Document:

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                                                                     Exhibit 4.5

                  LICENSE, DISTRIBUTION AND SUPPLY AGREEMENT

                                  BETWEEN:

                             DRAXIS HEALTH, INC.

                                    AND

                     ELAN PHARMA (INTERNATIONAL) LIMITED

                                    AND

                        ELAN PHARMACEUTICALS, INC.

                               JUNE 17, 1999

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                                 CONTENTS

RECITALS

ARTICLES

<TABLE>
<S> <C>
1   DEFINITIONS
2   EXCLUSIVE LICENSE
3   LICENSE FEE; CLOSING; CONDITIONS TO CLOSING
4   PERFORMANCE INCENTIVE
5   OWNERSHIP AND JOINT DEVELOPMENTS
6   CONFIDENTIALITY
7   PROJECT COMMITTEE; PROJECT DEVELOPMENT
         AND COMMERCIALIZATION
8   SUPPLY
9   FORECASTING AND ORDERING
10  PRICE
11  SAMPLES
12  DELIVERY AND PAYMENT TERMS
13  RIGHTS OF FIRST NEGOTIATION; NON-COMPETITION
14  REPRESENTATIONS AND WARRANTIES
15  PRODUCT WARRANTY AND LIABILITY
16  PATENTS AND TRADEMARKS
17  QUALITY CONTROL
18  RIGHTS OF INSPECTION AND REPORTS
19  FORCE MAJEURE
20  TERM AND TERMINATION
21  INDEPENDENT CONTRACTOR
22  ASSIGNMENT
23  MISCELLANEOUS

</TABLE>

ATTACHMENTS

<TABLE>
<S> <C>
A   PATENT RIGHTS/TRADEMARKS
B   EARLY TERMINATION FEE RATES, SCHEDULES FOR CALCULATION,
    EXAMPLE

          NPV Schedule--Attachment B-1
          ROI Schedule--Attachment B-2

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          Example Calculation--Attachment B-3
C   FORECAST
D   COST OF GOODS

</TABLE>

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            LICENSE, DISTRIBUTION AND SUPPLY AGREEMENT

THIS LICENSE, DISTRIBUTION AND SUPPLY AGREEMENT is made as of the 17th day of
June, 1999 (the "Effective Date"), by and between Elan Pharma (International)
Limited, an Ireland corporation having its principal offices at WIL House,
Shannon, County Clare, Ireland and Elan Pharmaceuticals, Inc., a Delaware
corporation with its offices at 800 Gateway Boulevard, South San Francisco,
California 94080 (together, "Elan"), and Draxis Health, Inc., a Canada
corporation having its principal offices at 6780 Goreway Drive, Mississauga,
Ontario, Canada L4V 1P1 ("Draxis").

                            RECITALS

A.  Elan owns or controls the rights to develop and commercialize certain
Products in the Territory, each as defined below, and desires to enter into
an exclusive agreement with Draxis for the further development and
commercialization of those Products in the Territory on the terms and
conditions contained in this Agreement.

B. As a part of the Agreement, Elan will supply Draxis with its requirements
of Product for distribution and sale within the Territory, also on the terms
and conditions stated below.

C. Simultaneously with the execution of this Agreement, and as a condition
to the transactions described herein, the parties or their Affiliates are
entering into a Common Stock Purchase Agreement for the purchase by Elan of
common stock of Draxis.

                           AGREEMENT

NOW, THEREFORE, IT IS AGREED between the parties as follows:

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ARTICLE 1 - DEFINITIONS

1.1  "Affiliate" as applied to Elan or Draxis shall mean any legal entity
other than Elan or Draxis, as the case may be, in whatever country organized,
controlled by or under common control with Elan or Draxis. "Affiliate" shall
also mean any company which owns or controls at least fifty per cent (50%) of
the voting stock of Draxis or Elan, or any other company at least fifty per
cent (50%) of whose voting stock is owned by or controlled by such company.
The term "control" means possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of such entity,
whether pursuant to the ownership of voting securities, by contract or
otherwise.

1.2  "After-Tax Contribution" shall mean the net contribution multiplied by
the income tax rate as set out in the NPV Schedule which is Attachment B-1
hereto.

1.3  "Change of Control" shall mean any agreement to acquire or actual
acquisition, by a third party not an Affiliate of such party immediately
prior to such acquisition, of ownership or control of at least fifty per cent
(50%) of the voting stock of Draxis, on the one hand, or Elan
Pharmaceuticals, Inc. or its ultimate parent company, Elan Corporation, plc,
on the other hand. For the purposes of this section, "control" shall have the
meaning given in the definition of Affiliate, above.

1.4  "Closing" and "Closing Date" shall mean, respectively, the consummation
of the transactions described herein and the date on which such consummation
occurs, as described in Section 3.1 below.

1.5  "Commercially Reasonable Efforts" shall mean reasonable efforts and
resources at least equal to those normally used by the party using such
efforts, for a compound, formulation or product owned by it or to which it
has rights, which has a similar market potential at a similar stage in its
product life, taking into account the formulation of the product, the
competitiveness of the marketplace, the proprietary position of the compound
or product, the applicable regulatory structure and requirements, the
clinical and pre-clinical study results pertaining to the Product, time and
cost of completion of development, the profitability of the Product, the size
and location of the subject market within the Territory and any other
relevant factors, as determined by the other party in its reasonable
discretion.

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1.6  "Cost of Goods" shall mean, with respect to Products supplied by Elan to
Draxis under this Agreement, Elan's actual and reasonable cost of producing
and/or supplying a Product in accordance with generally accepted accounting
principles and Elan's standard costing methodology, consistently applied.
Such costs shall include, but not be limited to, all bulk drug, work in
process (where applicable) and transfer price(s) paid by Elan, Product testing
and yield loss costs, royalties, milestone payments specific to the
Territory, costs of packaging and labelling (other than packaging and
labelling undertaken by or for the account of Draxis under Section 9.2 below)
and quality control or other testing of Products, less costs of goods
returned in accordance with a return policy approved by the Project
Committee, together with all allocated indirect costs and overhead applicable
to Elan's manufacturing, quality control or technical operations functions.

1.7  "Current Good Manufacturing Practices", or "cGMP" means that part of
pharmaceutical quality assurance with ensures that manufacturing sites are
maintained and operated and products are consistently produced and controlled
to the then current quality standards appropriate to their intended use and
as required by the Product specifications in effect from time to time and as
defined in applicable laws and regulations of the Food and Drug
Administration (FDA) and the Health Protection Branch of Canada (HPB).

1.8  "Effective Date" shall mean the date stated in the first paragraph above.

1.9  "Effective Termination Date" shall mean the applicable date stated, as
the case may be, in Section 20.2

1.10  "Factory" means the last applicable manufacturing site in the
production process for each of the Products' commercial supply for the
Territory, as notified to Draxis from time to time in writing by Elan.

1.11  "Forecast" shall have the meaning given in Section 4.2 below.

1.12  "Improvements" means technical improvements, modifications, inventions
or discoveries, whether patented or unpatented, that are developed, made or
acquired by Elan or an Affiliate during the term of this Agreement and that
are derived from or constitute additions or improvements over the Products
including, but not limited to, any new indications, new/additional dosage
forms or strengths, new oral and non-

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oral formulations, generic versions, new/additional drug delivery systems,
pro-drugs, analogues, or process improvements.

1.13  "Net Present Value" shall mean the net present value of the Products'
projected After-Tax Contribution over the remainder of the term of this
Agreement from the Effective Termination Date, determined according to the
most recent Forecast for each of the Products as approved by the Project
Committee, discounted back at the annual percentage rate contained in
Attachment B attached hereto and incorporated by this reference.

1.14  "Net Sales" shall mean the gross invoiced sales for Products sold or
commercially disposed of for value to a third party by Draxis or its
Affiliates, after deduction of the following amounts:

          (i) discounts, including cash discounts, customary trade allowances
or rebates actually taken or allowed;

          (ii) credits or allowances given or made for rejection, recall or
return of previously sold Products actually taken or allowed;

          (iii) any tax or government charge (including any tax such as a
value added or similar tax or government charge other than an income tax)
levied on the sale, transportation or delivery of a Product and borne by the
seller thereof; and

          (iv) packaging, freight, insurance and customs, duties and
brokerage fees on shipments of Product and borne by the seller thereof.

1.15  "Patent Rights" means the patents and patent applications (until such
time as such applications or any of them are denied, abandoned or issued into
patents) listed in Attachment A and any future patents and patent
applications, continuations, divisionals and reissues as part of patents and
patent applications in the Territory regarding the Products, which Elan owns
or under which Elan is licensed with the right to sublicense in the Territory.

