perform this Agreement, the
                     Shareholders' Agreement and all agreements executed
                     pursuant thereto. This Agreement, the Shareholders'
                     Agreement and all other documents and instruments
                     executed by SGF Sante pursuant hereto when delivered,
                     are and will be duly authorized, valid and binding
                     obligations of SGF Sante, enforceable against SGF Sante
                     in accordance with their respective terms, subject to
                     laws of general application relating


<PAGE>

                                       -28-


                   to bankruptcy, insolvency and the relief of debtors,
                   equitable principles limiting rights to specific performance
                   or other equitable remedies.

              (c)  SGF Sante is a Subsidiary of the Societe generale de
                   financement du Quebec.

              (d)  SGF Sante has the corporate power, authority and capacity to
                   own its Assets and to carry on its business in  the manner
                   and to the extent currently carried on in all jurisdictions
                   in which it presently carries on business and to perform its
                   obligations hereunder and consummate the transactions
                   contemplated hereby.

              (e)  SGF Sante is in compliance with the terms and provisions of
                   its Articles and by-laws, each as amended and in effect on
                   the Closing Date.


       4.1.2  NO VIOLATION

              The execution, delivery and performance of this Agreement, the
              Shareholders' Agreement and any documents or instruments
              delivered, executed and performed in connection herewith or
              therewith, the consummation of the transactions contemplated
              hereby or thereby (including the subscription for the Subscribed
              Shares) and compliance with the provisions hereof and thereof
              (a) will not, to the best of the knowledge of SGF Sante, violate
              any provision of any Applicable Law, (b) violate any provision of
              the Articles, by-laws, as amended, or directors' or shareholders'
              resolutions of SGF Sante, (c) violate or constitute a default
              under, or cause or permit the acceleration of the maturity of, any
              debt, obligation or contract, commitment or other agreement,
              written or oral, to which SGF Sante is bound, (d) result in the
              creation or imposition of any Encumbrance (i) on the Subscribed
              Shares, (ii) SGF Sante, (iii) any of its Assets or (iv) under
              any agreement or commitment to which SGF Sante is a party or by
              which SGF Sante or any of its Assets may be bound, or conflict
              with, result in the breach of or constitute (with due notice or
              lapse of time or both) a default under any such agreement or
              commitment or (e) violate any judgment, decree, order,
              regulation, or rule of any Governmental Authority applicable to
              SGF Sante or any of its Assets.


       4.1.3  CONSENTS, APPROVALS

              No consent, approval, permit or authorization of, or declaration,
              filing, qualification, designation or registration with, any
              third party or Governmental Authority is required which has not
              been duly obtained in connection with the execution, delivery and
              performance of this Agreement, the Shareholders' Agreement and
              any documents or instructions delivered, executed and performed


<PAGE>
                                     -29-


              in connection herewith or therewith, by SGF Sante and the
              consummation of the transactions contemplated hereby or thereby
              (including the subscription for the Subscribed Shares).


                                  ARTICLE 5

                                  COVENANTS


 5.1   REPORTS. As of the Closing Date and for so long as SGF Sante or
       its successors or permitted assigns holds shares of the Corporation
       representing not less than 10% of the total outstanding shares and
       Convertible Securities of the Corporation, the Corporation undertakes
       to supply SGF Sante, without charge, the following documents and
       acknowledges that SGF Sante rely on such undertakings for the purpose
       of its subscription:

       5.1.1  within 60 days following the end of each fiscal year, the annual
              audited financial statements of the Corporation and any
              Subsidiary, both on a consolidated and non-consolidated basis;

       5.1.2  within 30 days following the end of each fiscal year, the
              financial statements of the Corporation together with the report
              of the president of the Corporation on the Corporation's
              operations;

       5.1.3  within 30 days following the end of each month, the financial
              statements of the Corporation;

       5.1.4  not less than 45 days before the beginning of each fiscal year, a
              copy of the business plan of the Corporation for the said fiscal
              year which shall include quarterly and annual operating expenses
              (including inter-company charges) and cash flow budgets (including
              capital expenditures and repayment of advances from Draxis
              Health), the whole as approved by the board of directors of the
              Corporation;

       5.1.5  within five Business Days following the receipt thereof, a copy
              of any notice, letter or other document advising the Corporation
              of the occurrence of an event of default pursuant to any contract
              or financial undertaking to which the Corporation is a party or
              pursuant to the Applicable Law;

       5.1.6  within five Business Days of a senior officer of the Corporation
              or Draxis Health having knowledge of the receipt of any notice,
              letter or other document informing the Corporation of the
              institution or contestation of any legal proceeding involving the
              Corporation, a copy thereof; and


<PAGE>
                                     -30-


       5.1.7  within a reasonable delay, any other document or information
              which is sent to shareholders of the Corporation.

