Document:

Exhibit 10.3

OFFICE LEASE

McGarry
Management, LLC, of 401 Andover Street, North Andover, MA
01845, telephone (978) 686-1111, fax (978) 685-7878, Lessor, which expression shall include its heirs, successors
and assigns where the context so admits, does hereby lease to Andover Management Services, Inc. a Deleware corporation, of
510 Turnpike Street, North Andover, MA 01845 individually and severally,
hereinafter collectively referred to as Lessee,
Suite 204, as built out in the floor
plan attached hereto as Exhibit A, at 510 Turnpike Street, North Andover, MA,
together with the right to use in common with others entitled thereto, the
hallways and stairways necessary for access thereto, the parking lot and the
lavatories nearest thereto.  Lessor shall
construct the additional buildout as indicated in red on Exhibit A at Lessee’s
expense.

TERM & RENT

The term of this lease shall be for three (3) years, commencing on August
1, 2006 and ending on July 31, 2009, at the monthly rent of $4,019 payable in
advance on the first day of the month starting August 1, 2006.

Upon the execution of this lease, the LESSEE shall pay to the LESSOR
the amount of  $8,038 which shall be held
as a security for the LESSEE’s performance as herein provided and refunded to
the LESSEE at the end of this lease subject to the LESSEE’s satisfactory
compliance with the conditions hereof.

COMMON AREA MAINTENANCE

In addition to payments of rent. LESSEE shall pay the LESSOR an amount
equal to the LESSEE’s percentage share of the real estate taxes, common area
maintenance such as common area cleaning, maintenance, snow removal,
landscaping and all other costs associated with the operation of the building,
including building property insurance(hereinafter referred to as “CAM charges”).  LESSEE’s percentage share is 16%.

The CAM charges will be billed to LESSEE on a monthly basis in
advance.  In the twelfth month of each
year of the lease, LESSOR will supply LESSEE with copies of all bills
associated with the CAM charges, if requested by LESSEE.  Adjustments will be made by the LESSOR to
LESSEE’s pro rated monthly payments for additional rent as herein defined, and
reconciled between actual costs and annual projected charges adjusted annually.

 1
 

UTILITIES

LESSEE shall pay, as they become due, all bills for gas and electricity
(whether they are used for heat and/or air conditioning its offices) that are
furnished to the leased premises and presently separately metered.

PAYMENTS

Time is of the essence of each and every provision of the Lease.  In the event LESSEE is in default of any
payment hereunder beyond a five (5) day grace period, LESSEE shall pay to
LESSOR as additional rent, interest in the amount of 1% per month on the
outstanding amount due from the date it was originally due hereunder, and a
late fee of $25 for each occurrence to pay for LESSOR’S administrative costs.

USE OF LEASED PREMISES

The LESSEE shall use the leased premises only for the purpose of  professional offices.  The LESSEE acknowledges that no trade or
occupation shall be conducted in the leased premises or use made thereof which
will be unlawful, improper, noisy or offensive or contrary to any law or any
town by-law in force in the town in which the premised are suited.

FIRE INSURANCE

The LESSEE shall not permit any use of the leased premises which will
make voidable any insurance on the property of which the leased premises are a
part or on the contents of said property of which shall be contrary to any law
or regulation from time to time established by the New England Fire Insurance Rating
Association, or any similar body succeeding to its powers.  The LESSEE shall on demand reimburse the
LESSOR, and all other tenants, all extra insurance premiums caused by the
LESSEE’s use of the premises.

MAINTENANCE OF PREMISES

The LESSEE agrees to exclusively maintain the leased premises in the
same condition as they are at the commencement of the term or as they may be
put during the term of this lease, reasonable wear and tear, damage by fire and
other casualty only excepted, acknowledging that the leased premises are now in
good order.

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ALTERATIONS-ADDITIONS

The LESSEE shall
not make structural alterations or additions to the leased premises, but may
make non-structural alterations provided the LESSOR consents thereto in writing,
which shall not be unreasonably delayed or withheld.  All such allowed alterations shall be at
LESSEE’s expense and shall be in quality at least equal to the present
construction.  LESSEE shall not permit
any mechanic’s liens, or similar liens, to remain upon the leased premises for
labor and material furnished to LESSEE or claimed to have been furnished to
LESSEE in connection with work of any character performed or claimed to have
been performed at the direction of LESSEE and shall cause any such lien to be
released of record forthwith without cost to LESSOR.  Any alterations or improvements made by the
LESSEE shall become the property of the LESSOR at the termination of this
lease.