1.16  "Performance Incentive" shall have the meaning given in Section 4.1 below.

1.17  "Product(s)" means any or all of the following products, to the extent
of the rights owned, licensed or controlled by Elan in the Territory:
Zanaflex-Registered Trademark-, Diastat-Registered Trademark-,
Mysoline-Registered Trademark-, Neurobloc-TM-, frovatriptan, Zelapar-TM-,
Zonegran-TM-, ziconotide and Zanaflex-Registered Trademark- MR, and any
Improvements to any of the Products which Elan owns or under which Elan is
licensed with the right to sublicense in the Territory.

1.18  "Project Committee" shall have the meaning given in Section 7.1 below.

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1.19  "Proprietary Information" includes, without limitation, compilations,
formulae, processes, plans, blueprints, formulations, technical information,
new product information, methods of product delivery, test procedures,
know-how, product samples, customer lists, market plans or strategies, sales
information, specifications, scientific, clinical, commercial and any other
information or data considered confidential in nature, whether communicated
in writing or orally, which is of competitive advantage to either party in
the conduct of its business.

1.20  "Regulatory Approvals" shall mean a Notice of Compliance and/or any
similar or successor approval issued from time to time by the Health
Protection Board of Canada, or any successor agency, which is required for
the marketing of a Product in the Territory.

1.21  "Return on Investment Value" shall have the meaning given in the ROI
Schedule attached as Attachment B-2.

1.22  "Termination Fee" shall have the meaning given in Section 20.2 below.

1.21  "Territory" means Canada and, as the context requires, each of its
provinces and territories.

1.22  "Trademarks" shall mean the trademarks for the Products listed in
Attachment A including any trade names and trade dress related to the
Trademarks.

1.23  "Year" shall mean any calendar year during the term of this Agreement.

ARTICLE 2 - EXCLUSIVE LICENSE

2.1  Subject to the other terms of this Agreement, Elan hereby grants to
Draxis and Draxis hereby accepts an exclusive license to use, market, sell
and distribute the Products under the Patent Rights and the Regulatory
Approvals now or hereafter owned or controlled by Elan for the sole and
exclusive purpose of using, marketing, selling and distributing (but not
manufacturing) the Products in the Territory, for all human indications.

2.2  Subject to the other terms of this Agreement, Elan hereby grants to
Draxis an exclusive, royalty-free, fully paid-up license to use the
Trademarks on packaging,

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labelling and other materials used in connection with commercialization of
Product in the Territory for so long as this Agreement remains in effect.
Draxis agrees that it will use the Trademarks only in promotion of the
Products, and in accordance with standard pharmaceutical industry practices
and such additional standards and practices as Elan may reasonably request.

2.3  Subject to the other terms of this Agreement, Elan hereby grants to
Draxis the exclusive right to develop and commercialize all Improvements to
any Product for and to the extent of Elan's rights in the Territory, for the
sole and exclusive purpose of using, marketing, selling and distributing (but
not manufacturing) Product in the Territory, for all human indications, on
the same basis as described in this Agreement. It is understood and agreed
that Elan shall have no obligation to develop any Product Improvements for
the Territory.

2.4  Draxis shall not have the right to sublicense any of its rights without
the prior written approval of Elan, in its sole discretion. Any such
sublicensee shall assume in writing and be bound by all the terms and
conditions of this Agreement, and any such sublicense shall not waive or
release the obligations of Draxis hereunder.

ARTICLE 3 - LICENSE FEE; CLOSING; CONDITIONS TO CLOSING

3.1  In consideration for Elan granting the rights described in Article 2,
Draxis agrees to pay to Elan, at the Closing, the amount of Twelve Million US
Dollars (US$12,000,000.00), in immediately available funds by wire transfer
to an account designated by Elan in writing. The parties shall agree in
writing on an allocation of such fee to each of the Products on or before the
Closing Date.

3.2  The Closing shall take place as soon as practical after execution of
this Agreement by the parties, on a mutually agreed time and date, at the
offices of Elan Pharmaceuticals, Inc. in South San Fransisco, California. The
Closing shall occur simultaneously with the closing of the stock purchase
under the Common Stock Purchase Agreement described above. Unless waived in
writing, Closing of this Agreement shall be subject to the making or receipt
by the parties of all necessary notices, filings, consents or approvals to or
by third parties, governmental agencies in or outside the Territory, and
internal management, board of directors or shareholders.

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ARTICLE 4 - PERFORMANCE INCENTIVE

4.1      For each Year for which this Agreement is in effect, Elan shall pay
to Draxis a performance incentive based on Net Sales of each Product in the
Territory, calculated by Product and presentation thereof, as follows:

         (a)       For Net Sales of such Product above 100% but not more than
              115% of Forecast, a payment of * percent (*%) of Cost of
              Goods for applicable presentations of such Product sold;

         (b)       For Net Sales of such Product above 115% but not more than
              130% of forecast, a payment of * (*%) of Cost of Goods for
              applicable presentations of such Product sold; and

         (c)       For Net Sales of such Product above 130% of forecast, a
              payment of * percent (*%) of Cost of Goods for applicable
              presentations of such Product sold.

4.2      For each Year while this Agreement is in effect, Draxis shall report
to Elan on a quarterly basis its Net Sales and contribution calculation of
each presentation of Product and for all Products in the aggregate in the
Territory, and for each full Year will use audited financial statements for
that year, or other financial information acceptable to Elan in its
discretion. Quarterly reports shall be due within sixty (60) days of the end
of each quarter. Draxis will also provide a year-to-date calculation, by
Product, of the percentage amount and variance of Net Sales of each Product
compared to the current forecast or budget for that Product as approved by
the Project Committee and in effect as of the end of the period under review
(the "Forecast"). The year-end report shall include Draxis's calculation by
Product of any resulting Performance Incentive per the above formula. Each
Year-end report shall be submitted on an audited basis as with other
quarterly reports, and the final audited report no later than 140 days after
the end of each Year. The current forecast, by Product, is attached hereto as
Attachment C. The forecast may be changed only by written agreement of the
Project Committee.

4.3      Elan shall pay any Performance Incentive amounts due to Draxis
within thirty (30) days of receipt of Draxis's calculation of such amounts,
unless Elan disagrees with the calculation of the Performance Incentive, in
which case it shall notify Draxis promptly in writing (but in any event not
less than fourteen (14) days from receipt of Draxis's calculations) of such
disagreement. The parties shall make good faith efforts to discuss and
resolve any such disagreement, and shall refer it to the COO

* Material has been omitted and filed separately with the Securities and
  Exchange Commission.

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of Elan and the CEO of Draxis if not resolved within fourteen (14) days of
Elan's notice.

4.4      Any Performance Incentive payments shall be payable in and remitted
in Canadian Dollars by Elan. If amounts are calculated in other than Canadian
Dollars, such amounts shall be converted to Canadian Dollars at the closing
spot rates of exchange, as published by the WALL STREET JOURNAL for the last
business day in the Territory preceding the date of remittance. Payments
shall be made by Elan's check to Draxis's address as provided in Section 23.2
below or by wire transfer as notified in writing by Draxis.

4.5      Performance Incentive amounts shall be calculated hereunder using
Net Sales only for final sales of Product by Draxis or any Draxis Affiliate
to independent third parties in arm's-length transactions. No multiple
counting or payment shall be payable upon the sale of a given order of
Product.

4.6      Draxis shall keep complete and adequate records with respect to the
sale of Product and Performance Incentive amounts payable hereunder for at
least four (4) years after expiry of the Year concerned. Elan shall have the
right to have such records of Draxis inspected and examined, at Elan's
expense during normal business hours, for the purpose of determining
correctness of payments made and owed hereunder. If an error of more than
$5000 in Elan's favor is found in such records, the error will be corrected,
any overpaid amounts returned and any and all reasonable expenses will be
borne by Draxis. Such inspection and examination shall be made by an
independent, certified, public accountant to whom Draxis shall have no
reasonable objection. It is understood that such examination with respect to
any Year hereunder shall take place not later than three (3) Years following
the expiration of that Year, and that no more than one examination per year
shall take place under this Section.

4.7      Any withholding or other tax required to be withheld by Draxis under
the laws of the Territory for the account of Elan in respect of payments to
be made by Draxis hereunder shall be promptly paid by Draxis for and on
behalf of Elan to the appropriate tax authorities, and Draxis shall, within
sixty (60) days of making such payment, furnish Elan with proof of payment of
such tax together with tax receipts or other evidence of payment sufficient
to enable Elan to support a claim in respect of any sum so withheld. Any such
tax required to be withheld shall be borne solely by

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Elan. Draxis shall cooperate with Elan in taking reasonable and legally
authorized steps to reduce or to eliminate such withholding or other taxes.