 5.2   ONGOING OBLIGATIONS. As of the Closing Date and for so long as SGF
       Sante or its successors or permitted assigns holds shares of he
       Corporation representing not less than 10% of the total outstanding
       shares and Convertible Securities of the Corporation, the Corporation
       covenants and agrees that it shall do or cause to be done each of the
       things set forth herein:

       5.2.1  the Corporation will use the Subscription Price exclusively in
              accordance with the Business Plan;

       5.2.2  the Corporation shall keep its Equipment in good repair, working
              order and condition;

       5.2.3  the Corporation shall subscribe for and maintain insurance
              coverages which are adequate and customary in the industry for
              each of the following items:

              (a)  insurance against loss or damage to its Assets, business
                   interruption and civil responsibility;

              (b)  directors and officers liability insurance policy in an
                   amount of no less than one million dollars ($1,000,000) and
                   to adopt an indemnity provision either in its Articles or in
                   its By-laws protecting its directors;

       5.2.4  the Corporation shall comply, in all material respects, will all
              Applicable Laws and Environmental Laws and shall obtain and renew
              all permits, certificates of authorizations, Licences and
              Intellectual Property Rights required to conduct its Business as
              required by Applicable Laws and Environmental Laws;

       5.2.5  the Corporation shall pay and discharge all Taxes when due, unless
              they are contested in good faith;

       5.2.6  the Corporation shall keep and maintain complete and accurate
              Books and Records and Tax Returns and file all Tax Returns when
              due;

       5.2.7  the Corporation shall properly maintain and protect its corporate
              existence, technology and Intellectual Property Rights;

       5.2.8  the Corporation shall ensure that all its employees are bound by
              proper confidentiality agreements and agreements providing for
              the assignment to employer of all intellectual property, rights,
              discoveries and inventions, substantially in accordance with the
              form set out in Schedule 5.2.8;











<PAGE>

                                     -31-

     5.2.9   the Corporation shall allow SGF Sante's representative to visit
             its facilities, inspect its Books and Records and Assets and
             discuss with its directors, officers and auditors its affairs and
             finances during normal business hours upon giving reasonable
             written notice;

     5.2.10  the Corporation shall ensure that at each of its board of
             directors' meeting, its comptroller tables a written report
             confirming the status of all prescribed deductions at source,
             withdrawals and other remittances mandated under all Applicable
             Laws;

     5.2.11  the Corporation shall provide its directors with a copy of the
             draft minutes of the latest board meeting within 20 Business Days
             following the date of such meeting;

     5.2.12  the Corporation shall respect at all times all rights benefiting
             SGF Sante under the Shareholders' Agreement;

     5.2.13  the Corporation shall take all such actions as are within its
             power to control and to use all reasonable commercial efforts to
             cause other actions to be taken which are not within their power
             to control so as to ensure compliance with any of its covenants
             and conditions set forth herein;

5.3  ACTIONS TO SATISFY COVENANTS. Each of the Corporation, Draxis Health and
     SGF Sante hereby agrees to take all such actions as are within its power
     to control and to use all reasonable commercial efforts to cause other
     actions to be taken which are not within its power to control so as to
     ensure compliance with any of its covenants and conditions set forth
     herein.

                                    ARTICLE 6

                                     CLOSING

6.1  CLOSING. The Closing of the transaction contemplated by this Agreement
     shall be held at the offices of Fasken Martineau DuMoulin LLP, at 800
     Place-Victoria, Suite 3700, Montreal, Quebec, H4Z 1E9, on February 18,
     2000 or on such other date and at such other time as may be agreed upon by
     the parties hereto (the "Closing Date").

6.2  EFFECTIVE DATE. Notwithstanding the Closing Date and except as otherwise
     specifically stated to the contrary herein, the transaction contemplated
     by this Agreement shall be effective as of the Effective Date.

<PAGE>

                                     -32-

                                   ARTICLE 7

                    SURVIVAL AND RELIANCE ON REPRESENTATIONS
                       AND WARRANTIES AND INDEMNIFICATION

7.1  SURVIVAL NOTWITHSTANDING INVESTIGATION. The parties hereto shall be
     entitled to rely upon the representations and warranties set forth
     herein and the covenants and obligations of the parties hereto which shall
     survive the Closing Date and shall continue in full force and effect in
     accordance with and subject to the terms of this Article 7 notwithstanding
     any due diligence investigation by SGF Sante.

