**Exhibit4.53**

 

**RETIREMENTCOMPENSATION ARRANGEMENT**

**TRUSTAGREEMENT**

 

This Agreement****made as of this 1st day of June 2005.

 

Between:                **DRAXIS Health Inc.**, a company incorporated under the laws ofthe Province of Ontario, having its head office in the Province of Ontario(hereinafter referred to as the “Company”)

 

-and-

 

**RichardJ. Flanagan, *****, and *******,trustees of the Retirement Compensation Arrangement Trust for Richard J.Flanagan of DRAXIS Health Inc. (the “Trust”) in the province of Ontario(hereinafter referred to as the “Trustees”).

 

**A.****   **WHEREASpursuant to the terms of a Retirement Compensation Arrangement (hereinaftercalled the “RCA”) dated June 1st, 2005, the parties heretoagree to enter into a trust agreement whereby the Trustees agree to act as Trusteesand to administer a trust in accordance with the terms and conditions of thisAgreement;

 

**B.****   **ANDWHEREAS the Company has established a trust for the purposes of providingretirement benefits for some or all of its employees, known as the RetirementCompensation Arrangement Trust for Richard J. Flanagan of DRAXIS Health Inc.from the Effective Date and has appointed the Trustees to administer the Trustas of the Effective Date;

 

**C.****   **ANDWHEREAS the Trustees have agreed to act as Trustees in accordance with theterms and conditions contained herein;

 

**D.****   **ANDWHEREAS contributions by the Company are made in connection with benefits thatare to be or may be received or enjoyed by the Members (hereinafter referred toas the “Member”) on, after or in contemplation of a substantial change in theservices rendered by the Member, the retirement of the Member, the disabilityor death of the Member or the loss of office or employment of the Member;

 

**E.****    **TheRCA Plan Text requires the Company to pay contributions into trust to fund theplan benefits and the Company hereby agrees to transfer to the Trustees the sumof $751,111 as an initial contribution.

 

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NOW THEREFORE that inconsideration of the member continuing to provide faithful service to theCompany and the Company providing the RCA Plan to the Member and such othergood and valuable consideration and the sum of $10.00 now paid by each party toeach of the other parties (receipt and sufficiency of which is herebyacknowledged by each of the parties), the parties hereto agree as follows:

 

## **1.**         INTERPRETATION

 

1.1       **Definitions.**The following terms have the meanings given:

 

**“Agreement”**means this trust agreement as amended from time to time;

 

**“Beneficiary”**means the beneficiaries referred to in Schedule “A”;

 

**“EffectiveDate”** means the date on which the Company provides funds toestablish the Trust Fund to the Trustee.

 

**“IncomeTax Act”** means the Income Tax Act of Canada, as amended fromtime to time;

 

**“FinancialInstitution”** means a Canadian Chartered Bank, Foreign BankBranch, Credit Union, Trust or Loan Corporation or other lending institutionlicensed by the Federal Government of Canada to transact business in Canada.

 

**“Member”**means a person who is enrolled in the Plan by the Company under the Terms andConditions set out in Schedule “A”;

 

**“Plan”**means the Retirement Compensation Arrangement (“RCA”) Plan as amended from timeto time attached hereto as Schedule “A”.

 

**“Powers”**shall be deemed to mean and include those things which the Trustees may, intheir sole and absolute discretion, do or refrain from doing in the management,supervision or carrying out of this Trust and the doing or refraining fromdoing any act shall not violate any duty to the Members and any Beneficiariesof the Trust and such powers shall not be limited by any statutory limitationsset out in the Ontario Trustee Act or any other relevant provinciallegislation;

 

**“RCA”**means a Retirement Compensation Arrangement within the meaning of the *Income Tax Act (Canada)*;

 

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**“Spouse”**means, in relation to a Member, either of a man or woman who has been expresslydesignated as the sole and only Beneficiary at the time of the death of theMember, and

 

1.aremarried to each other or,

 

2.arenot married to each other and are living together in a conjugal relationship,

 

(i)            continuouslyfor a period of not less than three years, or

 

(ii)           ina relationship of some permanence, if they are the natural or adoptive parentof a child, both as defined in the Family Law Act.

 

and shall not include anyother Persons notwithstanding that such Person may be a spouse of the Member.

 

**“Trustees”**means the individuals that from time to time act as the Trustees of the TrustFund;

 

**“TrustFund”** means the trust fund established pursuant to thisAgreement.

 

1.2       **Number and Gender.**Unless the context requires otherwise,words importing the singular include the plural and vice versa, and wordsimporting gender include both genders.