ASSIGNMENT-SUBLEASING

The LESSEE shall not assign or sublet the whole or any part of the leased
premises to an unrelated company without LESSOR’s prior written consent, which
shall not be unreasonably delayed or withheld. 
Notwithstanding such consent, LESSEE shall remain liable to LESSOR for
the payment of all rent and for the full performance of the covenants and
conditions of this lease.  Any rent to be
paid by any assignee or subtenant in excess of the rent payable hereunder,
shall be forthwith paid to the LESSOR.

SUBORDINATION

The lease shall be subject and subordinate to any and all mortgages,
deeds of trust and other instruments in the nature of a mortgage, now or at any
time hereafter, a lien or liens on the property of which the leased premises
are a part and the LESSEE shall, when requested, promptly execute and deliver
such written instruments as shall be necessary to show the subordination of
this lease to said mortgages, deed of trust or other such instruments in the
nature of a mortgage.  Under no
circumstances may the LESSEE or his agents record this lease or any notice of
this lease without the written consent of the LESSOR.

LESSOR’S ACCESS — LOCKS & KEYS

The LESSOR or agents of the LESSOR may, at reasonable times, enter to
view the leased premises and may remove placard and signs not approved and
affixed as herein provided, and make repairs and alterations as LESSOR should
elect to do and may show the leased premises to others.  All locks in the building must be keyed to
the LESSOR’S master key; therefore, LESSEE may not change or replace any lock
or add any new locks 

 3
 

without the LESSOR’S
written permission.  There will be a $200.00 charge to the LESSEE for each lock
that LESSEE adds or replaces without LESSOR’S written permission.

INDEMNIFICATION AND LIABILITY

The LESSEE shall
save the LESSOR harmless from all loss and damage occasioned by the use or
escape of water or by the bursting of pipes, as well as from any claim or
damage resulting from neglect in not removing snow or ice from the roof of the
building or from the sidewalks bordering upon the premises so leased, or by any
nuisance made or suffered on the leased premises, unless such loss is caused by
the neglect of the LESSOR.

LESSEE’S LIABILITY INSURANCE

The LESSEE shall maintain with respect to the leased premises
comprehensive public liability insurance in the amount of $1,000,000, with
property damage insurance in limits adequate to cover all of LESSEE’s property,
in responsible companies qualified to do business in Massachusetts and in good
standing therein insuring the LESSOR as well as the LESSEE against injury to
persons or damage to property as provided. 
The LESSEE shall deposit with the LESSOR certificates for such insurance
upon the request of the LESSOR.

FIRE, CASUALTY —EMINENT DOMAIN

Should a substantial portion of the leased premises, or of the property
of which they are a part, be substantially damaged by fire or other casualty,
or be taken by eminent domain, the LESSOR may elect to terminate this
lease.  When such fire, casualty, or
taking renders the leased premises substantially unsuitable for their intended
use, a just and proportionate abatement of rent shall be made, and the LESSEE
may elect to terminate this lease if:

(a)                                  The
LESSOR fails to give written notice within thirty (30) days of said fire,
casualty or taking of its election to restore the leased premises, or

(b)                                 The
LESSOR fails to restore the leased premises to a condition substantially
suitable for their intended use within ninety (90) days of said fire, casualty
or taking.

The LESSOR
reserves, and the LESSEE grants to the LESSOR, all rights which the LESSEE may
have for damages or injury to the leased premises for any taking by eminent
domain, except for damage to the LESSEE’s fixtures, property or equipment.

 4
 

DEFAULT & BANKRUPTCY

In the event that:

(a)                                  the
LESSEE shall default in the payment of any installment of rent or other sum
herein specified and such default shall continue for ten (10) days after
written notice thereof; or

(b)                                 the
LESSEE shall default in the observance or performance of any other of the
LESSEE’s covenants, agreements or obligations hereunder and such default shall
not be corrected within thirty (30) days after written notice thereof; or

(c)                                  the
LESSEE shall be declared bankrupt or insolvent according to law, or if any
assignment shall be made of LESSEE’s property for the benefit of creditors,

then the LESSOR
shall have the right there after, while such default continues, to re-enter and
take complete possession of the leased premises, to declare the term of this
lease ended, and remove the LESSEE’s effects, without prejudice to any remedies
which might be otherwise used for arrears of rent or the balance of the rent
due under this lease or other default. 
The LESSEE shall indemnify the LESSOR against all loss of rent and other
payments, which the LESSOR may incur by reason of such termination during the
residue of the term.  If the LESSEE shall
default, after reasonable notice thereof, in the observance or performance of
any conditions or covenants on LESSEE’s part to be observed or performed under
or by virtue of any of the provisions in any article of this lease, the LESSOR,
without being under any obligation to do so and without thereby waiving such
default, may remedy such default for the account and at the expense of the
LESSEE.   If the LESSOR makes any
expenditures or incurs any obligations for the payment of money in connection
therewith, including but not limited to, reasonable attorney’s fees in
instituting, prosecuting or defending any action or proceeding, such sums paid
or obligations incurred, with interest at the rate of 12% per annum and costs,
shall be paid by the LESSEE as additional rent.