7.2  INDEMNIFICATION BY THE CORPORATION AND DRAXIS HEALTH. Subject to the
     limitations provided in this Agreement, the Corporation and Draxis Health
     shall be solidarily liable to SGF Sante and its respective directors,
     officers and employees (collectively, the "SGF Sante Indemnified Persons"
     and singly a "SGF Sante Indemnified Person") and shall defend, indemnify
     and hold harmless all of the SGF Sante Indemnified Persons against any and
     all loss, including a decrease in value of the Subscribed Shares,
     liability, cost, fine or expense of any kind (other than indirect,
     consequential or incidental losses or damages such as losses of profits
     or of business opportunities), including the reasonable cost of legal
     representation in respect thereof and any interest or penalty in
     connection therewith ("Claims"), incurred or suffered by or imposed upon
     any of the SGF Sante Indemnified Persons arising directly or indirectly
     out of:

     7.2.1  the breach of any representation or warranty of the Corporation
            contained in Article 3 of this Agreement;

     7.2.2  the breach or non-fulfillment of any agreement, covenant,
            undertaking or obligation of the Corporation contained in this
            Agreement;

     7.2.3  any liability of the Corporation for Taxes with respect to a
            taxation year preceding the Closing Date not disclosed in the
            Financial Statements or in a schedule hereto;

     7.2.4  any liability resulting from any actual or threatened litigation
            with respect to an event, condition, action or omission occurring
            prior to the Closing Date, whether or not the Corporation or Draxis
            Health had knowledge thereof; and

     7.2.5  any liability of the Corporation with respect to a work-related
            accident or occupational disease on the part of an employee, past
            or present, of the Corporation to the extent the liability arises
            with respect to an event occurring before the Closing Date.

<PAGE>

                                     -33-

7.3  INDEMNIFICATION BY SGF SANTE. SGF Sante shall be liable to each of the
     Corporation and its directors, officers and employees (collectively, the
     "Corporation Indemnified Persons" and singly, a "Corporation Indemnified
     Person") and shall defend, indemnify and hold harmless all of the
     Corporation Indemnified Persons against any and all loss, liability, cost,
     fine or expense of any kind (other than indirect, consequential or
     incidental losses or damages such as losses of profits or of business
     opportunities), including the reasonable cost of legal representation in
     respect thereof and any interest or penalty in connection therewith
     ("Claims"), incurred or suffered by or imposed upon any of the Corporation
     Indemnified Persons arising directly or indirectly out of:

     7.3.1  the breach of any representation or warranty of SGF Sante
            contained in Article 4 of this Agreement; and

     7.3.2  the breach or non-fulfillment of any agreement, covenant,
            undertaking or obligation of SGF Sante contained in this Agreement.

7.4  INDEMNIFICATION AGAINST THIRD-PARTY CLAIMS

     7.4.1  Promptly upon receipt by any of the SGF Sante Indemnified Persons
            or the Corporation Indemnified Persons (in this section referred to
            as the "Indemnitee") of notice of any demand or statement:

            (a)  by or on behalf of any Person or entity other than SGF Sante
                 or the Corporation; and

            (b)  which, if maintained or enforced, will or might result in any
                 Claim of the nature described in sections 7.2 or 7.3,

            ("Third-Party Claim") in respect of which the Indemnitee proposes
            to demand indemnification from SGF Sante or the Corporation and
            Draxis Health, as the case may be, (in this section referred to as
            the "Indemnitor") pursuant to the provisions hereof, the Indemnitee
            shall give written notice to that effect to the Indemnitor with
            reasonable promptness.

     7.4.2  The Indemnitor shall have the right by written notice to the
            Indemnitee within 30 days of the giving of the notice described in
            subsection 7.4.1 to assume the control of the defence, compromise
            or settlement of the Third-Party Claim, without cost to the
            Indemnitee and without limiting in any way the Indemnitee's right
            to indemnification pursuant to the provisions hereof.

     7.4.3  Upon the assumption of control by the Indemnitor as aforesaid,
            the Indemnitor shall diligently proceed with the defence,
            compromise or settlement of the Third-


<PAGE>

                                      -34-

               Party Claim at Indemnitor's sole expense, including retention of
               counsel reasonably satisfactory to the Indemnitee. The Indemnitee
               shall cooperate fully, but at the sole expense of the Indemnitor,
               in making available to the Indemnitor all pertinent information
               and witnesses under the Indemnitee's control and in taking such
               other steps as in the reasonable opinion of counsel for the
               Indemnitor are necessary to enable the Indemnitor to conduct such
               defence. The Indemnitee shall be entitled to reasonable security
               from the Indemnitor for any expense, costs or other liabilities
               to which it may be or may become exposed by reason of such
               cooperation.