 

1.3       **Headings.**The headings in this Agreement are included solelyfor the ease of reference and are not to be used to interpret this Agreement.

 

**2.****         ESTABLISHMENTAND ACCEPTANCE OF TRUST**

 

2.1       **Establishment.**In order to establish and settle a trust tofund Plan benefits, the Company will contribute $10.00 to the Trustees.

 

2.2       **Trust Fund.**All contributions received by the Trustees inconnection with the Plan, together with any earnings, profits, increments andaccruals arising thereon, reduced by authorized payments shall constitute aTrust Fund which shall be held by the Trustees pursuant to the trust provisionssettling the trust set out within this Agreement and dealt with in accordancewith the enabling powers contained within this Agreement.

 

2.3       **Acceptance.**The Trustees hereby accept the trusts created bythe terms of the Agreement and the powers set out within this Agreement andagree to hold, invest, distribute and administer the Trust Fund in accordancewith this Agreement.

 

2.4       **Subject to Agreements.**The Trust Fund shall be held by theTrustees in trust for the Member subject to the terms and conditions containedherein and at no time shall any part

 

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of the Trust Fundbe used for or diverted to purposes other than those consistent with the termsof this Agreement and the RCA.

 

**3.****        USEOF TRUST FUND**

 

3.1       TheTrust Fund shall be used solely for the purposes of paying amounts that arepayable under the Plan and any taxes, expenses for administration and otheramounts payable in respect of the Trust Fund.

 

**4.****         PAYMENTSFROM THE TRUST FUND**

 

4.1       **Payments of benefits.**The Trustees shall make payments fromthe Trust Fund in accordance with the terms of the Plan. Notwithstanding theforegoing, no payments shall be made from the Trust Fund to the Member, Spouseor Beneficiary of such Member or to the Company at any time that any loan isoutstanding to a Financial Institution.

 

4.2       **Withholding.**The Trustees shall withhold from any planpayments to be made to the Member pursuant to this Agreement any amountrequired by the Income Tax Act or any other governing statute to be withheld.

 

4.3       **Taxes.**The Trustees shall pay from the Trust Fund all taxesof whatever kind that may be levied or assessed under existing or future lawsupon or in respect of the Trust Fund or any assets forming a part thereof. Thisparagraph also applies to any interest or penalty applicable in respect of anytaxes.

 

4.4       **Sale of assets.**If the Trustees must sell assets in order tomake a payment, the Trustees may select the assets to be sold in the Trustees’sole discretion.

 

**5.****         INVESTMENTOF TRUST FUND**

 

5.1       **Investment Directions.**The Trustees shall invest theinvestments of the Trust Fund and may, from time to time, delegate the power todirect the investments to one or more other persons.

 

5.2       **Permissible Investments.**The Trustees may acquire anyinvestments whatsoever, notwithstanding that the investments may not beauthorized by law. For greater certainty, and without in any way limiting theforegoing, the Trustees may acquire interests in pooled funds, partnerships,life insurance policies, annuity contracts and loans of private companiesincluding the Company.

 

**6.****         RETIREMENTCOMPENSATION ARRANGEMENT**

 

6.1       Itis intended that the Plan and the Trust Fund be a retirement compensationarrangement for the purposes of the *Income Tax Act (Canada)*.

 

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**7.****         POWERSOF TRUSTEES**

 

7.1       Withoutin any way limiting or derogating from the powers and authorities otherwiseavailable to the Trustees, the Trustees have the following powers andauthorities in the administration and investment of the Trust Fund, to beexercised in accordance with this Agreement:

 

a)     **Purchase of property.**To invest the Trust Fund or any partthereof in such manner and in such loans, bonds, securities or other property(including securities issued by the Trustees or its affiliates or by theCompany), and upon such terms as the Trustees shall consider advisable, withoutbeing restricted to a class of investments which the Trustees may be permittedby law to make.

 

b)    **Sale, exchange, conveyance and transfer of property.**Tosell, exchange, convey, transfer or otherwise dispose of any securities orother property held by it, upon such terms and for such consideration as theTrustees consider suitable.

 

c)     **Exercise of owner’s rights.**To vote upon any stocks, bondsor other securities; to give general or special proxies or powers of attorneywith or without power of substitution; to exercise any conversion privileges,subscription rights, or other options, and to make any payments incidentalthereto; to oppose, or consent to, or otherwise participate in corporatereorganizations or other changes affecting corporate securities; and generallyto exercise any of the powers of an owner with respect to all stocks, bonds,securities or other property held as part of the Trust Fund.