NOTICE

Any notice from the LESSOR to the LESSEE relating to the leased
premises or to the occupancy thereof, shall be deemed duly served, if left at
the leased premises addressed to the LESSEE, or, if mailed to the leased
premises, registered or certified mail, return receipt requested, postage
prepaid, addressed to the LESSEE.  Any
notices from the LESSEE to the LESSOR relating to the leased premises or to the
occupancy thereof, shall be deemed duly served, if mailed to the LESSOR by
registered or certified mail, return receipt requested, postage prepaid,
addressed to the LESSOR at 401 Andover St., North Andover, MA 01845.  Rents shall be mailed or delivered to LESSOR
at 401 Andover St., North Andover, MA 01845.

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SURRENDER

The LESSEE shall at the expiration or other termination of this lease
remove all LESSEE’s goods and effects from the leased premises.  LESSEE shall deliver to the LESSOR the lease
premises and all keys, locks thereto and other fixtures connected therewith and
all alterations and additions made to or upon the leased premises, in the same
condition as they were at the commencement of the term, or as they were put in
during the term hereof, reasonable wear and tear and damage by fire or other
casualty only excepted.  In the event of
the LESSEE’s failure to remove any of LESSEE’s property from the premises,
LESSOR is hereby authorized, without liability to LESSEE for loss or damage
thereto, and at the sole risk of LESSEE, to remove and store any of the
property at LESSEE’s expense, or to retain same under LESSOR’s control or to
sell at public or private sale, without notice any or all of the property not
so removed and to apply the net proceeds of such sale to the payment of any sum
due hereunder, or to destroy such property.

QUIET ENJOYMENT

LESSOR agrees that, providing that LESSEE is current with rent payments
and other financial obligations and is performing and observing the terms,
provisions, conditions and covenants of this Lease on its part to be performed
and observed, LESSEE shall and may lawfully, peaceably and quietly have, hold,
occupy and enjoy the leased premises as herein provided, without any manner of
hindrance, molestation or ejection from LESSOR or anyone claiming by, through
or under LESSOR.

RULES & REGULATIONS

LESSEE will observe and comply with and will cause its employees and
agents to observe and comply with reasonable Building rules and regulations
from time to time promulgated by LESSOR for the benefit and prosperity of the
Building.

OTHER PROVISIONS

	
  LESSEE shall:

  	
   

  	
  (1) be responsible for cleaning its offices;

  
	
   

  	
   

  	
  (2) place plastic mats under all moving chairs in
  its offices;

  
	
   

  	
   

  	
  (3) not place any sign on the property at said
  premises other than those provided by LESSOR; and

  
	
   

  	
   

  	
  (4) not permit smoking in its offices or the common
  areas of the building.

  

 

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Signed
as a sealed instrument this            17th              day of   July, 2006

	
  McGarry Management, LLC,
  LESSOR

  	
   

  	
  Andover Management Services, Inc., LESSEE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
  By

  	
   

  
	
   

  	
  John F. McGarry,
  Manager

  	
   

  	
   

  	
  Edwin A. Reilly

  

 

 

 7Exhibit
4.58

DRAXIS HEALTH INC.

2006 STOCK OPTION PLAN

TABLE OF CONTENTS

	
  ARTICLE 1 - PURPOSE OF THE PLAN 

  	
  1

  
	
   

  	
   

  
	
  1.01

  	
   

  	
  Purpose

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 2 - INTERPRETATION

  	
  1

  
	
   

  	
   

  
	
  2.01

  	
   

  	
  Definitions

  	
  1

  
	
  2.02

  	
   

  	
  Extended Meanings

  	
  3

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 3 - GRANT OF OPTIONS

  	
  3

  
	
   

  	
   

  
	
  3.01

  	
   

  	
  Authority of Board

  	
  3

  
	
  3.02

  	
   

  	
  Shares Reserved

  	
  4

  
	
  3.03

  	
   