ARTICLE 5 - OWNERSHIP AND JOINT DEVELOPMENTS

5.1      All existing or subsequently developed Proprietary Information of
Elan will be owned by Elan. All existing or subsequently developed
Proprietary Information of Draxis will be owned by Draxis. Each party will
have access to Proprietary Information of the other as is reasonable and
appropriate to carry out the intent of this Agreement.

5.2      In the event that a development or Improvement is made by either
party, or jointly; or a development is made by Draxis pursuant to its
obligations under this Agreement; such a development, whether patentable or
not (an "Invention"), will be owned by Elan if it pertains to any of the
Products, and will be owned by the party or parties making such Improvement
or development, if not related to the Products.

5.3      In case Inventions made pursuant to Article 5.2 are patentable, Elan
and Draxis each agree to fully cooperate with the other and/or its attorneys
in:
A.       preparing, filing and prosecuting patent applications;
B.       vesting title as herein provided; and
C.       providing non-financial assistance as reasonably requested by the
         other in enforcing any patents resulting from such patent applications.

5.4      The cost of patenting Inventions will be borne by the owner of the
Invention. In the event of jointly-owned Inventions, the costs will be shared
equally by both Draxis and Elan.

5.5      To the extent not owned by Elan, Elan retains the right to use all
data generated by, or arising from, further development or from studies or
clinical development and regulatory work as set out in Article 7 undertaken
separately by Draxis on any of the Products (whether before or after
Regulatory Approval for such Product) for the purpose of gaining regulatory
approval and market support in any countries outside the Territory.

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ARTICLE 6 - CONFIDENTIALITY

6.1  A party receiving Proprietary Information from the other, directly or
indirectly, will treat such information as confidential and will use efforts
at least equivalent to those used to protect its own Proprietary Information.
Except as set forth in Article 6.2 following, all information or data
communicated from one party to the other will be deemed and treated as
Proprietary Information unless otherwise agreed to in writing. All oral
communications, whether or not summarized and reduced to writing, shall also
be considered confidential. Access to such Proprietary Information will be
limited to employees, agents, advisors or consultants of the party receiving
such information, who reasonably require such information and who are bound
to said party by a like obligation of confidentiality. A party receiving
Proprietary Information will not use such information for its own benefit or
for the benefit of others or in any way not consistent with the purposes set
out in this Agreement.

6.2  Nothing contained herein will in any way restrict or impair each party's
right to use, disclose or otherwise deal with any Proprietary Information
which:
A.  at the time of disclosure is in the public domain or thereafter becomes
part of the public domain by publication or otherwise through no act of the
party receiving such information;
B.  the party receiving such information can conclusively establish was in
its possession prior to the time of the disclosure;
C.  is independently made available as a matter of right to the party
receiving such information by a third party who is not in violation of a
confidential relationship with the other party;
C.  is developed by a party independently of the Proprietary Information
received from the other party; or
D.  is information required to be disclosed by legal process; provided, in
such case, the disclosing party timely informs the other and uses its best
efforts to limit the disclosure and maintain confidentiality to the extent
possible and cooperates reasonably with the other party to attempt to limit
such disclosure.

6.3  The party receiving Proprietary Information will obtain no right of any
kind, or license under any patent application or patent, except as expressly
stated in this Agreement. All Proprietary Information will remain the sole
property of the party disclosing such information or data.

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6.4  Upon termination of this Agreement, the party to which Proprietary
Information has been disclosed will upon request within thirty (30) days
return all such information, including any copies thereof, and cease its use,
or at the request of the party transmitting such Proprietary Information,
will promptly destroy the same and certify such destruction to the
transmitting party, provided that each party may retain one copy of the
Proprietary Information for compliance and recordkeeping purposes.

6.5  Termination or expiration of this Agreement shall not relieve the
parties of their obligations under this Article 6.

6.6  Nothing in this Article 6 will prevent Draxis or Elan from disclosing to
each other the results of any work carried out by them pursuant to Article 7
and Draxis and Elan hereby agree to disclose to each other such results
promptly.

ARTICLE 7 - PROJECT COMMITTEE; PRODUCT DEVELOPMENT AND
COMMERCIALIZATION

7.1  The Project Committee shall consist of three representatives from each
party as designated by each of them from time to time. Unless otherwise
agreed by the parties, the Project Committee shall meet at least once every
six months. The Project Committee shall meet alternatively at the offices of
Elan Pharmaceuticals and Draxis, or as otherwise agreed, each party bearing
its own expenses in preparing for and attending such meetings. Meetings shall
be chaired by one of the Draxis representatives whom it selects. Between
meetings of the Project Committee, each party shall keep the other generally
informed as to its progress with its respective obligations under this
Agreement. Draxis will provide Elan's Project Committee members with advance
written reports and agenda items as the Committee reasonably determines are
appropriate, including without limitation reasonably current profit/loss
statements for each of the Products individually, and in the aggregate.

7.2  The Project Committee shall provide strategic advice and oversight for
the development and commercialization of the Products in the Territory. In
particular, the Project Committee shall have the following responsibilities:

     (a)    to review and approve an annual budget, timeline, Forecasts,
            marketing and business plans for the Products in the Territory
            and any updates or amendments thereto;

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     (b)    to review and approve all clinical, regulatory and product
            development plans, timelines and budgets for the Products
            including but not limited to clinical trial protocols, and any
            updates or amendments thereto; and

     (c)    to review the Products' performance against such plans and budget
            at each meeting of the Project Committee.

7.3  The Project Committee shall attempt to operate by consensus, and all
decisions of the Project Committee shall require majority support. In the
event of a dispute among the project Committee which cannot be resolved by
consensus, after further informal discussion, such dispute shall be referred
to the CEO of Draxis and the COO of Elan Pharmaceuticals, Nor the America, a
division of Elan Pharmaceuticals, Inc., who shall discuss the matter and
attempt to reach an amicable solution.

7.4  Draxis shall have primary responsibility, at its expense, for the
preparation, filing and pursuit of the application for Regulatory Approval of
each Product in the Territory an, as approved by the Project Committee,
formulary approval for provinces in the Territory. Draxis will use diligent
efforts to do so and to obtain and maintain, on Elan's behalf as the owner
and holder thereof, the Regulatory Approvals for the Product in the
Territory. Elan will be responsible for the payment of any third party costs
of generating any additional data required by HPB in order to obtain
Regulatory Approval for any of the Products, provided that the Project
Committee approves in advance the undertaking of any such costs as being
reasonable and necessary. Elan shall on a timely basis provide Draxis with
such assistance as Draxis may reasonably request from time to time in
obtaining or maintaining such Regulatory Approvals, including without
limitation providing Draxis with a copy of Elan's New Drug Application or
such other documents or information within Elan's possession or control as
Draxis may reasonably require for the purposes of fulfilling its obligations
hereunder. For purposes of providing information required for Regulatory
Approvals or formulary approvals, Elan will use its reasonable best efforts
to respond to Draxis requests within five business days, unless the volume or
scope of information requested makes such time unreasonable or impractical.

7.5  Once Regulatory Approval is obtained for a Product, Draxis will use
Commercially Reasonable Efforts to launch and market such Product in the
Territory for the duration of this Agreement, and to obtain such provincial
formulary approvals as may be appropriate, each in accordance with the
marketing and business plans,

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budget and timeline approved in advance by the Project Committee. Elan will
discuss in advance with Draxis any forthcoming process or other changed or
improvement in any of the Products undertaken in the U.S., e.g., a new
formulation or delivery system or method. Draxis will use Commercially
Reasonable Efforts to supplement or update any Regulatory Approvals and take
such other action reasonably necessary or appropriate to accommodate and
adopt such changes for the affected Products in the Territory.

(a) Elan at its expense shall provide to Draxis examples of all materials
used, in available media, for marketing and promotion of the Products in the
United States together with examples of any training materials and any other
documentation or marketing aids generated in respect of the Products for the
United States. Draxis also agrees to display the Trademarks on the Products
and such promotional materials in a format or type style previously
authorized and approved in writing by Elan Pharmaceuticals, Inc. on the same
timeline as described below. Draxis shall otherwise be entitled to adapt such
materials for Canadian purposes, as it sees fit, for the marketing and
promotion of the Products in the Territory and shall provide any such
marketing or promotion materials to Elan for its approval, not to be
unreasonably withheld, at least ten (10) business days in advance of any
proposed use, publication or submission to any agency or third party unless a
longer period is required by any agreement between Elan and its licensor, in
which case (i) Elan will notify Draxis of such longer period, and (ii) the
Elan and licensor approval periods shall run concurrently. Elan shall provide
any comments on such materials within that time, and if requested by Draxis,
in written form with two (2) business days of providing oral comments. The
Project Committee shall use its good faith efforts to resolve any
disagreement over the content or form of any such proposed materials, and
shall refer any remaining disagreement to senior management for prompt
resolution as provided above. Elan's failure to timely provide any comments
to Draxis as provided above shall be deemed to be approval of such materials
for the proposed use.