 

d)    **Registration of Investments.**To cause any securities orother property held or forming part of the Trust Fund to be registered in theirown name as Trustees, or in the name of one or more of its nominees asTrustee(s), and to be represented by certificates which include securities ofthe same class and nature held for other accounts for which the Trustees act ina fiduciary capacity; to hold any securities in bearer form; and to holdsecurities of an issuer utilizing a book-based central depository system forwhich certificates are not being issued, in which case the books and records ofthe Trustees shall at all times show such securities or the proportionateinterest thereof that are part of the Trust Fund.

 

e)     **Acquire life insurance.**To apply for and purchase as anauthorized investment of the Trust Fund life insurance on the life of anyperson including the Member.

 

f)     **Insurance.**To accept as assignee for consideration or as adonation to the Trust Fund any life insurance policy or policies on the life ofany person and/or benefits under any such policy or policies and to use andapply any portion of the Trust Fund in the payment or pre-payment of premiumsupon or for the purpose of maintaining in force any such insurance, whetherapplied for and purchased by the Trustees or accepted by them as assignees ordonees and any insurance so purchased by or donated to or otherwise acquiredand held by the Trustees shall be deemed to be an authorized

 

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investment in alike manner so shall any payment or pre-payment of any premium thereon. TheTrustees are specifically authorized to acquire universal life insurance orpermanent life insurance policies with some or all of the contributions to theTrust Fund.

 

g)    **Borrowing.**To borrow or raise money for the purposes of theTrust on such terms and conditions as the Trustees consider appropriate, and touse the property of the Trust Fund to secure the repayment of the amountborrowed or raised with the purpose of such borrowing to ultimately benefit theMember and Beneficiary.

 

h)    **Retention of property acquired.**To accept and retain anysecurities or other property received or acquired by them as Trustees, whetheror not such securities or other property would normally be purchased asinvestments for the Trust Fund.

 

i)      **Bank accounts.**To open directly or indirectly through one ormore of it’s nominees as Trustee(s), and operate an account with a bank, trustcompany or securities brokerage firm and to retain cash in the account. Anycash deposited with the Trustees or an affiliate shall be credited withinterest at the usual rate for such deposits (without any liability to accountfor any profit resulting from the use of the cash while on deposit).

 

j)      **Execution of instruments.**To make, execute, acknowledge anddeliver all documents of transfer and conveyance and all other instruments thatmay be necessary or appropriate to carry out the Trustees’ powers.

 

k)     **Tax elections.**To make, or refrain from making, anyelection, determination, designation, allocation or apportionment that isrequired or permitted by any taxing statute. This power shall be exercised inaccordance with the direction of the Member and, in the absence of suchdirection, in the Trustees’ absolute discretion.

 

l)      **Settlement of claims and debts.**To settle, compromise, orsubmit to arbitration any claims, debts or damages due to owing to or from theTrust Fund; to commence or defend suits or legal or administrative proceedings;and to represent the Trust Fund in all suits and legal and administrativeproceedings.

 

m)    **Employment of agents and others.**To retain suitable agents,lawyers (who may be counsel for the Company), accountants, actuaries and othercompetent and qualified persons for the purpose of seeking professional adviceof issues and matters pertaining to the Trust Fund, the Plan, tax matters andany and all other issues that may or will impact upon the Plan, the Member orBeneficiary.

 

n)    **Power to commingle.**To consolidate the Trust Fund wherethere are a number of employees covered as Members under the Plan, for thepurposes of investment, or any part thereof, with any other trust funds forwhich the Trustees are trustee into a single common fund, and to divide thecommon fund into units or proportionate interests that are held by the trustfunds for each respective Member.

 

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o)    **Non-arm’s length transactions.**To enter into a transactionwith the Trustees (acting in any other capacity), a Member or Beneficiary ofthe Trust Fund or any other non-arm’s length person, if the Trustees arepermitted to enter into the transaction with such a non-arm’s length person.

 

p)    **Power to do any necessary act.**To do all such acts, take allsuch proceedings, and exercise all such rights and privileges, not specificallymentioned, as the Trustees consider necessary to administer the Trust Fund.