     7.4.4     The final determination of any such Third-Party Claim,
               including all related costs and expenses, shall be binding and
               conclusive upon the parties hereto, as to the validity or
               invalidity, as the case may be, of such Third-Party Claim
               against the Indemnitor hereunder. Notwithstanding any
               provision of this section 7.4, the Indemnitor may not consent
               to any settlement of a Third-Party Claim if the terms of such
               settlement require the Indemnitee to act or refrain from
               acting, without the prior written consent of the Indemnitee.

     7.4.5     Should the Indemnitor fail to give notice to the Indemnitee as
               provided in subsection 7.4.2, the Indemnitee shall be entitled
               to make such settlement of the Third-Party Claim as in its
               sole discretion may appear advisable, and such settlement or
               any other final determination of the Third-Party Claim shall
               be binding upon the Indemnitor.

7.5  INDEMNIFICATION TO BE AFTER INSURANCE, ETC. The amount of the
     indemnification for any Claim shall be payable on demand and shall be
     determined after giving effect to any insurance recoveries or recoveries
     from third parties, other than the Corporation.

7.6  AMOUNT OF CLAIM. For purposes of determining the amount of any Claim
     contemplated by section 7.2, SGF Sante shall be entitled, at its sole
     option, to deem the amount of such Claim to be equal to 32.05% (the "SGF
     Share of the Underlying Loss") of the actual loss or liability of the
     Corporation (the "Underlying Loss") which gave rise to such Claim,
     calculated as if section 7.5 applied, MUTATIS MUTANDIS, for the purposes
     of this Article 7; all other provisions of this Article 7 shall thereupon
     continue to apply as if the SGF Share of the Underlying Loss were the
     Claim.

7.7  CURRENCY OF INDEMNIFICATION. If any Claim is based on an expense
     incurred in, or a Third-Party Claim expressed in, currency other than
     Canadian currency, it shall be converted into Canadian currency at the
     rate of exchange prevailing as of the date of payment, or expenditure or
     ascertainment of loss in the absence of direct payment, or at the date
     of the Third-Party Claim, as the case may be, giving rise to the Claim.

<PAGE>

                                     -35-

7.8  EXPIRY AND LIMIT OF LIABILITY.

     7.8.1     The representations and warranties of the Corporation, Draxis
               Health and SGF Sante herein (other than those of the
               Corporation and DHI with respect to the matters set forth in
               subsections 3.1.10 and 3.1.27 and except in the event of
               fraud, gross negligence or deliberate misrepresentation) shall
               continue in full force and effect for a period of three years
               after the Closing Date and no Claim shall be made after such
               termination date by any party based on or arising out of the
               breach or  non-fulfillment of any such representations or
               warranties.

     7.8.2     The representations and warranties of the Corporation and
               Draxis Health with respect to the matters set forth in section
               3.1.10 shall survive so long as any claim may be made in
               respect of such matters under any applicable statute of
               limitations.

     7.8.3     The representations and warranties of the Corporation and
               Draxis Health with respect to matters set forth in section
               3.1.27 shall continue in full force and effect for a period of
               four years after the Closing Date.

     7.8.4     In the event of fraud or deliberate misrepresentation by
               commission or omission, the representations and warranties of
               the Corporation, Draxis Health and SGF Sante herein shall
               continue in full force and effect indefinitely after the
               Closing Date.

     7.8.5     Notwithstanding the provisions of this section 7.8, no Claims
               with respect to breaches or failures of representations and
               warranties contemplated by subsections 7.2.1 and 7.3.1 which
               would, were it not for this subsection 7.8.5, have occurred,
               may be made against any of the SGF Indemnified Persons or the
               Corporation Indemnified Persons hereunder, and no breach or
               failure of representations and warranties contemplated by
               subsections 7.2.1 and 7.3.1 shall be considered to have
               occurred, unless and until the individual Claim or aggregate
               of individual Claims which would, were it not for this
               subsection 7.8.5, have arisen, exceeds $100,000, in which
               event all breaches and failures of representations and
               warranties contemplated in subsections 7.2.1 and 7.3.1 shall
               be considered to have occurred as if this subsection 7.8.5 did
               not exist and the amounts claimable shall be the aggregate of
               the Claims then being asserted and not be limited to that
               amount only in excess of the above limit.

7.9  SGF SANTE's RECOURSES. In the event of a Claim which, in accordance with
     section 7.6, is deemed to be equal to the SGF Share of the Underlying
     Loss, in settlement of the obligations of Draxis Health under this
     Article 7, Draxis Health shall have the option of either:

     7.9.1     Paying SGF Sante the amount of the SGF Share of the Underlying
               Loss; or

<PAGE>

                                     -36-

     7.9.2     investing a sum of money in the Corporation, as a contribution
               to capital and without any shares or debt issued to it in
               consideration therefor, which is equal to the Underlying Loss
               so as to put the Corporation in the same financial position it
               would have been in, on a consolidated basis, if the event
               giving rise to the Underlying Loss had not occurred.