(b) In addition, Elan shall share with Draxis in a timely manner any
competitive intelligence or clinical data as well as any market research Elan
may obtain or have in its possession which may be of assistance in the
marketing and promotion of the products or in obtaining Regulatory Approvals
or formulary approvals in the Territory. Draxis shall share any such
information in its possession with Elan, mutatis mutandis.

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7.6  Elan shall at its expense, as soon as practical after the Effective Date
and for the duration of this Agreement, employ and post at Draxis's
headquarters a full-time advisor or consultant. That person shall be
dedicated to assisting Draxis in fulfilling its obligations under this
Agreement and its business plan for the Products as approved by the Project
Committee, and shall assist in communicating with Elan in that regard. Through
its Management by Objective program or any successor program, Elan will
provide bonus objectives to each of its Project Committee members who
participate in any such programs (and, if applicable, the Elan full-time
employee described above) which are reasonably related to the success of the
Products in the Territory.

ARTICLE 8 - SUPPLY

8.1  During the term and in accordance with the provisions of this Agreement,
Draxis shall purchase all of its requirements for Products exclusively from
Elan.

8.2  Elan shall use Commercially Reasonable Efforts, subject to force majeure
or any other cause beyond the reasonable control of Elan, to maintain through
its suppliers a continuous supply of each of the Products to Draxis, subject
to the provisions of Article 9.

8.3  Draxis shall not sell or distribute any Product for resale or
redistribution outside the Territory.

ARTICLE 9 - FORECASTING AND ORDERING

9.1      Products shall, unless otherwise agreed in writing between the
parties, be manufactured and supplied in accordance with the specifications
designated by Elan for each Product in writing from time to time, and
thereafter as amended only by mutual written agreement of the parties. Such
specifications shall be consistent with the Regulatory Approval for marketing
of the Product in the Territory.

9.2      It is understood and agreed that it shall be Draxis's
responsibility, at its expense, to package and label or have packaged and
labelled all Product sold by Draxis in accordance with Elan's agreements with
third party contractors and suppliers, and all applicable laws and
regulations in the Territory, including without limitation regulations
requiring dual language labelling and packaging. The parties shall cooperate
reasonably to arrange for shipments of Product to any third party

<PAGE>

                                                                        Page 15

contractor designated by Draxis to provide such services. Unless otherwise
agreed, it is understood that Product shall be provided by Elan to Draxis for
Territory-specific labelling and packaging. In the alternative, Draxis shall
provide Elan with its requirements for such Territory-specific packaging and
labelling and will pay the full cost thereof. Unless prohibited by law or
regulation, all such packaging and labelling shall include, in Elan's
discretion, a reference and/or logo appropriate to the product referring to
Elan Pharmaceuticals.

9.3      It is further understood and agreed that Elan obtains each of the
Products from third party manufacturers or contractors responsible for most
if not all manufacturing processes. Elan will notify Draxis as far in advance
as is practical of any change or proposed change in Product specifications,
delays in productions, amendments to Elan's contracts with such third parties
which are material to Draxis for the Territory, or other material aspects of
Elan's relationship with such third parties and will use Commercially
Reasonable Efforts to work with Draxis to minimize the results of any such
events in the Territory. Draxis understands and agrees with the foregoing,
and will provide Elan as much advance notice as is practical of any event
reasonably requiring notice to or participation of Elan or its third party
suppliers of Product. The parties will revise forecasting and ordering time
lines and procedures and other aspects of their supply relationship as may be
reasonably necessary to allow Elan to fulfill its obligations to those third
parties on a timely basis.

9.4       Unless otherwise agreed in writing by the parties, not less than six
calendar months prior to the shipment date for the first order of each
Product, Draxis shall submit to Elan a written, non-binding forecast of the
quantities of Product which Draxis expects to purchase during each of the
four calendar quarters following such shipment date. Thereafter, not later
than fourteen (14) days prior to the beginning of each successive calendar
quarter, Draxis shall submit an updated forecast for the following four
consecutive calendar quarters ("Estimated Quantity"). The first quarter's
forecast of each Estimated Quantity shall constitute a minimum purchase
commitment for that quarter, against which Firm Orders (as defined below)
will be placed. The parties shall agree on a reasonable format for such
forecasts.

9.5      Not less than six calendar months prior to the shipment date for the
first order of each Product, Draxis shall submit to Elan a written purchase
order for its requirement of the Product ("Firm Order") with such information
and in a form to be agreed between the parties. Second and subsequent Firm
Orders shall quote a

<PAGE>

                                                                        Page 16

shipment date not less than four calendar months from the date of such order.
In case of any conflict between the terms of this Agreement and the terms set
forth in any Firm Order, the terms of this Agreement shall be controlling.
The total of Firm Orders for each Product in a calendar quarter shall be
between 75% and 125% of that quarter's Estimated Quantity of Product in the
prior forecast. For orders in excess of 125%, Elan shall make reasonable
efforts to supply such excess amount. In the case of Zanaflex, Diastat and
Mysoline, Elan shall make reasonable efforts to supply such Products as soon
as possible after receipt of forecasts of Estimated Quantity from Draxis for
launch in the Territory consistent with any third party contractual
requirements.

9.6     The parties shall cooperate to establish reasonable minimum purchase
order quantities for each presentation of Product, taking into account
minimum batch sizes or order quantities required of Elan in its orders to the
supplier of that Product, resulting Costs of Goods, dating of Product and
each presentation thereof, and other relevant factors.

ARTICLE 10 - PRICE

10.1     Unless otherwise agreed by the parties in writing, the prices for each
Product shall be Elan's Cost of Goods for such presentation of each Product
from time to time, *. Cost of Goods for each
presentation of Product may be changed only in writing by Elan to Draxis, as
provided below, for any future Firm Orders for Products.

10.2     All prices for Product shall be determined and paid in United States
Dollars unless otherwise required by Elan as a result of its underlying
supply contracts for Product.

10.3     The current prices of the Product shall be subject to review by Elan
on not more than a semi-annual basis to take into account any increases or
decreases in Elan's Cost of Goods from time to time. Draxis shall be entitled
to receive a proportionate breakdown, in reasonable detail, of the categories
making up the Cost of Goods for each Product. Adjustments to Elan's Cost of
Goods shall be communicated in writing to Draxis at least three (3) months in
advance of implementation. If within thirty (30) days of a written notice of a
price increase Draxis objects to such increase in writing, after good faith
discussion between the parties, Elan shall forthwith make available its Costs
of Goods documentation in

* Material has been omitted and filed separately with the Securities and
  Exchange Commission.

<PAGE>

                                                                        Page 17

confidence to an independent auditor appointed by Draxis and reasonably
acceptable to Elan. The auditor will check the calculations and base
information used by Elan to determine that the calculations are accurate and
in accordance with the agreed mechanism under this agreement. The auditor
will not provide any proprietary or confidential information relating to Cost
of Goods changes to Draxis, but will provide a summary of the reasons for any
change in Cost of Goods. Draxis agrees that if the auditor certifies in
writing to Draxis the correctness of the calculations it will accept the
notified price change. Elan agrees that if any error or omission occurs in
the calculation of the revised price this will be corrected and new prices
prepared. Both parties agree that such price will be effective from the
notified date, with appropriate adjustments to be made to invoices issued in
respect of shipments between the notified price change date and the date at
which prices were actually agreed. The reasonable fees and disbursements
charged by the auditor shall be paid by the party whose contention is
rejected by the auditor.

ARTICLE 11 - SAMPLES

11.1     Elan agrees that if sampling is approved by the Project Committee as
appropriate for a Product, it will provide samples of Product at a price
equal to its Cost of Goods for that presentation of Product from time to
time, as determined under Article 10 above, as follows:
         (a)     Sample prices will apply only to invoices issued for Product
            in the first twelve-month periods after launch of that Product in
            the Territory unless otherwise approved by the Project Committee.
         (b)     Sample quantities will be included in all Estimated Quantity
            forecasts, identified in separate purchase orders by Product, and
            aggregate sample quantities by Product will not exceed ten percent
            (10%) of commercial quantities of that Product ordered in each of
            the first two twelve-month periods following launch unless otherwise
            approved by the Project Committee.

11.2     Draxis shall have the sole responsibility for ensuring that all samples
are properly packaged and labelled in accordance with applicable laws, rules
and regulations in the Territory.