 

**8.****             ACCOUNTSAND RECORDS**

 

8.1           **Maintenance of accounts.**The Trustees shall prepare andmaintain accurate and detailed accounts of all investments and transactions inrespect of the Trust Fund as set out herein. Within ninety (90) days followingthe end of each calendar year and within ninety (90) days after the removal,replacement or resignation of a Trustee, the Trustees shall prepare a statementsetting forth all investments and cash transactions effected by it during suchcalendar year or during the period from the close of the last calendar year tothe date of such removal, replacement or resignation, in respect of the TrustFund.

 

8.2           **Inspection of records.**The accounts and records of the TrustFund will be open for inspection and audit upon written notice to the Trusteeby any person specified by a Member or Beneficiary. The Trustee shall respondto such notice within ninety (90) days of receiving the request in writing.

 

**9.****             PROVISIONOF INFORMATION**

 

9.1           TheCompany shall provide the Trustees with a copy of Schedule A to the Trust Deedand with any other information required by the Trustees to fulfill theirresponsibilities under this Agreement.

 

**10.****          RESPONSIBILITIESAND LIMITATIONS**

 

10.1         **Adequacy of the Trust Fund.**The Trustees have noresponsibility to ensure the adequacy of the Trust Fund to make payments underthe Plan.

 

10.2         **Loss to the Trust Fund.**The Trustees shall not be liable forthe making, retention or sale of any investment nor for any loss to ordiminution of the Trust Fund, unless due to the Trustees’ own bad faith,reckless disregard of duties, willful default or misconduct (“Fault”).

 

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10.3         **Reliance on information and advice.**The Trustees shall notbe liable for any act or omission in reliance on information provided to themor on the advice of suitable counsel and advisors except where the liabilityarises because of Fault on the part of the Trustees.

 

10.4         **Reliance on Designation.**The Trustees are hereby empoweredto rely upon the Member’s Beneficiary Designation pursuant to the RCA Plan inSchedule “A”.

 

10.5         **Directions.**The Trustees shall not be liable for any act oromission in respect of any direction given in accordance with this Agreementexcept where the liability arises because of Fault on the part of one or moreof the Trustee(s). A Trustee shall not be liable for the malfeasance ornegligence of another Trustee.

 

10.6         **Proceedings.**The Trustees are not required to institute,prosecute or defend any proceedings relating to the Trust Fund, or to exerciseany other powers referred to in subparagraph 7.1(1), unless they have beenfirst indemnified to their satisfaction against any expenses or liabilitieswhich may incur as a result thereof.

 

10.7         **Compliance with the law.**The Trustees shall comply with anylaw, order or regulation which requires the Trustees to take or refrain fromtaking any action under this Agreement.

 

10.8         **Conflict of interest.**The Trustees may do the following:

 

a)     Ontheir own behalf or on behalf of other accounts that they manage, deal withsecurities of the same class or nature as are held by the Trust Fund;

 

b)    Usein other capacities knowledge gained in their capacity as Trustees of the TrustFund; and;

 

c)     Holdany office, position or employment with a corporation, and receive remunerationtherefor.

 

10.9         **Persons dealing with Trustees.**A person dealing with theTrustees need not inquire into the decisions or authority of the Trustees or tosee the application of any money, securities or any other property paid,delivered or lent to the Trustees.

 

### **11.**          TRUSTEES’COMPENSATION AND EXPENSES

### ** **

11.1         **Amount of compensation.**The remuneration of the Trusteesduring the terms of this Agreement shall be paid by the Company and shall beset from time to time by the Company with the agreement of the Trustees andpayable as set out in the Plan. The said sum shall be a global payment inrespect of the duties and obligations of the Trustees under this Agreement, thePlan and under any other similar agreements between the Trustees and theCompany.

 

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11.2         **Payment from the Trust Fund.**Subject to paragraph 11.3,the Trustees’ compensation and all expenses incurred by the Trustees in theadministration of the Trust Fund shall be paid from the Trust Fund.

 

11.3         **Payment by Company.**The Company shall pay the Trustees’compensation and all expenses incurred by the Trustees in the administration ofthe Trust Fund, other than compensation and expenses relating to the custodyand investment of the Trust Fund. The Trustees are entitled to payment from theTrust Fund for any compensation or expenses that remain unpaid after thirty(30) days.

 

**12.****          RESIGNATION,REMOVAL, REPLACEMENT OF TRUSTEES**

 

12.1         **Resignation by a Trustee.**A Trustee may, terminate his orher duties and obligations by giving sixty (60) days notice in writing, inwhich event the remaining Trustees shall immediately use their best efforts toappoint a new Trustee (which may be a trust company licensed to carry on thebusiness of a trust company in Canada). The terminating Trustee shall forthwithtransfer the Trust Fund, together with all records, accounts, receipts andother documents in respect thereof, to the Trustees.