7.10 FIRST SPECIAL COVENANT. Draxis Health shall be solely responsible for
     all costs in excess of $40,000 incurred by the Corporation with respect
     to the repair or replacement of the underground storage tank which
     leaked in 1999 as more fully described in Schedule 3.1.27 and all
     necessary remediation and clean-up resulting therefrom in complete
     conformity with all Applicable Laws and Environmental Laws as well as
     with respect to the replacement of the second underground storage tank as
     may be required so as to be in complete conformity with all Applicable Laws
     and Environmental Laws. Draxis Health shall immediately, upon written
     demand by SGF Sante, remit to he Corporation any such excess. No such
     costs, under or over $40,000, shall be included in the calculation of the
     $100,000 limit referred to in subsection 7.8.5 provided Draxis Health is
     not in default under this section 7.10.

7.11 SECOND SPECIAL COVENANT. Draxis Health shall be solely responsible for
     any amounts payable by the Corporation after the Closing Date on account
     of the purchase price (as that term is defined in the asset purchase
     agreement entered into as of June 12, 1998 among Baker Cummins Inc. as
     vendor, Ivax Corporation, the Corporation as purchaser and Draxis Health).
     Draxis Health shall, immediately upon written demand by SGF Sante, remit
     to the Corporation the amount of any such payment. Such amount shall not
     be included in the calculation of the $100,000 limit referred to in
     subsection 7.8.5 provided Draxis Health is not in default under this
     section 7.11.

7.12 DRAXIS HEALTH OBLIGATIONS. The obligations of Draxis Health hereunder
     are as primary obligor and not as surety or guarantor and Draxis Health
     agrees that it does not have any right of subrogation against the
     Corporation with respect hereto.

7.13 OTHER RECOURSES. The provisions of this Article 7 constitute additional
     remedies for SGF Sante Indemnified Persons and are in addition to any
     other recourses they may have, including the right of SGF Sante to demand
     resolution of this Agreement.

                                  ARTICLE 8

                                 ARBITRATION

8.1  CHOICE OF ARBITRATION. Subject to section 8.11 below, any Claim arising
     in respect of this Agreement which is challenged, any controversy or
     dispute regarding the execution of this Agreement, including its
     annulment, as well as any dispute with regard to the interpretation


<PAGE>

                                     -37-

     or application of this Agreement must be submitted to arbitration to the
     exclusion of the courts, the whole in accordance with the procedure
     hereinafter established.

8.2  NOTICE TO ARBITRATE. Any party or parties to this Agreement wishing to
     submit a Claim, conflict, dispute or disagreement (collectively a
     "Dispute") to arbitration must forward to the other parties to the Dispute
     a written notice (hereinafter referred to as "Notice to Arbitrate"),
     containing a reasonably detailed description of the Claim, conflict,
     dispute or disagreement and the nomination of an arbitrator.

8.3  CHOICE OF SECOND ARBITRATOR. Within 10 days of the receipt of Notice to
     Arbitrate, the other party or parties involved in the Dispute shall name a
     second arbitrator and send a notice to this effect to the party or parties
     making the submission, the first-named arbitrator and to the second-named
     arbitrator; in the absence of such a notice, the first-named arbitrator
     shall be the sole arbitrator and sections 8.6 and 8.10 inclusively shall
     apply MUTATIS MUTANDIS.

8.4  CHOICE OF THIRD ARBITRATOR. The two arbitrators appointed in accordance
     with the above procedure shall, within 10 days following the appointment
     of the second arbitrator, name a third arbitrator who shall be a member
     in good standing of the Quebec Bar and will act as President of the
     Arbitration Committee; if the first two arbitrators fail to agree on a
     third arbitrator, either one or both may apply to a judge of the Superior
     Court of the Province of Quebec, District of Montreal, to appoint the
     third arbitrator.

8.5  CHOICE OF SINGLE ARBITRATOR. In order to minimize costs, the parties
     involved in any dispute may agree, in writing, to appoint a single
     arbitrator in which event a notice of such appointment shall be sent to
     the arbitrator in question; sections 8.6 to 8.10 inclusively shall apply
     MUTATIS MUTANDIS to such sole arbitrator.

8.6  HEARING AND AWARD. The hearing shall be held in Montreal. The date of
     hearing must be held within 30 days of the appointment of the third
     arbitrator. The award of the board of arbitrators must be rendered in
     writing and served to the parties within 90 days following the hearing.
     Any such award (including with respect to the payment of fees and
     disbursements related to the arbitration) which is rendered shall be
     final, binding and without appeal, and shall become executory as a
     judgement against the parties upon homologation.