  	
  Eligibility

  	
  4

  
	
  3.04

  	
   

  	
  Limits with Respect to Insiders

  	
  4

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 4 - TERMS OF OPTIONS

  	
  4

  
	
   

  	
   

  
	
  4.01

  	
   

  	
  Option Agreement

  	
  4

  
	
  4.02

  	
   

  	
  Exercise Price

  	
  5

  
	
  4.03

  	
   

  	
  Time of Exercise

  	
  5

  
	
  4.04

  	
   

  	
  Expiry Date

  	
  5

  
	
  4.05

  	
   

  	
  Early Expiry

  	
  5

  
	
  4.06

  	
   

  	
  Non-Assignable

  	
  6

  
	
  4.07

  	
   

  	
  No Rights as Shareholder or to Remain an Eligible
  Person

  	
  6

  
	
  4.08

  	
   

  	
  Adjustments to Common Shares

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 5 - EXERCISE OF OPTIONS

  	
  8

  
	
   

  	
   

  
	
  5.01

  	
   

  	
  Manner of Exercise

  	
  8

  
	
  5.02

  	
   

  	
  Delivery of Share Certificate

  	
  8

  
	
  5.03

  	
   

  	
  Withholding

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE 6 - ADMINISTRATION 

  	
  8

  
	
   

  	
   

  
	
  6.01

  	
   

  	
  Administration

  	
  8

  
	
  6.02

  	
   

  	
  Amendment of Plan and Options

  	
  9

  
	
  6.03

  	
   

  	
  Compliance with Laws and Stock Exchange Rules

  	
  9

  

 

ARTICLE 1 - PURPOSE OF THE PLAN

1.01         Purpose

The purpose of the DRAXIS Health Inc. 2006 Stock Option Plan is to
assist and encourage directors, officers and employees of the Corporation and
its Subsidiaries to work towards and participate in the growth and development
of the Corporation and its Subsidiaries by providing such persons with the
opportunity, through stock options, to acquire an ownership interest in the
Corporation.

ARTICLE 2 - INTERPRETATION

2.01         Definitions

In this Plan:

“Board” means
the board of directors of the Corporation.

“Cause”
includes:

(a)           the continued failure
by the Optionholder to substantially perform his or her duties in connection
with his or her employment by, or service to, the Corporation (other than as a
result of physical or mental illness) after the Corporation has given the
Optionholder reasonable written notice of such failure and a reasonable
opportunity to correct it;

(b)           the engaging by the
Optionholder in any act which is injurious to the Corporation or its reputation
financially or otherwise;

(c)           the engaging by the
Optionholder in any act resulting or intended to result, directly or
indirectly, in personal gain to the Optionholder at the expense of the
Corporation;

(d)           the conviction of the
Optionholder by a court of competent jurisdiction on any charge involving
fraud, theft or moral turpitude by the Optionholder in connection with the
business of the Corporation; or

(e)           any other conduct that
constitutes cause at common law, “serious reason” within the meaning of the Civil Code of Québec, or “good and sufficient cause” or “serious
reason” as such terms are interpreted from time to time by the jurisprudence of
the Province of Québec.

“Change of
Control” includes:

(a)           the acquisition by any
persons acting jointly or in concert (as determined by the Securities
Act (Ontario)), whether directly or indirectly, of voting securities
of the Corporation which, together with all other voting securities of the
Corporation

held by such persons,
constitute in the aggregate more than 20% of all outstanding voting securities
of the Corporation;

(b)           an amalgamation,
arrangement or other form of business combination of the Corporation with
another corporation which results in the holders of voting securities of that
other corporation holding, in the aggregate, more than 20% of all outstanding
voting securities of the Corporation resulting from the business combination;
or

(c)           the sale, transfer,
lease or exchange of 50% or more of the property of the Corporation to another
person or corporation, other than in the ordinary course of business of the
Corporation, or to a Subsidiary.

“Common Shares”
means common shares of the Corporation.

“Corporation”
means DRAXIS Health Inc. and any successor corporation thereto.

“Date of Termination”
means the actual date of termination of (i) the office of the Optionholder
or (ii) the employment of the Optionholder, as applicable, and does not
include any period during which the Optionholder is in receipt of or is
eligible to receive any statutory, contractual or common law notice or
compensation in lieu thereof or severance payments following the actual date of
termination or resignation.

“Eligible Person”
means any director, officer or employee of the Corporation or any Subsidiary.

“Exercise Price”
means the price per Common Share at which Common Shares may be subscribed for
by an Optionholder pursuant to a particular Option Agreement.