 

12.2         **Removal of a Trustee.** A Trustee may be removed by a majorityof the Trustees at any time by giving (60) days notice in writing to suchTrustee and in such event a majority of the remaining Trustees shall appoint anew Trustee (which may be a trust company licensed to carry out the business ofa trust company in Canada). After receiving such notice of removal, theterminating Trustee shall forthwith transfer the Trust Fund, together with allrecords, accounts, receipts and other documents in respect thereof to such newTrustee, at the time and in the manner directed by the remaining Trustees.

 

12.3         **Successor Trustee.**A new Trustee may be appointed by theremaining Trustees as a successor Trustee and upon such appointment being made,the successor Trustee shall be bound by the terms of this Trust Agreementincluding the same powers and duties in the Plan Text or any amended or similarversion of this Trust Agreement or the Plan Text. In that regard, the successorTrustee shall execute all the necessary documents to complete its appointmentas successor Trustee.

 

**13.****          AMENDMENT**

 

13.1         ThisAgreement may be amended from time to time by an instrument in writing executedby the Trustees. No amendment may be made that conflicts with the terms of theRCA Plan and this Agreement.

 

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**14.****          GENERAL**

 

14.1         **Payments to minors and incompetents.**If any person to whom apayment is to be made is a minor or is otherwise incompetent to receive thepayment or to give a release for it, the payment may be made to the legalrepresentative of the person. If there is no legal representative, the paymentmay be made in the manner determined by the Trustees.

 

14.2         **Severability.**If any provision in this Agreement is found tobe invalid or unenforceable, the remaining provisions shall not be affected,and this Agreement shall be construed as if the invalid or unenforceableprovision were not in the Agreement.

 

14.3         **Disputes.**Should any difference of opinion at any time existbetween the Trustees, the Member, Spouse or Beneficiary of such Member inrelation to the commission or omission of any acts, or otherwise, in theexecution of the Trusts herein, an arbitrator agreed upon by the parties shallbe selected and the decision of the arbitrator shall be final and binding uponthe parties. The Parties shall share equally the cost of the arbitrator.

 

**15.****          GOVERNINGLAW**

 

15.1         ThisAgreement shall be subject to and construed under the laws of the Province ofOntario.

 

**16.****          BINDINGUPON HEIRS AND SUCCESSORS**

 

16.1         ThisAgreement shall endure to the benefit of and be binding on the parties to thisAgreement and their respective legal and personal representative, successorsand permitted assigns.

 

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**IN WITNESS WHEREOF**the Company and the Trustees have executed this Agreement as of the date at thetop of page 1.

 

 
| SIGNED IN THE PRESENCE  OF |                                      |
|----------------------------|-------------------------------------------|
|                       |                                      |
|                       |                                      |
|                       |                                      | /s/ Martin Barkin |   |
| Witness                    | Per: Martin Barkin                        |
|                       | President & CEO                       |
|                       | I have the authority to  bind the Company |
|                       |                                      |
|                       |                                      |
|                       |                                      | /s/ Richard J. Flanagan |   |
| Witness                    | Per: Richard J.  Flanagan                 |
|                       | I have the authority to  bind the Trust   |
|                       |                                      |
|                       |                                      |
|                       |                                      | /s/ Maureen A. Flanagan |   |
| Witness                    | Per: Maureen A.  Flanagan                 |
|                       | I have the authority to  bind the Trust   |
|                       |                                      |
|                       |                                      |
|                       |                                      | /s/ Gordon B. Lang |   |
| Witness                    | Per: Gordon B. Lang                       |
|                       | I have the authority to  bind the Trust   |

 

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**SCHEDULEA**

 

**RETIREMENTCOMPENSATION ARRANGEMENT (RCA) PLAN**

 

**FORRICHARD J. FLANAGAN OF**

 

**DRAXISHEALTH INC.**

 

 

Effective Date:      June1, 2005

 

 
| Signed on July 8, 2005  at Kirkland, Québec |                |
|--------------------------------------------------|---------------------|
|                                             |                |
|                                             |                |
| /s/ Martin Barkin                                |                |
| Martin Barkin                                    | President & CEO |
|                                                  |                     |  |  |

 

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**CONSTRUCTION OF THE PLAN**

 

The Plan provides Benefits to Members which areintended to supplement their retirement income.