<PAGE>

                                                                        Page 18

ARTICLE 12 - DELIVERY AND PAYMENT TERMS

12.1     Elan shall use its diligent efforts to arrange for the delivery of
Product in accordance with Draxis's instructions as specified in writing from
time to time.

12.2     Draxis shall be responsible for all charges associated with the
shipping and delivery of Product from the Factory applicable to each Product.
Each invoice to Draxis shall be in US Dollars and shall indicate the
ex-Factory price to Draxis of the Product under Section 10.1 above. Draxis
shall make payment of each invoice to Elan within thirty (30) days of date of
invoice.

ARTICLE 13 - RIGHTS OF FIRST NEGOTIATION; NON-COMPETITION

13.1     Draxis will have a right of first negotiation on any neurologic or
pain management pharmaceutical products for which Elan obtains sublicense or
distribution rights specific for the Territory or to North America, with the
exception of Antegren-TM-.

13.2     Elan will have a right of first negotiation on any proposed sale,
transfer or sublicense by Draxis to any unaffiliated party for any of the
pharmaceutical products, assets or business of the Draxis Pharmaceutica
division of Draxis, as now or hereafter configured or defined, in the
Territory.

13.3     While this Agreement remains in effect, Draxis and its Affiliates
will not, unless approved in advance by Elan in its discretion, market or
distribute in the Territory any pharmaceutical product which is directly
competitive with any of the Products. For a period of twelve (12) months
after the expiration or termination of this Agreement, Draxis and its
Affiliates will not, unless approved in advance by Elan in its discretion,
market or distribute in the Territory any pharmaceutical product containing a
compound which is the same active ingredient or chemical moiety as any of the
Products. During and after the term of this Agreement, Draxis and its
Affiliates will not seek or promote customers or sales of Products outside
the Territory. Nothing in this Section affects the obligations of Draxis
under Article 6 above.

ARTICLE 14 - REPRESENTATIONS AND WARRANTIES

14.1     Elan hereby represents and warrants to Draxis as follows:

<PAGE>

                                                                        Page 19

A.       Elan has the full legal right to enter into the Agreement and to
perform its obligations hereunder. The Agreement is duly executed and
delivered by Elan and constitutes a legal, valid and binding obligation,
enforceable against Elan in accordance with its terms.
B.       Prior to the Closing Date, Elan will have obtained all necessary
notices, consents, approvals and authorizations of all governmental
authorities and other third parties required in connection with entering into
and performing the Agreement which were required as of the date of the
Agreement.
C.       The execution and delivery of the Agreement and the performance of
Elan's obligations hereunder (i) to Elan's best knowledge do not conflict
with or violate any requirement of applicable laws, rules or regulations, and
(ii) do not conflict with, or constitute a default under, any contractual
obligation of Elan.
D.       Elan either owns or has exclusively licensed to it in the Territory
the Products, and the Patent Rights as described in Attachment A insofar as
they pertain to the Products, and has not granted to any third party any
license or other interest of any kind (including any charge, lien or
encumbrance) for the Products under the Patent Rights in the Territory which
would affect Draxis's rights under this Agreement, except as follows:
         1)      Mysoline:  Elan has entered into a distribution agreement
           with Wyeth-Ayerst Canada Inc., which is terminable by Elan upon six
           months' prior written notice. Elan will submit that notice at or
           prior to the Closing.
E.       To the best of Elan's knowledge at the date of this Agreement,
without investigation, the manufacture, use, distribution or sale of Product
in the Territory will not infringe the issued patents of any third party.
C.       As of the Effective Date, Elan's Cost of Goods and
Territory-specific milestone payments for each Product are as set forth in
Attachment D.
D.       To Elan's best knowledge at the date of this Agreement, without
investigation, there is no patent other than the Patent Rights for which a
license would be required for the promotion, distribution and sale by Draxis
of the Products in the Territory, as contemplated by this Agreement.
E.       The Patent Rights and Trademarks listed in Attachment A identify all
patents, whether issued or pending, and all Trademarks, whether issued or
pending, with respect to any of the Products in the Territory. To Elan's best
knowledge, without investigation, it has no reason to believe that any of the
Patent Rights or Trademarks are (or, if granted or approved, would be)
invalid.
F.       To Elan's best knowledge, without investigation, there are no
investigations, third party allegations or actions, or claims against Elan or
its Affiliates, including any

<PAGE>

                                                                        Page 20

pending or threatened (in writing) action against any of them in any court or
by or before any governmental body or agency, with respect to the Products
(including without limitation, sales by Elan of the Products outside the
Territory) or its obligations set forth herein, which if successful would
materially and adversely affect Elan's ability to perform its obligations
under this Agreement.

14.2     Draxis hereby represents and warrants to Elan as follows:

A.       Draxis has the full legal right to enter into the Agreement and to
perform its obligations hereunder. The Agreement is duly executed and
delivered by Draxis and constitutes a legal, valid and binding obligation,
enforceable against Draxis in accordance with its terms.
B.       Prior to the Closing Date, Draxis will have obtained all necessary
notices, consents, approvals and authorizations of all governmental
authorities and other third parties required in connection with entering into
and performing the Agreement which were required as of the date of the
Agreement.
C.       The execution and delivery of the Agreement and the performance of
Draxis's obligations hereunder (a) to Draxis's best knowledge, do not
conflict with or violate any requirement of applicable laws, rules or
regulations, and (b) do not conflict with, or constitute a default under, any
contractual obligation of Draxis.
D.       To Draxis's best knowledge at the date of this Agreement, the
manufacture, use, distribution or sale of the Products in the Territory will
not infringe the patent rights of any third party.
E.       To Draxis's best knowledge, without investigation, except as
disclosed in writing to Elan there are no investigations, third party
allegations or actions, or claims against Draxis or its Affiliates, including
any pending or threatened (in writing) action against any of them in any
court or by or before any governmental body or agency, with respect to the
Products or its obligations set forth herein, which if successful would
materially and adversely affect Draxis's ability to perform its obligations
under this Agreement.
F.       Draxis has not granted, and subsequent to the Effective Date of this
Agreement will not grant to any third party any license or other interest of
any kind (including any charge, lien or encumbrance) in all or any part of
Draxis's rights under this Agreement, without the prior written consent of
Elan in its discretion; except that Draxis may grant a floating lien or
charge solely in the inventory of Products, any resulting accounts receivable
and any cash proceeds thereof which may be generated from time to time by
Draxis.

<PAGE>

                                                                        Page 21

ARTICLE 15 - PRODUCT WARRANTY AND LIABILITY

15.1     In addition to its representations in Article 14 above Elan warrants
that as of the delivery dates of shipments, as provided herein, Product
provided to Draxis shall be manufactured and packaged in accordance with all
specifications contained in the Regulatory Approval for the Product, from
time to time, and then-current Good Manufacturing Practices.

15.2     Elan shall promptly replace or refund the invoice price of any
quantity of the Product found not to correspond with Elan's warranties in
Article 15.1 hereof.

15.3     Except for Elan's liability pursuant to Article 15.4, Elan's
obligation to replace or refund as aforesaid shall constitute the full extent
of Elan's liability under this Agreement in respect of any loss or damage
sustained by Draxis or arising from any other cause whatsoever and Elan shall
not be liable for any consequential or indirect loss suffered by Draxis
arising therefrom. ELAN MAKES NO WARRANTIES, WHETHER EXPRESS OR IMPLIED OR OF
MERCHANTABILITY, OTHER THAN THOSE CONTAINED IN THIS ARTICLE 15. Elan shall
cooperate reasonably in providing the benefit of any warranty rights it may
have against its suppliers in connection with manufacture of any of the
Products.

15.4     Each party shall indemnify and hold the other, and their respective
employees, directors, representatives and advisors, harmless from and against
any and all liabilities, actions, suits, claims, demands, prosecutions,
damages, costs, expenses or money judgements (including reasonable attorneys'
fees but not consequential or indirect loss) which arise out of:
a)       the intentional misconduct or negligence of the indemnifying party
with respect to its acts or omissions under this Agreement or pertaining to
the Products; or
b)       the material breach by the indemnifying party of its representations
and warranties contained in this Agreement;
except to the extent of an indemnity obligation on the part of the other
party under this section. In the event of a claim which may give rise to a
right of indemnity under this section, the party intending to claim indemnity
shall give the indemnifying party notice in writing as soon as practicable of
any such claim or lawsuit and shall permit the indemnifying party to
undertake the defence thereof at its expense.