“Expiry Date”
means the date on which an Option expires pursuant to the Option Agreement
relating to that Option.

“Grant Date”
means the date on which an Option is granted, which date may be on or, if
determined by the Board at the time of grant, after the date that the Board
resolves to grant the Option.

“Insider”
means:

(a)           an insider as defined
in the Securities Act (Ontario), other than a
person who falls within that definition solely by virtue of being a director or
senior officer of a Subsidiary; and

(b)           an associate, as
defined in the Securities Act (Ontario), of any
person who is an insider by virtue of (a) above.

“Notice of Exercise”
means a notice, substantially in the form of the notice set out in Schedule B,
from an Optionholder to the Corporation giving notice of the exercise or
partial exercise of an Option previously granted to the Optionholder.

 2
 

“Option” means an
option to purchase Common Shares granted to an Eligible Person pursuant to the
terms of the Plan.

“Option Agreement”
means an agreement, substantially in the form of the agreement set out in
Schedule A to this Plan, between the Corporation and an Eligible Person setting
out the terms of an Option granted to the Eligible Person.

“Optioned Shares”
means the Common Shares that may be subscribed for by an Optionholder pursuant
to an Option Agreement.

“Optionholder”
means an Eligible Person to whom an Option has been granted.

“Plan” means the
DRAXIS Health Inc. 2006 Stock Option Plan, as amended from time to time.

“Share Compensation
Arrangement” means any stock option, stock option plan, employee
stock purchase plan or any other compensation or incentive mechanism involving
the issuance or potential issuance of Common Shares, including a share purchase
from treasury which is financially assisted by the Corporation by way of a
loan, guarantee or otherwise.

“Subsidiary” has
the meaning attributed thereto in the Securities Act
(Ontario).

2.02         Extended
Meanings

In this Plan, words importing the singular number only include the
plural and vice versa, words importing any gender
include all genders and words importing persons include individuals,
corporations, limited and unlimited liability companies, general and unlimited
partnerships, associations, trusts, incorporated organizations, joint ventures
and governmental authorities.

ARTICLE 3 - GRANT OF OPTIONS 

3.01         Authority
of Board

Subject to the limitations of the Plan, the Board has the authority:

(a)           to determine which
Eligible Persons are to be granted Options and to grant Options to those
Eligible Persons;

(b)           to determine the terms
of such Options; and

(c)           to prescribe the form
of Option Agreement and Notice of Exercise with respect to a particular Option,
if other than substantially as set forth in Schedules A and B to this
Plan.

 3
 

3.02         Shares
Reserved

(1)           The maximum number of
Common Shares that may be reserved for issuance pursuant to Options granted
under the Plan is 1,500,000.

(2)           The maximum number of
Common Shares that may be reserved for issuance to any one Eligible Person
pursuant to Options granted under the Plan is 5% of the number of Common Shares
outstanding at the time of reservation.

(3)           Any Common Shares
subject to an Option that expires or terminates without having been fully
exercised may be made the subject of a further Option.  No fractional Common Shares may be issued
under the Plan.

3.03         Eligibility

Options may be granted by the Board to any Eligible Person, subject to
the limitations set forth in Sections 3.02(2) and 3.04, prior to his or
her Date of Termination.

3.04         Limits
with Respect to Insiders

(1)           The maximum number of
Common Shares that may be reserved for issuance to Insiders pursuant to Options
granted under the Plan and any other Share Compensation Arrangement is 10% of
the number of Common Shares outstanding.

(2)           The maximum number of
Common Shares that may be issued to Insiders under the Plan and any other Share
Compensation Arrangement within a one-year period is 10% of the number of
Common Shares outstanding.

(3)           The maximum number of
Common Shares that may be issued to any one Insider (and such Insider’s
associates, as defined in the Securities Act (Ontario))
under the Plan and any other Share Compensation Arrangement within a one-year
period is 5% of the number of Common Shares outstanding.

(4)           For the purposes of
Sections 3.04(2) and (3) above, the number of Common Shares outstanding is to
be determined on the basis of the number of Common Shares outstanding at the
time of the reservation or issuance, as the case may be, excluding Common
Shares issued under the Plan or under any other Share Compensation Arrangement
over the preceding one-year period.

ARTICLE 4 - TERMS OF OPTIONS

4.01         Option
Agreement

As soon as practicable following the grant of an Option, the
Corporation will deliver to the Optionholder an Option Agreement dated the
Grant Date, containing the terms of the Option and executed by the Corporation,
and upon delivery to the Corporation of the Option Agreement

 4
 

executed by the Optionholder such Optionholder will be
a participant in the Plan and have the right to purchase the Optioned Shares on
the terms set out in the Option Agreement and the Plan.