 

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##### **TABLE OF CONTENTS**

 
| ** ** | ** **                                                         | **Page No.** |
|------------|--------------------------------------------------------------------|--------------|
|       |                                                               |         |
| 1.         | DEFINITIONS                                                        | 1            |
|       |                                                               |         |
| 2.         | ELIGIBILITY AND ENROLMENT                                          | 4            |
|       |                                                               |         |
| 3.         | CONTRIBUTIONS                                                      | 5            |
|       |                                                               |         |
| 4.         | BENEFIT OPTIONS ON TERMINATION OF EMPLOYMENT OR  CHANGE OF CONTROL | 6            |
|       |                                                               |         |
| 5.         | PLAN BENEFITS                                                      | 7            |
|       |                                                               |         |
| 6.         | BENEFITS ON DEATH OR DISABILITY PRIOR TO  COMMENCEMENT OF ANNUITY  | 9            |
|       |                                                               |         |
| 7.         | RIGHT TO CEASE CONTRIBUTIONS TO THE PLAN                           | 10           |
|       |                                                               |         |
| 8.         | FUNDING AND ADMINISTRATION OF THE PLAN                             | 11           |
|       |                                                               |         |
| 9.         | MISCELLANEOUS PROVISIONS                                           | 12           |
|       |                                                               |         |
| 10.        | AMENDMENT OF THE PLAN                                              | 13           |

 

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# **1.**             DEFINITIONS

# ** **

**Actuary**

** **

**means a Fellow of the CanadianInstitute of Actuaries**

** **

**AnniversaryDate**

** **

means January 1stof each year following the Effective Date.

 

**Beneficiary**

** **

means, if there is noSpouse, the person designated by a Member under the Plan to receive benefitsarising from the death of a Member. If the Member fails to make a designation,any benefits will be paid to the Member’s estate.

 

**Changeof Control of the Company**

** **

means the purchase by athird party of shares of the Company containing in excess of 50% of the votingrights of shareholders.

 

**Company**

** **

means DRAXIS Health Inc.

 

**Continuous**

** **

means, in relation toemployment, membership or service, without regard to periods of temporarysuspension of the employment, membership or service of a Member and withoutregard to periods of layoff from employment, not exceeding 26 consecutive weeksduring such absence.

 

**Disability**

** **

means the continuous andcomplete inability of the Member to engage in any gainful occupation oremployment, whether with the Company or otherwise, for which the Member is, orbecomes, reasonably qualified by training, education or experience. The Membermust at all times be under the regular care of a legally qualified doctor.

 

**Earnings**

** **

means the base salary,bonus and taxable value of benefits of the Member.

 

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**InvestmentIncome**

** **

means the investmentincome credited to a Member Account. The value of the investment income shallbe determined by the Company. Investment Income shall be credited from the daya contribution is credited to the date the benefit is to be provided on death,retirement, disability, withdrawal or the effective date of Canadiannon-residency of a Member or Change of Control or Sale of the Company.

 

**Member**

** **

means a person whois enrolled in the Plan by the Company.

 

**MemberAccount**

** **

means the contributionsallocated under this Plan to the Account of a Member. The Member Account willinclude accrued investment income.

 

**NormalRetirement Date**

** **

means the first day ofthe month immediately following the Member’s 59th birthday. If theMember’s birthday is the first day of a month, the Normal Retirement Date isthe Member’s 60th birthday.

 

**Plan**

** **

**means the Retirement CompensationArrangement for Richard J. Flanagan of DRAXIS Health Inc. is governed bysubsection 248(1) of the Income Tax Act (Canada).**

** **

**PlanYear**

** **

means for the first PlanYear, the period beginning on the Effective Date to the Anniversary Date. SubsequentPlan Years shall be 12 months commencing on the Anniversary Date.

 

**Saleof Company**

** **

means the sale of allvoting shares of the Company to a third party.

 

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**Spouse**

** **

means, in relationto a Member, either of a man or woman who,

 

1.     aremarried to each other, or

 

2.     arenot married to each other and are living together in a conjugal relationship,

 

(i)            continuouslyfor a period of not less than three years, or

 

(ii)           ina relationship of some permanence, if they are the natural or adoptive parentsof a child, both as defined in the Family Law Act.

 

**Trustees**

** **

means either a trustcompany or an insurance company licensed to transact life insurance business inCanada, or

 

three or moreindividuals, all of whom reside in Canada and one of whom must be independentto the extent that the individual is neither a shareholder, partner or employeeof the Company.

 

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# **2.**             ELIGIBILITY AND ENROLMENT

# ** **

**2.1****          Eligibility**

 

An employee shall join the Plan when designated by the Company.