In any such claim or lawsuit:

<PAGE>

                                                                        Page 22

(i)      the party claiming indemnity will cooperate reasonably in the
defense of the third party's claim, and shall have the right to participate
in such defense to the extent that in its judgement the party claiming
indemnity may be prejudiced thereby; and
(ii)     the party claiming indemnity shall not settle, offer to settle or
admit liability in any claim or suit without the written consent of an
officer of the indemnifying party, which consent shall not be unreasonably
withheld.

15.5     Draxis and Elan shall advise each other immediately, to be confirmed
in writing, of any occurrence which involves any material complaints about the
safety or effectiveness of any of the Products, including, without
limitation, a claim for death or injury following administration of Product
supplied hereunder, or any matter arising out of this agreement which is
required to be reported other than in a routine manner to the regulatory
authorities by either party. The parties will cooperate reasonably to
facilitate and develop written procedures for the reporting of adverse events
for the Products to appropriate regulatory agencies within and outside the
Territory. It is understood that if requested by Elan, Draxis will undertake
on Elan's behalf the reporting of adverse events with the Territory.

15.6     Draxis shall, throughout the term of this Agreement, obtain and
maintain at its own cost and expense from a qualified insurance company,
comprehensive general liability insurance, including standard product
liability insurance designating Elan as an additional insured. Such policy
shall provide protection against any and all claims, demands and causes of
action arising out of any defects, alleged or otherwise, of any one of the
Products or any material use in connection therewith or any use thereof.

15.7     In the event that, in the Territory, (i) any governmental authority
issues a request, directive or order that any of the Products be recalled,
(ii) a court of competent jurisdiction orders that any of the Products be
recalled, or (iii) Elan or Draxis reasonably determine, after mutual
consultation, that any of the Products should be recalled, the parties shall
cooperate and take all appropriate corrective actions. To the extent that
such a recall results from a breach of Elan's obligations or warranties under
this Agreement, or the negligence or willful misconduct of Elan, its
Affiliates or contractors, Elan shall be responsible for reimbursement of
Draxis's direct out-of-pocket expenses in conducting such recall. To the
extent that such a recall results from a breach of Draxis's obligations or
warranties under this Agreement, or the negligence or willful misconduct of
Draxis, its Affiliates or

<PAGE>

                                                                        Page 23

contractors, Draxis shall be responsible for reimbursement of Elan's direct
out-of-pocket expenses in conducting such recall. For the purposes of this
Agreement, the expenses of recall shall be those of notification, return
and/or destruction of the affected Product, the inventory, shipping, and
other associated amounts for the shipments of Product recalled, and the
direct out-of-pocket costs of acquiring and distributing replacement Product.
In no event shall any recall damages or costs include lost profits,
incidental, consequential or other damages of any kind. In any events leading
to and following an actual or potential recall situation, Elan and Draxis
shall cooperate fully with each other in communicating and coordinating with
as much advance notice as is practical under the circumstances.

ARTICLE 16 - PATENTS AND TRADEMARKS

16.1     Elan shall, at its expense and in its discretion, use its
Commercially Reasonable Efforts to prepare, file, prosecute and maintain the
Patent Rights and the Trademarks in the Territory, and will provide Draxis
with an annual status report in writing and such oral reports as Draxis may
reasonable request from time to time. Elan will consult with Draxis as far in
advance as is practical prior to abandoning any Patent Rights or Trademarks.
If, at any time during the term of this Agreement, either party shall become
aware of any third party infringement or threatened infringement of any
Patent Rights or Trademarks in the Territory, the following provisions shall
apply:
(i)      The party becoming aware shall promptly give written notice to the
other and shall make no admission of liability.
(ii)     If there is a disagreement as to whether the act complained of is in
fact an infringement, as described above, the parties shall refer such issue
to a mutually acceptable independent counsel (such acceptance not to be
unreasonably withheld), and the reasonable costs of such counsel incurred in
this regard shall be borne by the party whose view does not prevail.
(iii)    With or without the advice of independent counsel, Elan shall have
the right to litigate such alleged third party infringement. Elan shall
notify Draxis within sixty (60) days after the written notice described in
(i) above (of, if later, thirty (30) days after the decision of the counsel
described in clause (ii) above) whether it intends to so litigate.
(iv)     If Elan determines not to litigate in accordance with clause (iii)
above, and the counsel described in clause (ii) above has opined that the act
complained of is, or more likely than not it, an infringement in the
Territory, then Draxis may, in its sole discretion and expense, bring suit in
its name to restrain such third party

<PAGE>

                                                                        Page 24

infringement in the Territory. In such event Draxis shall conduct such
proceedings properly and diligently and shall keep Elan timely informed of
all developments.
(v)      In the event of any action permitted under this Section 16.1 by
either party, the other party will provide the necessary and timely
assistance in such action on reasonable terms and conditions to be agreed on
at such time. In connection with any deliberations concerning the prospects
for successfully bringing suit to enjoin such infringement, the parties shall
promptly and fully make available to each other their available information
concerning the validity and enforceability of the relevant Patent Rights or
Trademarks and any other relevant information.

16.2     The party controlling any such enforcement action shall not
compromise or consent to judgement in a way that diminishes the rights or
interests of the non-controlling party without that party's prior written
consent, such consent not to be unreasonably withheld. The out-of-pocket
costs expended by the party controlling any such action will first be
deducted from any and all proceeds recovered in the action, and then the
out-of-pocket costs of the other party. The remaining proceeds of any such
action will then be divided between the parties with seventy-five percent
(75%) to the party conducting the action, and the other twenty-five percent
(25%) to the other party. Any such amounts allocated to Draxis shall be
treated as Net Sales under this Agreement, less fifteen percent (15%) of such
allocated amount, to be paid to Elan.

16.3     In the event that the manufacture by or on behalf of Elan and the
use and/or sale of Product is claimed or threatened in writing to constitute
an infringement in the Territory of the intellectual property rights of a
third party, either party shall as soon as it becomes aware of the same,
notify the other thereof in writing, giving in the same notice full details
knows to it of the rights claimed by such party and the extent of any alleged
infringement. The parties shall cooperate reasonably in assessing and
responding to any such potential infringement.
         (i)     Draxis shall defend against any such alleged third party
infringement at its expense. In such event Draxis shall conduct such
proceedings properly and diligently and shall keep Elan timely informed as
far in advance as practical of all decisions or developments. In the event of
any action required under this Section 16.3 by Draxis, Elan will provide
necessary and timely assistance at its expense. Elan may, at its option and
expense, lead any such litigation using counsel of its choice reasonably
acceptable to Draxis, and will lead such litigation if conducting a defense
of the same Product in the U.S, with costs of such joint cross-border defense
to be allocated reasonably based on the size of markets and other relevant

<PAGE>

                                                                        Page 25

factors. In connection with any deliberations concerning the prospects for
successfully defending against such alleged infringement, the parties shall
promptly and fully make available to each other their available information
concerning the validity and enforceability of the relevant third party
intellectual property and any other relevant information.

16.4     The party controlling any such enforcement action shall not
compromise or consent to judgement in a way that diminishes the rights or
interests of the non-controlling party without that party's prior written
consent, such consent not to be unreasonably withheld.

16.5     In the event that because of any court order or settlement approved
by Elan under Section 16.4, Draxis is required or requested to cease selling
one or more of the Products in the Territory because the manufacture, use or
offer for sale of such Product allegedly infringes the patent rights of a
third party in the Territory, Elan will in good faith consider negotiating
for a license, at its expense, which would allow Draxis to continue to market
and distribute the affected Product in the Territory for the term of this
Agreement, and undertakes to do so if it does the same for the United States
and reasonably similar terms are available for such a license in the
Territory.

16.6     Subject to its agreements with third parties, Elan shall disclose to
Draxis and Draxis shall disclose to Elan as far in advance as is practical
the complete texts of all patent applications filed or to be filed by either
Elan or Draxis which relate to the Products and any Improvements as well as
all material information received concerning the institution or possible
institution of any interference, opposition, re-examination, reissue,
revocation, nullification or any official proceeding involving Patent Rights
or Trademarks anywhere in the Territory. It is understood that such
information is highly proprietary and confidential, has great value to Elan
in its business and will be protected as such by Draxis.