4.02         Exercise
Price

The Exercise Price of Common Shares subject to an Option will be
determined by the Board at the time of grant and will not be less than the
market price of the Common Shares at the Grant Date, calculated as the closing
price of a board lot of the Common Shares on The Toronto Stock Exchange on the
last trading day immediately preceding the Grant Date or, if the Common Shares
did not trade on such last trading day, the average, rounded up to the nearest
cent, of the bid and ask prices for a board lot of the Common Shares at the
close of trading on such last trading day. 
For the purposes of this Section 4.02, if the Option is granted
after the close of trading on any particular Grant Date, the “trading day
preceding the Grant Date” will be deemed to be the Grant Date.

4.03         Time of
Exercise

(1)           Subject to
Section 4.04, the Board shall determine at the time of grant the date or
dates on which Options will be exercisable. 
The Board may determine after the Grant Date that a particular Option
will be exercisable in whole or in part on earlier dates for any reason.

(2)           Notwithstanding
anything herein to the contrary, if there occurs a Change of Control at any
time when an Option granted under the Plan remains unvested with respect to any
Optioned Shares, such unvested portion will vest and become fully exercisable,
as to all the Optioned Shares in respect of which such Option was not
previously exercisable, by the Optionee at any time up to and including a date
30 days following the consummation of such Change of Control.

(3)           Notwithstanding the
provisions of Sections 4.03(1) and (2), no unvested portion of an Option
will vest as a result of a Change in Control that occurs after the Date of
Termination of an Optionholder.

4.04         Expiry
Date

The Expiry Date of an Option will be ten years after the Grant Date,
subject to

(a)           the right of the Board
to determine at the time of grant that a particular Option will have a shorter
term; and

(b)           the provisions of
Section 4.05 relating to early expiry.

4.05         Early
Expiry

An Option will expire before its Expiry Date in the following events
and manner:

(a)           if an Optionholder
dies, only the portion of the Option that is exercisable at the date of death
of the Optionholder may be exercised by the personal representatives of the
Optionholder during the period ending 6 months after the

 5
 

death of the Optionholder
or such later date as the Board may approve, after which period all Options
terminate;

(b)           if an Optionholder
resigns his or her office or employment (other than as provided for in Section 4.05(e)),
only the portion of the Option that is exercisable at the date of resignation
may be exercised by the Optionholder during the period ending 30 days
after the date of resignation or such later date as the Board may approve,
after which period all Options terminate;

(c)           if an Optionholder is
terminated without Cause, including a constructive dismissal, only the portion
of the Option that is exercisable at the Date of Termination may be exercised
by the Optionholder during the period ending 30 days after the Date of
Termination or such later date as the Board may approve, after which period all
Options terminate;

(d)           if an Optionholder
attains the mandatory retirement age established by the Corporation from time
to time or an Optionholder’s employment or service ceases due to permanent
disability, only the portion of the Option that is exercisable at the date of
retirement or cessation may be exercised by the Optionholder during the period
ending 6 months after the date of retirement or cessation or such later
date as the Board may approve, after which period all Options terminate; and

(e)           unless the Board
determines otherwise, an Option will expire immediately upon the Optionholder
ceasing to be an Eligible Person as a result of being dismissed from his or her
office or employment for Cause, including where an Eligible Person resigns his
or her office or employment after being requested to do so by the Corporation
as an alternative to being dismissed by the Corporation for Cause

subject in all cases to the earlier expiration of an Option on its
applicable Expiry Date.

4.06         Non-Assignable

Except as provided in Section 4.05(a), an Option may be exercised
only by the Optionholder and is not assignable in law or in equity, and any
purported assignment is void and of no force and effect whatsoever.

4.07         No Rights
as Shareholder or to Remain an Eligible Person

(1)           An Optionholder will
only have rights as a shareholder of the Corporation with respect to Optioned
Shares that the Optionholder acquires through the exercise of an Option in
accordance with its terms.

(2)           Nothing in this Plan or
in any Option Agreement will confer on any Optionholder any right to remain as
a director, officer or employee of the Corporation or any Subsidiary.