8.7  PROCEDURE AND EVIDENCE. Notice shall be given by the arbitrators, in
     writing, of the time and place of any hearings except where such hearings
     are adjourned by the arbitrators in the presence of both of the parties
     hereto. In the conduct of the hearing and particularly in the taking of
     testimony or other evidence in the course thereof, the arbitrators shall
     be bound by the rules of law applying to the competence, relevance and
     materiality of witnesses and testimony in the courts of the Province of
     Quebec and the rules of procedure set out in the CODE OF CIVIL PROCEDURE
     (Quebec). The arbitrators shall have full power and authority to

<PAGE>

                                     -38-

     permit, before or during any hearing, any amendment to the arbitration
     submission requested by the parties so submitting as well as any
     cross-demand by the other party or parties.

8.8  RESPECT OF DELAYS. In the event that the arbitration hearing is not
     held, or the arbitration award is not rendered, within the respective
     delays set out above, upon the receipt of a written notice to this effect
     from any party to the arbitration, the arbitrators shall no longer have
     jurisdiction to decide the matter submitted to them, and any party may
     thereupon take all steps to submit the matter to arbitration once again
     pursuant to these rules of procedure.

8.9  REPLACEMENT OF ARBITRATORS. In the event that one or more of such
     arbitrators resigns, refuses to act, withdraws, dies or otherwise becomes
     unable to fulfill the duties imposed upon him, then his place shall be
     filled by the parties originally naming him or if named by the other
     arbitrators, his place shall be filled by an appointment made by them; if
     no replacement has been named within 15 days following the date upon which
     the parties were advised of such failure to act, the vacancy may be filled
     by a judge of the Superior Court of the Province of Quebec, District of
     Montreal, upon motion by one of the parties.

8.10 SUPPLETIVE PROVISIONS. The parties to this Agreement agree that the
     provisions presently in effect of the CODE OF CIVIL PROCEDURE (Quebec)
     shall receive suppletive application to any arbitration proceeding
     undertaken or held by virtue of the present Agreement. In the event of a
     contradiction between the provisions of this Article 8 and the provisions
     of the aforementioned sections of the CODE OF CIVIL PROCEDURE (Quebec),
     the provisions of this Article 8 shall have precedence.

8.11 EXCEPTIONS TO ARBITRATION. Notwithstanding the provisions of this
     Article 8, any party shall be entitled to commence procedures in a court
     of law in order to obtain injunctive or attachment relief against a
     defaulting party.

8.12 LANGUAGE. Each party to the arbitration shall be entitled to use English
     or French at its or his sole discretion. The arbitrator(s) shall be
     bilingual and able to communicate in both English and French.


                                  ARTICLE 9

                             GENERAL PROVISIONS

9.1  SUCCESSORS AND PERMITTED ASSIGNS. The provisions of this Agreement
     shall, except as otherwise provided herein, enure to the benefit of and be
     binding upon the parties hereto and their respective representatives,
     administrators, successors and permitted assigns and each and every Person
     so bound shall make, execute and deliver all documents necessary to carry
     out this Agreement.

<PAGE>

                                     -39-

9.2  NO ASSIGNMENT. No party may assign its Rights or obligations under this
     Agreement without the express written consent of all other parties.

9.3  NOTICES. All communications, notices and demands required or permitted
     hereunder shall be in writing and shall be deemed to have been duly given
     upon personal delivery, including delivery by courier or facsimile (with
     proof of receipt) to the addresses as set forth below:

     IF TO SGF SANTE:

     SGF SANTE INC.
     c/o SOCIETE GENERALE DE FINANCEMENT DU QUEBEC
     600 de La Gauchetiere West, Suite 1700
     Montreal, Quebec
     H3B 4L8

     Attention: The Secretary
     Fax: (514) 395-8055

     IF TO THE CORPORATION:

     DRAXIS PHARMA INC.
     16751 TransCanada Highway
     Kirkland, Quebec
     H9H 4J4

     Attention: President
     Fax: (514) 694-3841

     IF TO DRAXIS HEALTH:

     DRAXIS HEALTH INC.
     6870 Goreway Drive
     Mississauga, Ontario
     L4V 1P1

     Attention: The Secretary
     Fax: (905) 677-5494


<PAGE>

                                     -40-

     Each of the parties shall be entitled to specify different or additional
     addresses by giving written notice to the other party in the manner set
     forth herein.