 

**2.2**          Enrolment

** **

To enroll as a Member of the Plan, an eligibleemployee must complete a Plan Enrolment Form.

 

**2.3**          Information

** **

The Company will provide each Member with a writtenexplanation of the Plan.

 

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# **3.**             CONTRIBUTIONS

# ** **

**3.1**          MemberContributions

** **

Members may be required to contribute to this Plan bythe Company in such amounts as are required under their Employment Contract,subject to a Certificate signed by an Actuary. Such contributions shall vestimmediately in the Member.

 

**3.2**          CompanyContributions

** **

Each Plan Year, the Company is required to allocatecontributions on behalf of each Member, in such amounts, at such times,determined by the Company, subject to a Certificate signed by an Actuary.

 

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# **4.**             BENEFIT OPTIONS ON TERMINATION OF EMPLOYMENT ORCHANGE OF CONTROL

# ** **

**4.1**          AMember must withdraw from the Plan if employment with the Company terminatesbefore Normal Retirement Date.

 

**4.2**          AMember may elect to withdraw from the Plan if the Company undergoes a Change ofControl. The Company will provide a statement of the Member’s benefits to theMember upon termination of employment or Change of Control.

 

**4.3**          TheMember will provide written confirmation of the benefit option chosen within 60days of the receipt of the benefit statement.

 

**4.4**          TheCompany will provide funds in cash or in kind equal to the Member Account underthe terms and conditions of the benefit option selected by the Member.

 

**4.5**          TheMember may elect any one or a combination of the following options for thefunds equal to the Member Account:

 

1.     paymentfrom the Plan of a single lump sum or annual installments of equivalent valueover a period of up to 20 years

 

2.     paymentfrom the Plan of equal annual installments over the lifetime of the Member andSpouse.

 

At the option of theMember such payments may have immediate effect or be deferred to the first dayof any subsequent month.

 

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# **5.**             PLAN BENEFITS

# ** **

**5.1**          RetirementDates

** **

**1.****     NormalRetirement Date**

 

A Member’s lump sum, installment payments or retirement payments maybegin on the Member’s Normal Retirement Date or, at the option of the Member,on the first day of any subsequent month.

 

**2.****     EarlyRetirement Date**

 

A Member may elect to begin benefit payments on the first day of anymonth.

 

**3.****     PostponedRetirement Date**

 

a)     AMember who remains in the service of the Company after Normal Retirement Datemay elect to continue participation in the Plan.

 

b)    AMember may elect to defer payments past Normal Retirement Date.

 

c)     AMember who is past Normal Retirement Date and elects to begin payment ofbenefits must cease participation in the Plan no later than the day precedingthe first payment of such benefits.

 

**5.2****          Amountof Benefits**

 

The amount of a Member’s lump sum or, installmentpayments will be determined by applying the value of the Member Account toinstalment rates in effect at the date the benefit commences.

 

**5.3****          NormalForm of Benefit**

 

The normal form ofbenefit is payable annually for 20 years during the lifetime of the Member,whom failing, the Spouse of the Member. In the event neither the Member orSpouse survives the 20 year period, the remaining payments shall be payable tothe Beneficiary of the Member.

 

**5.4****          TransferOption**

 

The Member may elect totransfer the value of the Member Account as outlined in Section 4.5.

 

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**5.4****          OptionalForm of Benefits**

 

A Member may elect, inlieu of the Normal Form of Benefits:

 

1.     Toreceive benefits in the form of a lump sum cash payment or installment paymentsfor up to 20 years, or

 

2.     Toreceive payments in the form of equal annual installments over the Member’slifetime.

 

**5.5****          TransferOption**

 

The Member may elect to transfer the value of theMember Account as outlined in Section 4.5.

 

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# **6.**             BENEFITS ON DEATH OR DISABILITY PRIOR TOCOMMENCEMENT OF ANNUITY

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**6.1****         **Ifa Member dies or becomes disabled before actual retirement date, a benefitequal to the value of the Member Account at the date of death or disabilityshall be paid in a lump sum or in accordance with Article 5 to the Member,or Beneficiary.

 

On disability the benefit shall be paid to the Member.

 

If a Member has a Spouse at the date of death, theSpouse will receive a death benefit representing the Member Account.

 

If the Member does nothave a Spouse at the date of death, the Beneficiary will receive a deathbenefit representing the Member Account.