 6
 

4.08         Adjustments
to Common Shares

(1)           The number of Common
Shares delivered to an Optionholder upon exercise of an Option will be adjusted
as determined by the Board in the following events and manner, subject to the
right of the Board to make such additional or other adjustments as are
appropriate in the circumstances:

(a)           upon a subdivision of
the Common Shares into a greater number of Common Shares, a consolidation of
the Common Shares into a lesser number of Common Shares or the issue of a stock
dividend to holders of the Common Shares (other than dividends in the ordinary
course), the Corporation will deliver upon the exercise of an Option, in
addition to or in lieu of the number of Optioned Shares in respect of which the
right to purchase is being exercised and without the Optionholder making any
additional payment, such greater or lesser number of Common Shares as results
from the subdivision, consolidation or stock dividend;

(b)           upon the distribution
by the Corporation to holders of the Common Shares of shares of any class
(whether of the Corporation or another corporation, but other than Common
Shares), rights, options or warrants, evidences of indebtedness or cash (other
than dividends in the ordinary course), other securities or other assets, the
Corporation will deliver upon exercise of an Option, in addition to the number
of Optioned Shares in respect of which the right to purchase is being exercised
and without the Optionholder making any additional payment, such other
securities, evidence of indebtedness or assets as result from such
distribution; and

(c)           upon a capital
reorganization, reclassification or change of the Common Shares, a
consolidation, amalgamation, arrangement or other form of business combination
of the Corporation with another corporation or a sale, lease or exchange of all
or substantially all of the assets of the Corporation, the Corporation will
deliver upon exercise of an Option, in lieu of the Optioned Shares in respect
of which the right to purchase is being exercised, the kind and amount of shares
or other securities or assets as result from such event.

The purpose of such adjustments is to ensure that any Optionholder
exercising an Option after any such event will be in the same position as such
Optionholder would have been in if he or she had exercised the Option prior to
such event.

(2)           An adjustment will take
effect at the time of the event giving rise to the adjustment, and the
adjustments provided for in this Section are cumulative.

(3)           The Corporation will
not be required to issue fractional Common Shares or other securities under the
Plan and any fractional interest in a Common Share or other security that would
otherwise be delivered upon the exercise of an Option will be cancelled.

 7
 

ARTICLE 5 - EXERCISE OF OPTIONS

5.01         Manner of
Exercise

An Optionholder (or the personal representatives of a deceased
Optionholder) who wishes to exercise an Option may do so by delivering the
following to the Corporation on or before the Expiry Date of the Option:

(a)           a completed Notice of
Exercise; and

(b)           a cheque (which need
not be a certified cheque) or bank draft payable to the Corporation for the
aggregate Exercise Price for the Optioned Shares being acquired.

If the Optionholder is deceased, the personal representatives of the
Optionholder must also deliver to the Corporation evidence of their status to
represent the Optionholder.

In no event shall the Corporation provide financing to an Optionholder
(or personal representative of a deceased Optionholder) for the purpose of the
exercise of Options.

5.02         Delivery
of Share Certificate

As soon as practicable after receipt of the Notice of Exercise and
payment in full for the Optioned Shares being acquired, the Corporation will
direct its transfer agent to issue a certificate in the name of the
Optionholder (or, if deceased, the Optionholder’s estate) for the number of
Optioned Shares purchased by the Optionholder (or the Optionholder’s estate),
which will be issued as fully paid and non-assessable Common Shares.

5.03         Withholding

The Corporation will withhold taxes to the extent required by
applicable law in respect of any amounts under this Plan.

ARTICLE 6 - ADMINISTRATION

6.01         Administration

(1)           The Plan will be
administered by the Board or, if determined by the Board, by the Human
Resources and Compensation Committee of the Board.  If the Human Resources and Compensation
Committee is granted the authority to administer the Plan, all references in
this Plan to the Board will be deemed to be references to the Human Resources
and Compensation Committee.

(2)           The Board may interpret
the Plan and determine all questions arising out of the Plan and any Option
granted pursuant to the Plan, which interpretations and determinations will be
conclusive and binding on the Corporation and all other affected persons.

 8
 

6.02         Amendment
of Plan and Options

(1)           The Board may amend,
suspend or terminate the Plan at any time, provided that no such amendment,
suspension or termination may

(a)           be made without
obtaining any required regulatory or shareholder approvals or

(b)           prejudice the rights of
any Optionholder under any Option previously granted to the Optionholder
without the consent or deemed consent of the Optionholder.

(2)           The Board may amend the
terms of any outstanding Option (including, without limitation, the
cancellation of an Option or an amendment to the date or dates on which an
Option or a portion thereof vests and so becomes exercisable), provided that:

(a)           any required regulatory
and shareholder approvals are obtained;

(b)           the Board would have
had the authority to initially grant the Option under terms as so amended; and

(c)           the consent or deemed
consent of the Optionholder is obtained if the amendment would prejudice the
rights of the Optionholder under the Option.