9.4  BROKERAGE COMMISSIONS. The Corporation has not paid or become obligated
     to pay any fee or commission to any broker, investment banker, finder or
     the like in connection with the transactions contemplated by this
     Agreement. SGF Sante has not paid or become obligated to pay any fee or
     commission to any broker, investment banker, finder or the like in
     connection with the transactions contemplated by this Agreement. Each
     party hereby agrees to indemnify, defend and hold harmless the other
     against any and all Claims of the above-mentioned brokers, investment
     bankers, finders or the like, and against the Claims of all other parties
     claiming any right to a commission or compensation by or through the acts
     of that party or that party's partners, employees, agents or Affiliates in
     connection with this Agreement. Each party's indemnification obligations
     provided in Article 7 shall include all damages, losses, liabilities, and
     expenses, including reasonable attorney's fees, incurred in connection with
     any such claim for a broker's or finder's fee.

9.5  TIME OF THE ESSENCE. Time shall be of the essence of this Agreement.

9.6  COUNTERPARTS. This Agreement may be executed in any number of
     counterparts, each of which so executed shall be deemed to be an original,
     and such counterparts shall together constitute but one and the same
     Agreement.

9.7  SEPARABILITY. In the event that any provision of this Agreement is held
     invalid or unenforceable, such invalidity or unenforceability shall not
     affect the validity or enforceability of the remainder of this Agreement.

9.8  CONSENTS AND APPROVALS. Except as otherwise expressly set forth herein,
     whenever any party's consent or approval must be obtained hereunder, such
     consent or approval shall not be unreasonably withheld, delayed or
     conditioned.

9.9  ANNOUNCEMENTS. SGF Sante reserves the right for itself or its
     governmental representatives to publicly announce the following information
     in connection with its investment: the name and address of the Corporation,
     the nature of its business, the nature and amount of the investment and the
     number of jobs to be created, the whole subject to the prior approval by
     the Corporation of the content of such announcement. Draxis Health shall
     also be entitled to publicly announce the completion of the transaction
     contemplated herein, subject to the prior approval by SGF Sante of the
     content of the announcement. It is also recognized that Draxis Health is
     subject to certain disclosure obligations under Applicable Laws as a result
     of the listing of its shares on the Toronto Stock Exchange and NASDAQ, and
     it is agreed that the prior approval by SGF Sante of the content of all
     such disclosures with respect to the transaction contemplated herein and
     all accessory matters shall be required which approval shall not be
     unreasonably withheld or delayed, it being agreed that if such approval is
     not

<PAGE>

                                     -41-

     obtained in the required delay imposed by Applicable Laws then the
     Corporation may process with same disclosure. In the event that the
     Corporation organizes an official ceremony or press conference to
     publicize the investment by SGF Sante, it shall obtain its prior written
     approval which shall not be unreasonably withheld and advise it of such
     ceremony at least 15 days prior thereto in order to permit SGF Sante or
     its representatives or invitees to attend thereat.

9.10 LANGUAGE. This Agreement is executed by all the parties hereto in French
     and in English. The parties hereto expressly agree that in the event of any
     misunderstanding, dispute or controversy amongst them with respect to any
     of the provisions of this Agreement, the French version and the English
     version shall have equal value and neither of them shall prevail.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.


                                       SGF SANTE INC.


                                   Per: /s/ Francis Bellido
                                       -------------------------
                                       Francis Bellido


                                   Per: /s/ Michel Beland
                                       -------------------------
                                       Michel Beland


                                       DRAXIS PHARMA INC.


                                   Per: /s/ Dwight Gorham
                                       -------------------------
                                       Dwight Gorham

<PAGE>


                              TABLE OF CONTENTS


<TABLE>
<CAPTION>

                                                                           Page
                                                                           ----
<S>                                                                        <C>
ARTICLE 1  DEFINITIONS AND INTERPRETATION .................................  1
     1.1   Definitions.....................................................  2
     1.2   GAAP............................................................  8
     1.3   Interpretation Not Affected by Headings.........................  8
     1.4   Extended Meanings...............................................  8
     1.5   Entire Agreement................................................  8
     1.6   Amendment.......................................................  8
     1.7   Waiver of Rights................................................  8
     1.8   Schedules.......................................................  8
     1.9   Applicable Law..................................................  9
     1.10  Funds...........................................................  9
     1.11  Business Day....................................................  9
     1.12  Third Party Beneficiaries.......................................  9

ARTICLE 2  SUBSCRIPTION, ALLOTMENT AND ISSUE OF SUBSCRIBED SHARES..........  9
     2.1   Subscription....................................................  9
     2.2   Subscription Price.............................................. 10