16.7     Draxis acknowledges that Elan Pharmaceuticals, Inc. is the owner of
the Trademarks listed in Attachment A hereto (with the exception of Mysoline,
which is owned by Elan Pharma (International) Limited). Draxis agrees that:
(a) the use of the Trademarks by Draxis shall inure to the benefit of and be
on behalf of Elan Pharmaceuticals, Inc.; (b) nothing in this Agreement shall
give Draxis any right, title or interest in the Trademarks other than the
right to use the Trademarks in accordance with this Agreement; (c) Draxis
will not attack the title of Elan

<PAGE>

                                                                        Page 26

Pharmaceuticals, Inc. to the Trademarks or register, or attempt to register,
in its own or its Affiliates' name any of the Trademarks, or any variation
thereof, in any form in conjunction with any Product or other product, in the
Territory, or in any other country, without the prior written consent of Elan
Pharmaceuticals, Inc.; (d) the nature and quality of the Products sold by
Draxis in connection with the Trademarks; and all related advertising,
promotional and other related uses of the Trademarks by Draxis shall conform
to reasonable standards set by Elan Pharmaceuticals, Inc.; and (e) Draxis will
cooperate with Elan Pharmaceuticals, Inc. in facilitating Elan
Pharmaceuticals, Inc.'s control of such nature and quality and will supply
Elan Pharmaceuticals, Inc. with specimens of all uses of the Trademarks upon
request.

16.7     Draxis agrees that it will accept a trademark, tradename and related
trade dress adopted by Elan as a part of an international trademark and
tradename strategy for frovatriptan and ziconotide, provided that no
infringement issues are presented in the Territory for such mark, and Elan
will share with Draxis the results of any search or inquiry in that regard.
In the event Elan's mark presents infringement risks in the Territory, the
parties will cooperate reasonably to choose another acceptable mark for the
affected Product in the Territory.

ARTICLE 17 - QUALITY CONTROL

17.1     Elan shall provide or cause to be provided a Certificate of Analysis
to Draxis concurrently with each invoice for Product. Draxis agrees promptly
to inspect each delivery of Product to determine whether or not it is in
conformity with the warranties set forth in Article 15.1. In the event that
any quantity of Product delivered to Draxis hereunder fails to conform with
the said warranties, Draxis may reject the delivery concerned by giving
written notice of rejection to Elan within twenty-one (21) days of Draxis's
receipt of the Product. Such notice shall specify the manner in which the
Product fails to conform with the warranties. In the absence of such
notification, Draxis shall be deemed to have accepted the Product.

17.2     Promptly after receipt by Elan of a notice of rejection pursuant to
Article 17.1 hereof, the parties will consult with each other in an attempt
to resolve any dispute regarding the rejected delivery. If any such dispute
remains unresolved thirty (30) days after receipt by Elan of the notice of
rejection, Elan will use Commercially Reasonable Efforts to replace the
rejected delivery within thirty (30) days of expiration of such initial
thirty (30) day period, and Draxis will pay for the

<PAGE>

                                                                        Page 27

replacement delivery in accordance with the provisions hereof applicable to
sale of Product.

17.3     If within sixty (60) days after receipt by Elan of the notice of
rejection the parties agree that the Product in question did not comply with
the warranties, Elan will give credit to Draxis for Elan's invoice price of
such rejected shipment. If during such sixty (60) day period the parties
agree that the Product in question did comply with the warranties, Elan shall
be entitled to full payment and shall have no obligation to give such credit
to Draxis. If during such sixty (60) day period the parties fail to reach
agreement regarding the rejection, an expert appointed by Elan and reasonably
acceptable to Draxis shall visit the affected Factory and repeat the analysis
of the samples of the relevant shipment in the presence of the appropriate
Elan and Draxis personnel. Draxis and Elan shall supply the expert with
copies of all tests, data, documentation, standards, etc. as the expert may
reasonably require in connection with such analysis, and the expert's
decision as to whether such lot has met the Specifications for Product shall
be final and binding on the parties hereto. The expert shall execute an
appropriate confidentiality agreement. All expenses and costs of such expert
shall be borne by the party whose contention is finally rejected by the
expert. In the event that either the expert or the parties agree that the
delivery should be rejected, Draxis will return the rejected delivery to Elan.

ARTICLE 18 - RIGHTS OF INSPECTION AND REPORTS

18.1     If reasonably requested by Draxis, Elan will use reasonable efforts
to facilitate the visit by Draxis's and Elan's authorized representatives to
a Factory during normal business hours for the purposes of inspecting plant
premises, the manufacturing process and technical records insofar as they
relate to the manufacture of a Product.

18.2     Elan shall notify Draxis in writing as far in advance as practical if
it becomes aware of any intended changes to the site, location or method of
manufacture of the Product by Elan or any of its suppliers, so that Draxis
shall have as much time as possible to notify regulatory authorities and
obtain approval for such intended changes before Elan or such supplier makes
any such changes.

<PAGE>

                                                                        Page 28

ARTICLE 19 - FORCE MAJEURE

19.1     Neither party shall be liable in damages for, nor shall this
Agreement be terminable or cancellable by reason of, any delay or default in
such party's performance hereunder if such default or delay is caused by
events beyond such party's reasonable control including, but not limited to,
acts of God, regulation or law or other action or failure to act of any
government or agency thereof, war or insurrection, civil disturbance,
destruction of production facilities or materials by earthquake, fire, flood
or storm, labor disturbances, epidemic, or failure of suppliers, contractors,
public utilities or common carriers; provided however, that the party
seeking relief hereunder shall immediately notify the other party of such
cause(s) beyond such party's reasonable control. The party which may invoke
this Section 19.1 shall use all reasonable efforts to reinstate its ongoing
obligations to the other. If the cause(s) shall continue unabated for 30 days
then both parties shall meet to discuss and negotiate in good faith what
modifications to this Agreement should result from this force majeure.

19.2     Each party shall endeavour to resume its performance hereunder as
quickly as possible if such performance is delayed or interrupted by reason
of any cause set forth in 19.1 above.

ARTICLE 20 - TERM AND TERMINATION

20.1     This Agreement shall become effective on the first date written
above and shall terminate on December 31, 2008, unless earlier terminated in
accordance with the provisions of this Agreement. Beginning no later than one
year and ending not later than six (6) months prior to such expiration, the
parties will enter into good faith discussions, without obligation, about
possible renewal of this Agreement and the terms of any such renewal.

20.2     This Agreement may be terminated prior to expiration by Elan, in its
sole discretion, as follows:

         (a) On or prior to December 31, 2001, Elan may elect to terminate
this Agreement by giving Draxis as much written notice as is practical of
Elan's Change of Control. Such notice shall be effective on the date
specified therein (the "Effective Termination Date"). Within five (5)
business days of such Effective Termination

<PAGE>

                                                                        Page 29

Date, Elan shall pay or cause to be paid to Draxis, by wire transfer in
immediately available funds, an amount equal to the greater of the Net
Present Value and the Return on Investment Value; and

         (b) From January 1, 2002 through the term of this Agreement, Elan
may elect to terminate this Agreement by giving six (6) months' prior written
notice to Draxis. Within five (5) business days of the end of such six month
period (the "Effective Termination Date"), Elan shall pay or cause to be paid
to Draxis, by wire transfer in immediately available funds, an amount equal
to the greater of the Net Present Value and the Return on Investment Value;
and

         (c) Throughout the term of this Agreement, Draxis will give Elan as
much written notice as is practical of any Change of Control of Draxis. Upon
any occurrence of such a Change of Control, Elan may elect, within thirty
(30) days of such notice, to terminate this Agreement by giving six (6)
months' prior written notice to Draxis, provided that Elan has determined in
its reasonable judgement based on substantive evidence that following its
Change of Control, Draxis's capability of performing its obligations under
this Agreement will likely be materially impaired or reduced. Within five (5)
business days of the end of such six month period under this subsection (c)
(the "Effective Termination Date"), Elan shall pay or cause to be paid to
Draxis, by wire transfer in immediately available funds, Return on Investment
Value, as shown in Attachment B and Schedule B-2 for a Change of Control of
Draxis.

         The amounts payable under subsections (a), (b) or (c) shall be
referred to as the Termination Fee. In addition to the Termination Fee, Elan
shall reimburse Draxis for any unavoidable additional actual out-of-pocket
costs it may incur in terminating as of the Effective Termination Date any
third party commitments previously approved by the Project Committee. Elan
shall also purchase existing inventory of Products owned by Draxis as
provided in Section 20.6 below.

20.3     Subject to the provisions of Article 19 hereof (Force Majeure), Elan
shall have the right to terminate this Agreement as it pertains to the
relevant Product(s) or, at its option, convert the exclusive licenses and
related rights for such Product(s) to a non-exclusive license upon ninety (90)
days' written notice to Draxis, in the event Draxis shall have failed to
begin marketing (including efforts to obtain appropriate pricing and
reimbursement, as determined by the Project Committee) such Product(s) in the
Territory within six (6) months after the later of the Closing Date or
Regulatory

<PAGE>

                                                                        Page 30

Approval for such Product, in the Territory. For the avoidance of doubt,
Draxis shall be deemed to have commenced marketing when it commences
promoting the Product in accordance with this Agreement, notwithstanding that
certain pricing and formulary reimbursement issues may still be outstanding
with health regulatory authorities or that supply of Product may not yet be
available.