 

**6.2**          TheSpouse or Beneficiary may elect one or a combination of the following options:

 

1.     toreceive the death benefit as a lump sum cash payment or in installment paymentsfor up to 20 years, or

 

2.     toreceive payments from the Plan of equal annual installments over the lifetimeof the Spouse or Beneficiary.

 

**6.3****         **AMember and Spouse may jointly waive the Spouse’s entitlement to the deathbenefit by filing the waiver.

 

**6.4**          Theamount of installment payments will be determined by applying the value of theMember Account to the installment payment rates in effect on the date of theMember’s death.

 

**6.5**          TheCompany shall provide a statement of the Member’s death or disability benefitupon receiving confirmation of the Member’s death or Disability.

 

**6.6**          Thedeath or disability benefit shall be paid upon receipt of the Member’s, Spouse’sor Beneficiary’s written direction.

 

**6.7****         **NotwithstandingArticles 6.1 or 6.2 the Member, Spouse or Beneficiary of the Member, as thecase may be, may elect to defer receipt of payments to the first day of anymonth subsequent to the Disability or death of the Member.

 

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# **7.**             RIGHT TO CEASE CONTRIBUTIONS TO THE PLAN

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**7.1**          TheCompany may permanently cease making contributions to the Plan at any time.

 

**7.2**          TheCompany will make all contributions required by the terms of the Plan up to thedate of termination of the Plan.

 

**7.3**          TheCompany will provide each affected Member with a written statement of thebenefits and options available to such Member following the cessation ofcontributions by the Company to the Plan.

 

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# **8.**             FUNDING AND ADMINISTRATION OF THE PLAN

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**8.1**          Administration

 

The Trustees have the final authority for allinterpretations of the Plan provisions.

 

The Company has adoptedthis Plan for the purpose of providing periodic retirement income to Members,in respect of their service as employees.

 

The administrator of thePlan are the Trustees of the RCA Trust. The Trustees may delegate specificadministrative functions and tasks to other parties.

 

**8.2**          **Funding**

 

The Plan is financed by Company Contributions with theexception of Member Contributions if required under Section 3.1.

 

**8.3****          **Investments of the Fund****

 

The Company shall establish an RCA Trust and theTrustees shall invest contributions made to the Plan at their sole discretion,subject to such investments being permitted under the terms of the Trust Deedand approved by the Company and in the case of Member Contributions, by theMember.

 

**8.4****          AdministrationFees**

 

All fees arising due to the administration of the Planmay be paid by the Company, failing which, they will be paid by the Trusteesfrom the Trust Fund.

 

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# **9.**             MISCELLANEOUS PROVISIONS

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**9.1**          Beneficiary

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The Member may appoint a Beneficiary or change theBeneficiary previously appointed at any time under the terms and conditions ofthe Plan.

 

Beneficiary appointmentsmade under the Plan are revocable unless the Member instructs otherwise inwriting.

 

**9.2****          MarriageBreakdown**

 

If, as the result of the breakdown of a Member’smarriage or other conjugal relationship, a benefit will be paid to the Spouseof the Member, as ordered by a written agreement, decree, order or judgement,the Member will provide a copy to the Company. The Spouse will receive abenefit not greater than 50% of the benefit to which the Member is entitledunder the terms of the Plan. The remaining Member benefit will not be adjustedor replaced as a result of the breakdown.

 

**9.3****          DisclosureRequirements**

 

1.     Anyperson entitled to benefits under the Plan, including a Member, Spouse or aduly authorized agent, may request to examine or receive a copy of any documentrelating to the Plan. The request must be made in writing to the administratorof the Plan.

 

2.     Ifa Member terminates employment with the Company, dies, becomes disabled,becomes a Non-Resident or retires, or on the sale of the Company or on theCompany undergoing a Change of Control shall provide the Member, Spouse orBeneficiary with a written statement of the benefits and options available.

 

3.     TheCompany shall provide Members with a written explanation of any amendment tothe Plan.

 

**9.4****          Surrenderor Assignment**

 

Benefits payable underthis Plan are not capable of assignment or alienation during the lifetime ofthe Member. Benefits payable under this Plan shall not be charged, anticipatedor given as security. Assignment of benefits may occur to the extent outlinedin Section 9.2, Marriage Breakdown. No right or interest in the benefitsof a Member or personal representative, dependent or any other person, iscapable of being assigned or otherwise alienated during the lifetime of theMember.

 

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# **10.**          AMENDMENT OF THE PLAN

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**10.1**        TheTrustees reserve the right to amend any provision of the Plan or to terminatethe Plan. Any amendment will be signed by the Trustees.

 

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