ARTICLE 3  REPRESENTATIONS AND WARRANTIES
           REGARDING THE CORPORATION....................................... 10
     3.1   Representations and Warranties regarding the Corporation........ 10
           3.1.1   Corporate Matters....................................... 10
           3.1.2   Subsidiaries............................................ 11
           3.1.3   Authorized and Issued Capital of the Corporation........ 11
           3.1.4   No Violation............................................ 12
           3.1.5   Consents, Approvals..................................... 12
           3.1.6   Other Agreements of Officers............................ 13
           3.1.7   Transactions with Related Parties....................... 13
           3.1.8   Financial Statements.................................... 13
           3.1.9   Changes in the Corporation's Business................... 13
           3.1.10  Taxes................................................... 15
           3.1.11  Existing Contracts...................................... 16
           3.1.12  Compliance with Applicable Laws......................... 18
           3.1.13  Employees............................................... 18
           3.1.14  Collective Agreements................................... 19
           3.1.15  Benefit Plans........................................... 19
           3.1.16  Litigation.............................................. 20
           3.1.17  Insurance............................................... 20
</TABLE>


                                      -i-



<PAGE>
<TABLE>
<CAPTION>
<S>  <C>   <C>                                                             <C>
           3.1.18 Title to Assets ........................................ 21
           3.1.19 Intellectual Property Rights ........................... 21
           3.1.20 Immoveable Property .................................... 22
           3.1.21 Suppliers and Customers ................................ 23
           3.1.22 Licences ............................................... 23
           3.1.23 Year 2000 Issues ....................................... 24
           3.1.24 Bank Accounts .......................................... 24
           3.1.25 Liabilities ............................................ 24
           3.1.26 Corporate Records ...................................... 24
           3.1.27 Environmental Protection ............................... 25
           3.1.28 The plant .............................................. 26
           3.1.29 Inventory .............................................. 26
           3.1.30 Accounts Payable and Accounts Receivable ............... 26
           3.1.31 Advances from Draxis Health ............................ 27
           3.1.32 Disclosure ............................................. 27

ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SGF Sante .................... 27
     4.1   Representations and Warranties of SGF Sante ................... 27
           4.1.1  Corporate Matters ...................................... 27

ARTICLE 5 COVENANTS ...................................................... 29
     5.1   Reports ....................................................... 29
     5.2   Ongoing obligations ........................................... 30
     5.3   Actions to Satisfy Covenants .................................. 31

ARTICLE 6 CLOSING ........................................................ 31
     6.1   Closing ....................................................... 31

ARTICLE 7 SURVIVAL AND RELIANCE ON REPRESENTATIONS
           AND WARRANTIES AND INDEMNIFICATION ............................ 32
     7.1   Survival Notwithstanding Investigation ........................ 32
     7.2   Indemnification by the Corporation and Draxis Health .......... 32
     7.3   Indemnification by SGF Sante .................................. 33
     7.4   Indemnification Against Third-Party Claims .................... 33
     7.5   Indemnification to be After Insurance, etc. ................... 34
     7.6   Amount of Claim ............................................... 34
     7.7   Currency of Indemnification ................................... 34
     7.8   Expiry and Limit of Liability ................................. 35
     7.9   SGF Sante's Recourses ......................................... 35
     7.10  First Special Covenant ........................................ 36
     7.11  Second Special Covenant ....................................... 36
     7.12  Draxis Health Obligations ..................................... 36
     7.13  Other Recourses ............................................... 36

                                     -ii-

<PAGE>

<CAPTION>
<S>  <C>   <C>                                                             <C>
ARTICLE 8 ARBITRATION .................................................... 36
     8.1   Choice of Arbitration ......................................... 36
     8.2   Notice to Arbitrate ........................................... 37
     8.3   Choice of Second Arbitrator ................................... 37
     8.4   Choice of Third Arbitrator .................................... 37
     8.5   Choice of Single Arbitrator ................................... 37
     8.6   Hearing and Award ............................................. 37
     8.7   Procedure and Evidence ........................................ 37
     8.8   Respect of Delays ............................................. 38
     8.9   Replacement of Arbitrators .................................... 38
     8.10  Suppletive Provisions ......................................... 38
     8.11  Exceptions to Arbitration ..................................... 38

ARTICLE 9 GENERAL PROVISIONS ............................................. 38
     9.1   Successors and Permitted Assigns .............................. 38
     9.2   No Assignment ................................................. 39
     9.3   Notices ....................................................... 39
     9.4   Brokerage Commissions ......................................... 40
     9.5   Time of the Essence ........................................... 40
     9.6   Counterparts .................................................. 40
     9.7   Separability .................................................. 40
     9.8   Consents and Approvals ........................................ 40
     9.9   Announcements ................................................. 40
     9.10  Language ...................................................... 41
</TABLE>




                                     -iii-