6.03         Compliance
with Laws and Stock Exchange Rules

The Plan, the grant and exercise of Options under the Plan and the
Corporation’s obligation to issue Common Shares on exercise of Options will be
subject to all applicable federal, provincial and foreign laws, rules and
regulations and the rules of any stock exchange on which the Common Shares are
listed for trading.  No Option will be
granted and no Common Shares will be issued under the Plan where such grant or
issue would require registration of the Plan or of such Common Shares under the
securities laws of any foreign jurisdiction and any purported grant of any
Option or issue of Common Shares in violation of this provision will be
void.  Common Shares issued to
Optionholders pursuant to the exercise of Options may be subject to limitations
on sale or resale under applicable securities laws.

 9

SCHEDULE
A - FORM OF OPTION AGREEMENT

DRAXIS
HEALTH INC. 

2006 STOCK OPTION PLAN

OPTION AGREEMENT

This Option Agreement is entered into between DRAXIS Health Inc. (the “Corporation”)
and the Optionholder named below pursuant to the DRAXIS Health Inc. 2006 Stock
Option Plan (the “Plan”) and confirms that:

	
  (a)

  	
  on
                                                                    

  	
  (the “Grant Date”);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (b)

  	
                                                                         

  	
  (the “Optionholder”);

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  (c)

  	
  was granted a non-assignable option to purchase

  	
   

  	
   

  
	
   

  	
  Common Shares (the “Optioned Shares”) of the
  Corporation, exercisable as to ·%
  on · [NTD: Insert vesting
  information];

  
	
   

  	
   

  
	
  (d)

  	
  at a price (the “Exercise Price”) of

  	
  $                               

  	
  per Common Share; and

  
	
   

  	
   

  	
   

  	
   

  
	
  (e)

  	
  for a term expiring at 5:00 p.m., Toronto time, on
                                                         
  (the “Expiry Date”);

  
						

 

all on the terms and subject to the conditions set out in the
Plan.  By signing this agreement, the
Optionholder acknowledges that he or she has read and understands the Plan and
accepts the Options in accordance with the terms of the Plan.  Optionholder also acknowledges that, if the
Optionholder is an insider of the Corporation (“Insider Optionee”) he or she
shall be responsible to file all insider reports required to be filed by him or
her related to the grant of the Options and any exercise thereof.  Said reports must be filed within the time
periods imposed by the applicable securities regulator for said filings.  The Insider Optionee who does not file his or
her insider reports within the required delays shall be responsible for the
payment of any fine levied against him or her due to said late filing.

The Exercise Form required to be completed by the Optionholder for the
exercise of the options is attached.

IN WITNESS WHEREOF the Corporation and the Optionholder have executed
the Option Agreement as of ·,
200·.

	
  

  	
   

  	
  DRAXIS HEALTH INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
     Name
  of Optionholder

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
     Signature
  of Optionholder

  	
   

  	
   

  
						

SCHEDULE
B - FORM OF NOTICE OF EXERCISE

DRAXIS
HEALTH INC.

2006 STOCK OPTION PLAN

NOTICE OF EXERCISE

	
  TO:

  	
  DRAXIS Health Inc.

  16751 Trans-Canada Highway

  Kirkland, Québec

  H9H 4J4

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
  Secretary

  	
   

  
				

 

Reference is made to the Option Agreement made as of
                                                   
200·, between DRAXIS Health Inc. (the “Corporation”)
and the Optionholder named below.  The
Optionholder hereby exercises the Option to purchase Common Shares of the
Corporation as follows:

	
  

  	
  Number of Optioned Shares for which Option being
  exercised:

  	
  ·

  
	
   

  	
   

  	
   

  
	
   

  	
  Exercise Price per Common Share:

  	
  $·

  
	
   

  	
   

  	
   

  
	
   

  	
  Total Exercise Price (in the form of a cheque which
  need not be a certified cheque) or bank draft tendered with this Notice of
  Exercise):

  	
  $·

  
	
   

  	
   

  	
   

  
	
   

  	
  Name of Optionholder as it is to appear on share
  certificate

  	
  ·

  
	
   

  	
   

  	
   

  
	
   

  	
  Address of Optionholder as it is to appear on the
  register of Common Shares of the Corporation and to which a certificate
  representing the Common Shares being purchased is to be delivered:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Dated

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name of Optionholder

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Signature of Optionholder

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