20.4     Either party hereto may, at its option, terminate this Agreement by
giving to the other party prior notice in writing to that effect of not less
than ninety (90) days in the event the other party shall commit a material
breach of this Agreement (thirty (30) days, in the case of any payment
default), and shall fail to cure such breach during the ninety (90) day
period or thirty (30) day period as applicable, following receipt of said
notice from the non-breaching party, or such longer period as may reasonably
be necessary, provided the breaching party continues its diligent efforts to
cure; provided, however, that any such cancellation and termination shall not
release the breaching party from any obligations hereunder incurred prior
thereto. For the avoidance of doubt, Draxis's failure to use Commercially
Reasonable Efforts to obtain Regulatory Approval on Elan's behalf for such
Product in the Territory in accordance with Article 7 shall be deemed to be a
material breach for the purposes of this Article, as to such Product, except
where such failure is due to the decision of the Project Committee not to
undertake costs to generate additional data required to obtain Regulatory
Approval.

20.5     Either party hereto may terminate this Agreement immediately if the
other party becomes insolvent, or voluntary or involuntary proceedings are
instituted against the other party under any federal, state or local
bankruptcy or insolvency laws, or a receiver or trustee of the party's
property shall be appointed or the party makes an assignment for the benefit
of its creditors.

20.6     In the event of expiration of this Agreement, or the termination of
any rights granted hereunder with respect to a given Product prior to the
expiration or termination of this Agreement in its entirety, Draxis shall
have no further rights in the affected Patent Rights, Trademarks or
Product(s), except that inventory of such Product(s) may be sold by Draxis
for up to six (6) months after the date of such termination. In the event of
any such expiration or termination, including without limitation the early
termination provided for above, Elan will purchase from Draxis, at its then
net book value, any such inventory in such usable and salable quantities as
Elan may determine. Any expiration or partial or complete termination of this

<PAGE>

                                                                        Page 31

Agreement shall not affect the right, obligations and remedies of either
party accrued as of such expiration or termination.

ARTICLE 21 - INDEPENDENT CONTRACTOR

21.1     It is understood that both parties hereto are independent
contractors and engage in the operation of their own respective businesses
and neither party hereto is to be considered the agent of the other party for
any purpose whatsoever and neither party has any authority to enter into any
contract or assume any obligation for the other party or to make any warranty
or representation on behalf of the other party. Each party shall be fully
responsible for its own employees and consultants, and the employees of one
party shall not be deemed to be employees of the other party for any purpose
whatsoever.

ARTICLE 22 - ASSIGNMENT

22.1     Upon expiration or early termination of this Agreement, Draxis shall
identify and provide to Elan copies of all agreements entered into between
Draxis and any third party relating to any of the Products and will upon
Elan's request, assign to Elan the benefit and the burden of those contracts,
to the extent selected by Elan in its discretion and as expressly permitted
under such contracts. The parties will work together in advance to
co-ordinate any discussions with such third parties regarding those contracts.

22.2     Neither party may without written approval of the other, such
approval not to be reasonably withheld:
(a)      assign this Agreement or transfer its interest or any part thereof
(including granting any lien, charge or encumbrance thereon) under this
Agreement to any third party which is not an Affiliate; or
(b)      designate or cause any third party not an Affiliate to perform all
or part of its activities hereunder, or to have the benefit of all or part of
its rights hereunder.

23.3     Either party may, upon written notice to the other, assign all or a
part of its rights or obligations hereunder to an Affiliate, provided that
such assignment shall not affect or release the prior or ongoing obligations
of the assignor to the other party to this Agreement.

<PAGE>

                                                                        Page 32

ARTICLE 23 - MISCELLANEOUS

23.1     This Agreement shall be governed by the laws of Delaware, without
regard to its choice of law principles. All disputes arising under the
Agreement shall be referred to senior management of the parties as provided
in Section 7.3 above for good faith discussion and efforts toward amicable
resolution.

23.2     Any and all notices provided for hereunder shall be sent in writing
and to the respective parties at the following addresses by express courier:

           If to Elan:      Elan Pharma (International) Limited
                            WIL House
                            Shannon Business Park
                            Shannon, County Clare
                            Ireland
                            Attention: Chief Executive Officer

                            Elan Pharmaceuticals, Inc.
                            800 Gateway Boulevard
                            South San Francisco, California 94080 USA
                            Attention: Pres. and COO, Elan Pharmaceuticals
                            North America division

           With a copy to:  Elan Pharmaceuticals, Inc.
                            800 Gateway Boulevard
                            South San Francisco, California 94080 USA
                            Attention: VP, Legal Affairs, Elan Pharmaceutical
                            North America division

           If to Draxis:    Draxis Health, Inc.
                            6870 Goreway Drive
                            Mississauga, Ontario, Canada L4V 1P1
                            Attention: President

           With a copy to:  Draxis Health, Inc.
                            6870 Goreway Drive
                            Mississauga, Ontario, Canada L4V 1P1
                            Attention: Secretary

<PAGE>

                                                                        Page 33

or to such other addresses as may be subsequently furnished by one party to
the other in writing. Any such notice shall be deemed effective from the date
of mailing.

23.3     Each party agrees to comply with all applicable laws, rules and
regulations of any government agency or authority in the performance of its
obligations under this Agreement. In the event one or more terms of this
Agreement are found to violate the provisions of any applicable law, rule or
regulation, the parties hereto shall negotiate in good faith to modify this
Agreement, but only to the extent necessary to make the terms of this
Agreement valid and enforceable, having full regard for all applicable laws
and the intent and purposes of the parties entering into this Agreement.

23.4     This Agreement includes the Attachments, whether annexed at the time
of execution of this Agreement or later, as provided herein, constitutes the
entire Agreement between parties hereto relating to the subject matter
hereof, and this Agreement may not be varied except by an instrument in
writing signed by each party hereto by a duly authorized officer.

23.5     Should any part of this Agreement be held unenforceable or in
conflict with the applicable laws or regulations of any jurisdiction, the
invalid or unenforceable part or provision shall be replaced with a provision
which accomplishes, to the extent possible, the original business purpose of
such invalid or unenforceable part or provision in a commercially reasonable,
valid and enforceable manner, and the remainder of this Agreement shall
remain binding upon the parties hereto.

23.6     The captions of this Agreement are solely for the convenience of
reference and shall not affect its interpretation. This Agreement may be
executed in one or more counterparts, all of which shall comprise the
original instrument.

23.7     The following Articles and Sections shall survive expiration or
termination of this Agreement for any reason: 6, 13.3, 14, 15, 16, 18 and
23.1. Termination or expiration of this Agreement shall not affect any rights
previously accrued by either party.

23.8     The parties agree to take all further actions prior to and after the
Closing as may be reasonably necessary or appropriate to carry out the intent
of this Agreement, including without limitation the execution and delivery of
documents.

<PAGE>

                                                                        Page 34

23.9     Neither Draxis nor Elan (including their respective Affiliates)
shall use the name of the other party or otherwise disclose the substance or
existence of the transactions contemplated in this Agreement or the Stock
Purchase Agreement in any public statement, prospectus, annual report or
press release or other public communication (collectively "Public
Statements") without the prior written approval of the other party, which may
not be unreasonably withheld or delayed; provided, however, that both parties
shall endeavor in good faith to give the other party a minimum of two (2)
business days to review such Public Statements; provided, further, that, upon
approval of any such Public Statement, both parties may disclose to third
parties the information contained in such Public Statement without the
further approval of the other; and provided, further, that if a party hereto
does not approve such Public Statement, either party may still use the name
of the other party in any Public Statement without the prior written approval
of the other party, if such party is advised by counsel that such disclosure
is required to comply with applicable law.

                [REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]

<PAGE>

                                                                       Page 35

IN WITNESS WHEREOF, the parties have caused this Agreement to be entered into
by their duly authorized officers as of the day and year first set forth
above.

DRAXIS HEALTH INC.

By:     /s/ Martin Barkin
        -------------------------------------

Title:  President and Chief Executive Officer
        -------------------------------------

Date:   June 17, 1999
        -------------------------------------

ELAN PHARMA (INTERNATIONAL) LIMITED

By:     /s/ David Hurley
        -------------------------------------

Title:  Director
        -------------------------------------

Date:   14/7/99
        -------------------------------------

ELAN PHARMACEUTICALS, INC.

By:     [ILLEGIBLE]
        -------------------------------------

Title:  President
        -------------------------------------

Date:   7/16/99
        -------------------------------------<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:

<PAGE>

                                      -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;

<PAGE>

                                      -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;

<PAGE>

                                      -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-

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